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Business Recorder
3 days ago
- Politics
- Business Recorder
Section 122 (5A) ITO: Power granted to IR commissioners is not without boundaries: ATIR
ISLAMABAD: Appellate Tribunal Inland Revenue (ATIR) has held that the powers granted to Commissioners Inland Revenue to amend assessment orders under Section 122(5A) of the Income Tax Ordinance, 2001 are not without boundaries. The ATIR emphasised that the scope of investigation and inquiry under this provision is not open-ended, and must operate within clearly defined restrictions and limitations. In a strongly worded observation, the ATIR remarked that 'justice is a concept of moral rightness based on ethics and rationality,' asserting that unchecked investigative authority undermines both the legal process and individual freedoms. ATIR further stated that the investigative proceedings under the cited provision 'suffer not only from the vice of excessive delegation of legislative authority but also amount to a patent violation of fundamental rights and constitutional guarantees.' The ruling criticised the absence of adequate safeguards and procedural clarity, arguing that this lack opens the door to arbitrary use of power. Tax lawyer Waheed Shahzad Butt says this judgment could set a precedent for future challenges to administrative overreach and highlight the growing need for a balance between state authority and individual constitutional protections. The decision is being welcomed as a reaffirmation of the principles of due process and rule of law. ATIR order stated: 'under Section 122(5A) the scope of investigation and inquiry is not open ended without any restrictions and limitations. Matter of enquiries and fishing and roving inquiries is to be seen in the context of two mandatory prescribed conditions referred in the provision of law. Enquiries cannot be conducted without the presence of twin criteria of 'erroneous & prejudicial to interest of revenue' otherwise there would be no difference between (Regular Audit) Section 177 & (Amendment of assessment) Section 122(5A). Verification of any factual controversy is obviously out of purview of section 122(5A) and requires conduct of audit (if any) under section 177. Creation of tax demand under the umbrella of Section 122(5A) is a blunt violation. There is no concept of 'unfettered discretion' in the fiscal laws and arbitrary exercise of discretionary powers has to be struck down. Justice is a concept of moral rightness based on ethics and rationality, impugned order merits, cancellation, ATIR order added. Copyright Business Recorder, 2025
Business Recorder
20-05-2025
- Business
- Business Recorder
FBR's binding instructions: Member Legal approached regarding alleged blatant violations
ISLAMABAD: The Federal Board of Revenue (FBR) Member Legal has been approached regarding alleged blatant violations of FBR's binding instructions meant to prevent futile litigation in cases involving the recovery of withholding tax (WHT) defaults in terms of Section 161 of the Income Tax Ordinance, 2001. Concerns have been raised over certain field formations initiating recovery proceedings in apparent disregard of the landmark order passed by the Division Bench-I of the ATIR, as well as the explicit and binding directives earlier issued by the FBR itself. These actions are being viewed by stakeholders as attempts to undermine the authority of both the appellate forum and the FBR's own legal framework. Tax lawyer Waheed Shahzad Butt, speaking to this correspondent, 'emphasized the gravity of the situation. It is imperative that necessary steps be taken to ensure strict compliance with the FBR's binding instructions and the judicial pronouncements of ATIR. Any deviation from these standards amounts to administrative overreach and poses a serious risk to justice,' he stated. According to sources, a formal request has been made to the Member Legal to issue urgent and unequivocal instructions to all concerned field formations, directing them to halt actions that are inconsistent with established legal precedent and the FBR's internal guidance. Observers noted that the matter now warrants immediate and serious attention to prevent further miscarriage of justice and to preserve the integrity of administrative and judicial processes within the tax system It is deeply concerning that the binding instructions issued by the FBR have been openly violated, without any justification or explanation. Such a defiant act reflects either willful disobedience or gross incompetence, both of which are unacceptable and damaging to the credibility of the tax administration. The 161 notices generated under the command of flagship entity of the FBR exhibit a glaring lack of professional diligence and legal awareness. Such conduct not only undermines the integrity of the department but also exposes taxpayers to unlawful proceedings, thereby eroding public trust, Waheed added. Copyright Business Recorder, 2025
Business Recorder
20-05-2025
- Business
- Business Recorder
Affected party (taxpayer): Assessment order communication mandatory: ATIR
ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) has ruled that the communication of the assessment order to the affected party (taxpayer) is essential for the order to attain legal efficacy within the statutory timeframe. Through an order issued by the ATIR, it stated that an order passed internally on a file, but not communicated to the affected party (taxpayer) within the legally prescribed time limit, cannot be deemed to have been validly passed within that period. Prior to granting any extension in time for passing of amended order under Section 122(5A) of the Income Tax Ordinance, 2001, it is the bounden duty of the Commissioner to act impartially, providing a fair opportunity of hearing to all rival parties. It is reliably learnt that a landmark order has been passed by the ATIR on arguments made by tax lawyer Waheed Shahzad Butt wherein the ATIR held that communication of the order to the affected party is essential for the order to attain legal efficacy within the statutory timeframe. Merely signing or noting it on a file without informing the concerned party fails to meet the legal standard. Shahzad Butt Advocate, who represented the appellant, hailed the decision as a landmark in administrative and tax jurisprudence. He stated, 'This ruling is a critical reaffirmation that authorities must act transparently, within the bounds of the law, and with full regard to the rights of the parties involved. It sets a powerful precedent for future adjudication where procedural fairness is at stake.' ATIR order states 'Notice was issued on 08.01.2024 and the amended order has been passed on 08.11.2024. Resultantly, it has been proved that the order has been passed after a lapse of 305 days from the issuance of show cause notice, while as per statement of the author extension in time was sought from the concerned Commissioner after lapse of 239 days on 03.09.2024. A total period of 240 days has been provided by the legislature to dispose of the show cause notice (SCN)in the shape of assessment order. It is now settled principle of law that prior to granting extension, it is the bounden duty of the CIR to provide an opportunity of hearing to the rival parties and act like a neutral unbiased umpire. However, in the instant case, admittedly no such opportunity has been granted to the appellant, which renders the extension order illegal & void ab-initio. The impugned amended order is thus time barred, ATIR order added. Copyright Business Recorder, 2025
Business Recorder
12-05-2025
- Business
- Business Recorder
Automated income tax refund system: FBR has failed to enforce IHC's directive
ISLAMABAD: The Islamabad High Court's landmark judgment for effective enforcement of an automated income tax refund system remains unimplemented by the Federal Board of Revenue (FBR) despite assurances from Member (Policy) FBR The court's directive aimed to facilitate taxpayers and minimize interaction with tax functionaries, but the FBR has failed to take concrete steps in this regard. According to tax lawyer Waheed Shahzad Butt, the FBR's failure to enforce the court's directive appears to be a case of 'planned negligence,' allowing certain field formations within the department to continue obstructive practices when there is an issue of returning taxpayer money in the shape of tax refunds. Automated income tax refund system: FBR fails to implement IHC judgement Instead of embracing automation and transparency as directed by the IHC, some FBR officials are playing a hide-and-seek game with refund claimants. This deliberate inaction undermines taxpayer trust and perpetuates a corrupt manual culture that the court sought to eliminate. The FBR demanded $25 million from the donor agency to effectively enforce an automated tax refund system under the ITO 2001. The FBR submitted a report titled 'Findings and Recommendations of Committee for Effective Enforcement of Section 170A' before the IHC in a public interest petition. Report submitted by the FBR revealed that the FBR's e-portal had no direct electronic linkage with the biggest government withholding agents i.e. Accountant General Pakistan Revenues (AGPR), which deducted income tax on gross salary of the government employees. This is perhaps the most glaring impediment in the way of enforcement of automated tax refunds process. Tax deducted by other withholding agents such as power distribution companies (Discos), excise and taxation departments, educational institutes, travel agents, airlines, Sui Northern Gas Pipelines Limited (SNGPL), Sui Southern Gas Company Limited (SSGCL), telephone and internet service providers, semi-autonomous government entities, government departments etc was not visible in the FBR's database. The judgment in question was intended to streamline the refund process through automated means, reducing human intervention and curbing discretionary power. However, despite the passage of time, the FBR has yet to roll out the mandated system, and no official explanation has been provided for the delay, Waheed Butt added. Copyright Business Recorder, 2025
Business Recorder
08-05-2025
- Business
- Business Recorder
ATIR's landmark order: Senior taxmen face FBR law director's action
ISLAMABAD: The Director Law of the Federal Board of Revenue (FBR) Wednesday initiated extreme action against senior tax officials based on a landmark order issued by the Appellate Tribunal Inland Revenue (ATIR) Islamabad. The order highlighted the poor quality of assessments, which not only erodes taxpayer confidence but also negatively impacts the FBR's performance. In this regard, Director Law and written a letter to FBR Chairman on Wednesday recommending action against involved senior FBR officials. According to tax lawyer Waheed Shahzad Butt, the FBR had previously issued a circular stating that having five assessments reversed in appeal would be considered misconduct. However, the FBR failed to implement this crucial directive except one case where a senior officer was sent to DOT IR for passing accounting and tax laws again. The Director Law has now directed that a report be obtained from the concerned Chief Commissioner. If necessary, instructions will be issued to field formations to prevent such instances from recurring. This development aims to address the issue of frivolous poor assessments and improve the overall performance of the FBR: Waheed added. The FBR directive stated that during the hearing of the appeal in the subject titled case the on the contention of the taxpayer that all the discrepancies pertaining to revenue receipts under section 153(1)(a), contractual receipts under section 153( I )(c) and declared salary expenses were duly reconciled through documentary evidence before the assessing officer which were ignored by the assessing officer and an arbitrary tax demand was created. The Tribunal, to substantiate the appellant's claim provided a complete set of supporting documents with the instruction to verify. Despite repeated opportunities the department did not submit the reconciliation report. The learned DR, the same officer unsupported by any material evidence. Accordingly, the Impugned order is hereby annulled in its entirety, and the tits demand of Rs.43,977,137 deleted. A copy of this order shall he forwarded to the Director General (Legal), Federal Board of Revenue, for information and necessary corrective action to ensure that such instances of high-handedness and procedural lapses are not repeated in the future." 'The above state of affairs not only shatter the confidence of the taxpayers but also reflect the performance of the department in negative. It is, therefore. requested that report from the concerned Chief Commissioner may he called and then if warranted necessary instruction to avoid the recurrence of such instances may kindly be issued to the field formations. Copy of the judgment of the Tribunal is enclosed', Director Law added. Copyright Business Recorder, 2025
