Sec 175 of ITO: FBR’s DI&I has legal jurisdiction to issue notices: IHC

ISLAMABAD: The Islamabad High Court (IHC) on Tuesday held that the Directorate of Intelligence & Investigation of the Federal Board of Revenue (FBR) can take cognisance and has legal jurisdiction to issue notices under Section 175(1) of the Income Tax Ordinance (ITO) 2001 for the enforcement of any provision of the ordinance.

A division bench of IHC comprising Justice Aamir Farooq and Justice Ejaz Ishaq Khan while accepting the contentions in an intra-court appeal (ICA) of Directorate of Intelligence & Investigation FBR set aside the single-judge judgment dated 18-03-2016.

Advocate Hafiz Ahsaan Ahmad Khokhar represented the Directorate of Intelligence & Investigation before the Division Bench.

The taxpayer M/S KK Oil and Ghee Pvt Ltd had challenged the Directorate of Intelligence & Investigation notice issued under Section 175 of the ITO.

It contended that the notice was illegal, based on wrong assumption of jurisdiction and misapplication of law, and the same be declared ultra vires to law, and set aside.

The single judge accepted the contentions of the taxpayer in writ jurisdiction and decided against the taxing agency vide judgment dated 18-03-2016, and held that the notice issued by Directorate of Intelligence and Investigation under Section 175 of ITO was without jurisdiction. The taxing investigation agency challenged the impugned judgment before the Division Bench of the IHC.

Khokhar submitted that Directorate of Intelligence & Investigation FBR was established under section 230 of the Income Tax Ordinance 2001 to deal with all tax related issues and to gather information regarding tax evasion, fiscal fraud and revenue leakages.

He further stated that FBR on 09-02-2015 issued SRO 115/2015 regarding further detailed functions with reference to different provisions of Income Tax Ordinance, where in section 175 has also been included therein.

Khokhar contended that a notice issued under section 175(1) ITO was legal and within the jurisdiction as certain facts were concealed and on inspection in furtherance of notice that taxpayer claimed wrong exemption under Section 65-D of Ordinance read with Section 159 of the ITO, which caused huge loss to the exchequer, but this aspect was completely ignored by the single judge in chamber while issuing the judgment.

He further submitted that a notice U/S 175 (1)of the Ordinance can be issued by Directorate of Intelligence & Investigation to enforce any provision of Income tax Ordinance 2001 to gather information for the purposes of investigation regarding tax evasion and fiscal fraud and that section 175 of the Income tax Ordinance has given ample power to Directorate of Intelligence & Investigation and has made it very much clear that section 65-D of Ordinance cannot be read in isolation, thus proceedings under section 175 (1) of Ordinance were legally conducted by the taxing agency and was within legal jurisdiction.

The counsel for respondent taxpayer was of the view that Directorate Intelligence & Investigation could not issue notice U/S section 175 of Ordinance to the taxpayer and the order passed by single bench was legal and lawful.

The bench after hearing both sides passed the judgment and held that the sole issue before the court was whether notice issued under section 175 of Ordinance by Directorate Intelligence & Investigation FBR was legal and according to law.

Copyright Business Recorder, 2022