Refund of coercively/illegally recovered amount: Taxpayers are not obliged to follow procedural requirements: IHC

ISLAMABAD: Islamabad High Court (IHC) has declared that the taxpayers are not obliged to follow procedural requirements for seeking refund of the amount coercively/ illegally recovered from them.

According to an order of the LHC, the court has declared that tax recovered illegally cannot be held up subject to processing of any refund applications and taxpayer cannot be obliged to then follow procedural requirements for seeking a refund and get in a queue to regain control over such wrongfully collected amount.

It is reliably learnt that landmark observations have been recorded vide order dated 28.03.2024 by the IHC during hearing of constitutional petition by Islamabad Electric Supply Company (IESCO) against FBR/ LTO Islamabad, who illegally recovered funds from the bank accounts of the IESCO without following due process of law.

IHC’s restrictions impeding tax recovery efforts in Islamabad?

When contacted, tax lawyer Waheed Shahzad Butt informed that earlier IHC has also summoned Member (Operations-IR) and CCIR, LTO to appear in person, for violation of the order in tax recovery matters. There are two issues before the IHC. One relates to the refund of amounts illegally recovered by LTO and other is the contemptuous manner in which the injunctive order has been treated by LTO and continues to be breached by refusal of FBR/LTO to make whole the taxpayer in relation to the amounts illegally recovered.

Earlier notices were issued to Chief (Policy) FBR and CIR, LTO Islamabad to satisfy the Court as to why penal action should not be taken for: (a) coercively collecting funds from the accounts of the petitioner illegally and (b) inaction and refusal to return the funds after this Court had taken cognizance and brought the matter to their attention to take corrective action, Waheed Butt added.

IHC order stated: “As the concept of tax refund and the procedures prescribed for it relate to a different scenario where taxes have been collected or paid in accordance with provisions of tax statutes, and not where illegal recoveries have been affected in breach of Court orders or without lawful authority and jurisdiction. Consequently, once it is admitted that the amounts were coercively recovered in breach of Court’s orders, the taxpayer cannot be obliged to then follow procedural requirements for seeking a refund and get in a queue to regain control over such wrongfully collected amount.

“What emerges from the submissions of the parties is that refund in the amount of Rs.2.387 billion has already been sanctioned, but has not been credited to the account of the petitioner. A further amount of Rs.1060 million, which was collected during a period when an injunctive order was in the field, remains with the tax department and the tax department seeks to adjust such amount against a subsequent tax demand that has been generated against the petitioner.

“Petitioner’s grievance before the Court is that an amount was forcefully recovered from the account of the petitioner. Recovery was so affected through coercive means in breach of an order of the Court, such recovery is void for having been made in disregard of a court order rendering it without legal authority and jurisdiction. Such amounts (2.378 billion and Rs1060 million) shall be credited to the accounts of the petitioner from which they were wrongfully expropriated (or another account as identified by the petitioner) within a period of 15 days,” IHC ordered.

Copyright Business Recorder, 2024