Karachi, February 19, 2025 – The Federal Board of Revenue (FBR) has expressed serious concerns regarding the incompetence of Inland Revenue (IR) officers in issuing flawed assessment orders, which have led to an increase in frivolous litigation.
The FBR ATIR has taken note of the growing number of cases where procedural and legal frameworks were not properly followed, causing unnecessary legal disputes.
In light of this, the FBR has issued directives to all Chief Commissioners of IR across Large Taxpayers Offices (LTOs), Corporate Tax Offices (CTOs), Medium Tax Office (MTO), and Regional Tax Offices (RTOs). These directives highlight a crucial judgment passed by the Appellate Tribunal Inland Revenue (ATIR), underscoring the need for due diligence and adherence to legal protocols in issuing assessment orders.
The FBR ATIR emphasized that in a recent decision, the tribunal scrutinized an order issued by an assessing officer under Sections 161 and 205 of the Income Tax Ordinance, 2001. The tribunal noted that the procedural and legal framework outlined in the law was largely ignored, which is detrimental to compliance, adherence to due process, and revenue security. This negligence has resulted in a surge in unnecessary litigation at various judicial and appellate forums.
Moreover, the FBR ATIR judgment has provided a structured process for initiating proceedings, particularly in the context of a withholding agent or prescribed person under Section 153 of the Income Tax Ordinance, 2001. The tribunal outlined a step-by-step approach to ensure the accuracy and legality of assessment orders within the withholding regime. The prescribed steps include:
1. Status of Return filed under Section 114
2. Status of Statement filed under Section 165
3. Identification of Non-Compliance
4. Verification of Taxpayer’s Compliance
5. Initiation of Reconciliation Proceedings under Rule 44
6. Conclusion of Reconciliation Proceedings under Rule 44
7. Issuance of Show Cause Notice under Section 161(1) or 161(1A)
8. Consideration of Taxpayer’s Explanation and decision-making
9. Issuance of Default Surcharge under Section 205
10. Mention of Right to Appeal in FBR ATIR or High Court
11. Recovery Proceedings, if necessary
The ATIR further reinforced that any proceedings conducted under the Income Tax Ordinance, 2001, are deemed judicial proceedings within the meaning of Section 224 of the Ordinance. This clarification underscores the importance of procedural accuracy and legal compliance in issuing assessment orders.
Considering the observations of the FBR ATIR, the FBR has directed all assessing officers working in field offices to strictly adhere to the procedural and legal framework identified by the tribunal. This measure aims to prevent unnecessary litigation and ensure that assessment orders withstand appellate scrutiny.
To ensure compliance, the FBR has instructed Chief Commissioners to communicate these directives to all assessing officers under their jurisdiction. The FBR ATIR will continue to monitor the situation closely, emphasizing the need for quality assessment orders that align with legal standards and minimize the risk of legal disputes.