‘Same-day tax recovery from banks after notice issuance is unlawful’

LAHORE: Tax recovery from banks on behalf of taxpayers on same day after issuance of a notice is unlawful, said tax practitioners.

They said the department was legally not empowered to affect immediate recovery from a taxpayer’s bank or third party on the same day notice under Section 140, particularly where such notice follows the decision of the Commissioner (Appeals) Inland Revenue.

It is a common practice that department amends tax returns to raise demands worth billions of rupees and issue notices on that same day under Section 140 to recover the amount from the taxpayer’s bank accounts within less than 30 minutes after uploading the decision on the FBR web portal. In some cases, a similar course of action occurs even late at night on the same day.

The departmental sources said Section 140 of the ITO authorizes the Commissioner Inland Revenue to effectuate recovery of outstanding tax dues. Additionally, Rule 210c(3) of the Income Tax Recovery Rules, 2002 states that the amount mentioned in the notice is to be paid on the day the notice is served.

However, the tax practitioners have pointed out that Section 140(1) clearly requires the commissioner to fix a specific future date in the notice for payment. In most of cases, recovery is initiated within hours of the appellate order, denying them any meaningful opportunity to comply or challenge the demand. This conduct violates the procedural safeguards built into the Ordinance and breached constitutional rights of taxpayers.

Issuing recovery notices on the same day when the appellate orders were uploaded, and attaching bank accounts within minutes or hours, violated the principle of fair notice and procedural justice, they stressed.

According to these circles, the tax recovery is not a grab-and-go process. Even coercive measures must adhere to proper legal procedures. Tax authorities are not punitive agencies, but institutions responsible for promoting compliance through fairness and clarity.

Copyright Business Recorder, 2025