In a recent development, the Federal Board of Revenue (FBR) has directed the Inland Revenue (IR)-Operations Wing to formulate a policy and legal stance for the implementation of extreme coercive measures, specifically the sealing of bank accounts of taxpayers for recovery purposes. This move aims to bolster tax collection efforts and streamline the process. The FBR is set to present its enforcement policy before the Lahore High Court (LHC) by November 8, 2023.
Background and Context
The FBR has instructed the Member IR (Operations) to address the subject matter, referring to the Lahore High Court’s order dated October 18, 2023, in W.P.No.683361/2023. The case is scheduled for re-listing on November 8, 2023. This directive is of significant importance as it directly impacts the taxation landscape and the way the government intends to recover outstanding dues from taxpayers.
The Legal Framework
The Attorney General for Pakistan will also play a crucial role by providing legal insights to the court regarding the proposed action. If the FBR deems that the impugned measures do not align with existing laws and economic policies, it might consider taking disciplinary action against the officers responsible for implementing coercive measures that could potentially hinder the economic activities of the country.
During the proceedings at the Lahore High Court, the counsel representing the tax department informed the court that the accounts of the petitioner, who had earlier faced account sealing, have been de-sealed. It is acknowledged that the recovery action taken under section 140 of the Income Tax Ordinance, 2001, was executed within the stipulated timeframe to file an appeal.
Timing and Prima Facie Case
However, learned counsel for the respondents, who are Inland Revenue officers, pointed out that sufficient time was given to the petitioner to approach the Appellate Tribunal Inland Revenue (Appellate Tribunal). Moreover, it was revealed that the petitioner had indeed approached the Appellate Tribunal, and interim relief was granted. The fact that the Appellate Tribunal provided interim relief suggests that the petitioner had a strong prima facie case, making the recovered amount subject to potential return.
The counsel for the respondents emphasized the lack of a direct judgment on whether the impugned recovery cannot be executed during the appeal period. To address this legal question, learned counsel for the respondents requested additional time for preparation and argumentation.
In the meantime, the Chairman of the FBR is expected to submit a report within fifteen days, bearing his signature, on the policy and legal standpoint regarding the recovery of amounts through the extreme coercive measure of sealing bank accounts.
The FBR’s decision to consider sealing bank accounts as an extreme coercive measure for recovering outstanding taxes is a significant development in the realm of taxation in Pakistan. It raises several legal and procedural questions that will need to be thoroughly examined by the Lahore High Court.
As the court deliberates on the legal nuances and potential consequences of this decision, taxpayers and tax professionals alike are closely watching the proceedings. The outcome of this case could set a precedent for the handling of tax recovery in the country and significantly impact the relationship between the tax department and taxpayers.