KARACHI: The field formations of the Federal Board of Revenue (FBR) are facing difficulties in executing tax recovery exercises in Islamabad following recent restrictions imposed by the Islamabad High Court (IHC).
In a latest judgment on a petition filed by a private airline, the IHC declared that any coercive recovery under Section 140 of the Income Tax Ordinance without first issuing notice under Section 138(1) is “illegal and void ab-initio”.
The Court directed the field formation to reimburse the recovered Rs 256.34 million from the airline’s bank accounts within 30 days.
However, despite multiple requests by the airline through its legal team, the tax authorities did not reimburse the amount citing lack of a formal refund application. The airline contends that the relevant online refund application option was not even enabled on FBR’s portal.
The Commissioner Inland Revenue Zone IV Islamabad has now filed an intra-court appeal against the IHC order, seeking an interim injunction from the division bench.
On the other hand, the LTO, Islamabad in its letter sent to member IR legal, operations and policy expressed that this judgment has long standing consequences on the recovery of demand even after confirmation of demand from ATIR, as it barred the field formations within the limits of IHC from recovery without the issuance of notice u/s 138 (1) of the ITO even after the demand has been confirmed from the learned ATIR and any recovery affected without the issuance of such notice is liable to be reimbursed.
The letter argued that sections 138 and 140 operate on “entirely different paradigms” with the former concerning recovery directly from the taxpayer and latter concerning recovery from third parties holding funds on behalf of taxpayers.
The LTO Islamabad has also proposed amendments in the upcoming budget to clarify that section 140 recovery proceedings are independent of Section 138. The aim is to remove hindrances in tax recovery operations, especially after appellate tribunal decisions. However, some tax experts while supporting the court decision alleged that the tax officials for using said sections as a tool for harassing taxpayers.
Copyright Business Recorder, 2024