Some lawyers have raised a legal issue whether the Federal Board of Revenue (FBR) is empowered to obtain information from banks under section 176 of the Income Tax Ordinance 2001. A tax expert told Business Recorder here on Tuesday that a bank has challenged section 176 in the Lahore High Court.
The question arises whether the tax department can obtain general information from the banks under section 176 of the Income Tax Ordinance 2001. The Income Tax Ordinance 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 are all special laws. The question is which special law would be in vogue for obtaining data from the banks for tax purposes. In case the FBR wants to specifically mention 'banks' in the section 176 of the Income Tax Ordinance 2001, tax authorities have to move a bill for amendment in the Income Tax Ordinance 2001, the expert added.
When contacted, sources said that section 3 of the Income Tax Ordinance 2001 clearly talks about the overriding provisions of the Ordinance 2001 in case of other laws. Section 3 of the Ordinance 2001 says, "The provisions of this Ordinance shall apply notwithstanding anything to the contrary contained in any other law for the time being in force".
According to sources, section 3 of the Income Tax Ordinance 2001 has overriding provisions over the Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992. Sources said that the Income Tax Ordinance 2001 is a special law and whenever there is a conflict between the general law and special law, the provisions of the special law prevail. The Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 are also special laws.
If there is a conflict between two special laws, the provisions contained in the law enacted later will prevail. If one compares the Income Tax Ordinance 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992, the provisions of the Income Tax Ordinance 2001 will prevail. The Income Tax Ordinance 2001 has been enacted later as compared to Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992.
When asked where specifically it has been mentioned that provisions of law enacted later will prevail, sources said that this is basic principle of interpretation of the statute. The provisions of that law would prevail, which was enacted later as compared to other laws.
Sources said that the sub-section 5 of section 176 of the Ordinance 2001 also overriding effects of the special privileges under the law. As per sub-section 5, this section shall have effect notwithstanding any rule of law relating to privilege or the public interest in relation to the production of accounts, documents, or computer-stored information or the giving of information.
Sources added that the Income Tax Ordinance 2001 is very clear on the issue for obtaining information from banks. In order to resolve the issue amicably, the tax authorities and banks can sit together for sharing of information to broaden the tax base.
There is no need to amend the section 176 of the Ordinance 2001 as the law is clear to obtain information about the accountholders from the banks. Any further amendment would not be necessary in the presence of clear provisions of section 3 and section 176 of the Income Tax Ordinance 2001.
It is important to mention that section 176 is related to the notice to obtain information or evidence from any person or government department. Through a simple notice to the government department under section 176 of the Income Tax Ordinance 2001, the FBR can seek information about the citizens for tax purposes, if required. The authority of the officials of Inland Revenue under section 176 of the Ordinance 2001 is enough to obtain any kind of data from government departments for broadening the tax base.
Even if the law of any government department does not permit to give information under the law, the FBR can issue a notice to such department under section 176 of the Ordinance 2001 for seeking information about the citizens. If the law of any regulatory body or department does not allow sharing of information, the FBR can seek such information from the authority under the relevant provisions of the Income Tax Ordinance 2001, which empowers the Board to collect such data, sources added.