TUESDAY APRIL 05: Attachment of bank accounts: LTUs, RTOs told to complete all legal formalities

ISLAMABAD: The Federal Board of Revenue (FBR) has directed all Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Tax Office (RTOs) to fulfill all legal formalities before taking coercive measures including attachment of bank accounts of registered persons who have filed appeals against any order of the department.
Sources told Business Recorder here on Monday that attachment of bank account is a big enforcement measure which requires due care and fulfilment of all legal requirements. Without completion of all legal formalities at the level of commissioner of appeal, the FBR has asked the field formations to avoid such harsh measures like attachment of bank accounts. After completion of all legal formalities, the department can attach bank accounts.
However, the field formations should be very careful before taking such measure in cases pending at the level of appeals. "We have not stopped the Chief Commissioners from recovery proceedings, but directed the officials to complete all legal formalities before attachment of the bank accounts. In this way, a similar kind of treatment should be given to all registered persons who went to the first level of appeal.
The circular does not talk about barring the tax officials from recovery actions, but due care is needed at the level of appeals for taking coercive measures", the official added. When contacted, a tax expert argued that any taxpayer who had filed an appeal before first level of Commissioner of Appeals against any order of the tax department, the field formations have to clear all pending issues before collecting outstanding demands through coercive measures including attachment of bank accounts of the registered persons.
Experts said that if a taxpayer approaches the first level of appeal against the recovery order of the concerned commissioner, the FBR has barred the Chief Commissioners/ Commissioners from taking coercive measures including attachment of bank accounts. This means that wherever first level of appeal is pending before the commissioner appeal, such kind of enforcement or strict measures cannot be taken against the taxpayers in case all legal formalities have not been completed by the department.
According to sources, the rationale behind such order is to give opportunity to the taxpayer against whom demand has been created, before taking legal action against him.
Another legal expert said that the FBR's directive is not a new decision, but the same was already applicable since the tenure of ex-FBR Chairman Abdullah Yusuf. The idea was to facilitate the taxpayers and provide opportunity to them for filing an appeal before the level of commissioner of appeal. It is not appropriate to take strict action against the taxpayer at the first level of appeal without hearing his viewpoint. Apparently, the FBR has reminded the field formations to avoid strict action against the taxpayers, who have filed first level of appeal. In some cases, it has been observed that the tax department has created demands and started recovery proceedings without providing ample opportunity to the taxpayers, who filed appeals.
Other experts said that such kind of FBR circular or directive may hamper revenue collection and create problems in the field formations for recovery of taxes in current circumstances when the FBR has to chase target of Rs 1600 billion for 2010-11. In the presence of current law, the Commissioner, Inland Revenue, can only request, or pursue, the taxpayer to deposit the disputed amount or demand created, but cannot attach the bank account in case the person has filed appeal before the commissioner of appeals. This is subject to the condition that the field formations have also not completed legal formalities in such cases. Thus, without taking strict action against the non-compliant taxpayers, it would be difficult for the field formations to meet the monthly assigned targets under current economic situations, they added.