LAHORE: A higher appellate forum has held that no coercive recovery measures can be taken by Federal Board of Revenue (FBR) without due process.
A number of taxpayers had moved the forum, challenging the FBR over the coercive recovery of advance tax under Section 147 of the Income Tax Ordinance.
The taxpayers were aggrieved by FBR’s actions, which included unlawful attachment of bank accounts and tax recoveries without following due process.
According to details, the FBR had issued notices claiming that taxpayers had unpaid advance tax for the relevant period. They further argued that they had filed their own estimated tax liabilities and no advance tax was due against them.
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The FBR ignored the estimate and without issuing mandatory notices under Sections 137 and 138, directly attached their bank accounts and recovered hefty amounts worth billions of rupees.
Taxpayers were of the view that no prior notice under Sections 137 and 138 was issued before invoking Section 140. The tax assessment for the relevant year showed that a refund was due rather than a liability; therefore, they challenged the unlawful recovery before the higher forum.
The taxpayers argued that no advance tax was due from them under Section 147 of the Income Tax Ordinance for the relevant tax year as the tax return reflected a refund due.
Despite this, a notice for advance tax was issued without any prior notice under Sections 137 and 138 of the Ordinance.
Furthermore, the recovery was made from their banks on the same day under Section 140 without serving the required notices, especially when the tax return for the next tax year showed a refund, proving that the amount recovered was not due.
The tax department, on the other hand, contended that it was not obligated to issue notices under Sections 137 and 138 when advance tax was due under Section 147.
The law prescribes the time for payment of advance tax under Section 147 (5) (a) and there was no requirement for additional notices before making recoveries under Section 140. Once the deadline for payment passed, the tax department was entitled to recover the overdue amount without further notification.
The appellate forum held that the tax department’s recovery action was illegal. The recovery was made from the taxpayers’ bank accounts without issuing the requisite notices under Section 137 or 138 of the Income Tax Ordinance. Instead, a notice was issued under Section 140 to the petitioner’s bank, leading to coercive recovery.
Copyright Business Recorder, 2025
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