The Federal Board of Revenue (FBR) has sought legal opinion from the Law and Justice Division whether the Auditor-General of Pakistan (AGP) is legally empowered to challenge the decisions of alternative dispute resolution (ADR) mechanism.
Sources told Business Recorder on Saturday that FBR has forwarded a reference to the Law and Justice Division to know the legal status of AGP office for framing audit objections against decisions made by Alternative Dispute Resolution Committees (ADRCs).
The FBR is of the view that ADRC is an internal arrangement of FBR to resolve tax-related disputes of the taxpayers through the forum of committees. When the AGP office raised audit objections against decisions of ADRC, the FBR opined that the AGP has no legal authority to examine cases of ADRC as ADR mechanism is an internal arrangement of FBR for constitution of committees for settlement of tax disputes, sources added.
A special study of AGP on evaluation of performance of ADRCs had shown that ADRCs of FBR have given financial benefits to many companies by wrong interpretation of tax law. According to the report of the Auditor-General, the FBR should examine the observations of audit in the light of norms of prevailing laws and regulations and withdraw the wrong decisions, which had created ambiguity in law, being an example of tax savings for others taxpayers.
At the time of acceptance of application, the grievances should be examined under provisions of law by FBR and only those be forwarded to the committee which are on merit. It would minimise the burden and rush of work of the committees, the report added.
While making the ADR committees, instructions are to be issued to follow the provisions of the law and rules relating to subject to avoid using the decisions as precedent for other taxpayers. The report further said that with a view to create tax-friendly environment, the government introduced a scheme for out of court settlement through enactment (section 47A of Sales Tax Act, 1990). Alternative Dispute Resolution Committees comprising representatives of Collectorate, general renowned tax practitioner and Federation of Chambers of Commerce and Industry were constituted in each Collectorate.
The ADRC is a recommendatory body and its decision is finally accepted or rejected by FBR. The AGP had carried out performance audit of only 97 cases. The findings of audit further showed that FBR has given undue benefits to taxpayers through the forum of ADRC. The AGP report has also referred to a number of cases where cases have been settled unlawfully.
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