ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) Islamabad Bench-I has drafted a structured procedural framework for tax authorities to follow when initiating proceedings under Section 161 of the Income Tax Ordinance 2001 against taxpayers who fail to deduct or short-deduct tax under any of the provision requiring tax deduction or collection at source.
The Bench headed by M M Akram, the senior most Judicial Member of the Tribunal has been consistently delivering judgements laying down new precedents on the practical aspect of the taxing statutes.
The latest orders emphasize due process, legal compliance, and reconciliation to minimize unnecessary litigation and revenue loss.
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The step-by-step approach includes verification of compliance, issuance of notices, reconciliation, and enforcement actions, ensuring transparency and adherence to judicial precedents. The framework also highlights the taxpayer’s right to respond, appeal and seek review before final recovery proceedings are initiated.
Basharat Qureshi, a Karachi based tax consultant when contacted for comments explained that contrary to audit under Section 177 of income declared which requires selection either by the FBR or by the Commissioner the withholding audit is conducted of every withholding agent and for each taxpayer hence the procedure to be followed throughout the country should have been streamlined under the law.
Since in the Ordinance and Rules the procedure has not been laid down properly therefore the order of the ATIR is very apt and the FBR should circulate it for the step wise guidance of the field formation and adherence on the pattern earlier guidance issued regarding Section 111 based upon orders of the Supreme Court, he added.
“Failure to adhere to the prescribed procedure, as mandated under the Ordinance and as established by the superior courts, has resulted in losses tothe national exchequer.
In this context, we deem it appropriate to reiterate the correct procedural framework to prevent further revenue loss and to minimize unnecessary litigation between the revenue authorities and taxpayers.
Moreover, the practice of creating frivolous tax demands to meet budgetary targets not only misallocates resources and revenue but also places an undue burden on the judicial hierarchy, extending up to the Supreme Court.
To ensure due diligence, compliance, reconciliation, adherence to legal process, revenue security, and avoidance of unnecessary litigation, the following sequential steps must be followed when initiating proceedings against a taxpayer who has failed to deduct or has short-deducted tax under the law“, the ATIR order added.
Copyright Business Recorder, 2025
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