Author: Faisal Shahnawaz

ISLAMABAD: The Federal Board of Revenue (FBR) on Tuesday directed tax officials to ensure all formalities while initiating action against taxpayers to avoid “hazards of litigation.”

In an official note issued to all field offices, the FBR outlined measures for tax officials to avoid unnecessary litigation.

A day earlier the FBR issued an official note to the field offices of Inland Revenue (IR) regarding restoration of powers to IR officers related to freezing of bank accounts.

The FBR withdraw the instructions given to the commissioners IR for taking prior approval for attachment of bank accounts of a taxpayer for recovery of arrears. These instructions were issued by the then FBR chairman Shabbar Zaidi while assuming the charge on May 10, 2019.

The latest official note has clearly mentioned that the official should take care in taking coercive action, especially freezing of bank accounts.

The tax officials have been informed that on litigation the FBR had to spent remuneration and man-hours on preparing appeals and defending cases before various appellate fora.

“It is, therefore, essential to avoid entering into protracted litigation by exercising prudence and ascertaining the potential of a case to pass the test of appeal, so as not to divert resources from other potential cases involving substantial revenue.”

The FBR said that in order to forestall potential litigation by taxpayers on procedural lacuna, it is also important to ensure that no procedural lacuna is left during proceedings of the case.

“It has been observed that in certain cases, officers tend to initiate recovery proceedings without giving statutorily available time of 30 days to the taxpayer by resorting to attachment of bank accounts,” the FBR said, adding that subsequently, taxpayer being aggrieved of recovery proceedings before expiry of grace period, obtain stay orders from higher courts resulting in ‘vicious circle’ of litigation at multiple fora.

Therefore, the situation warrants that prudence is exercised both in terms of identifying the cases and deciding if a case has to be pursued at higher legal fora and to what level.

The FBR advised that in order to avoid unnecessary ‘hazards of litigation’ the tax offices should take following measures:

i. Coercive measures until case has been passed the test of appeal at the level of commissioner IR (Appeals) my be avoided. Moreover, in order to utilized collective wisdom, a committee comprising of senior commissioners IR headed by chief commissioner IR may be constituted at formation level to deliberate on the cases before according approval for coercive measures.

ii. While proposing filing of references and civil appeals, the zonal commissioner are expected to exercise their good-judgment and:

(a) propose filing of reference and civil appeals in those cases where substantial revenue or a question of law critical to maintaining the essence of the fiscal statutes and the tax machinery is involved; and

(b) enter into litigation in other cases only after due consideration of the probability of success and cost involved.

IR officers to freeze bank accounts for tax recovery