Sales Tax Act, 1990 has empowered the officials of Inland Revenue (IR) to call for record by notice in writing.
In a significant development aimed at strengthening the investigative powers of Inland Revenue (IR) officials, the Sales Tax Act, 1990 has been amended to empower them to call for information by notice in writing. The Federal Board of Revenue (FBR) recently issued an updated version of the Sales Tax Act, incorporating amendments introduced through the Finance Act, 2021, effective up to June 30, 2021.
Section 38A of the Sales Tax Act, 1990 outlines the newfound authority as follows:
38A. Power to call for information— The Commissioner may, by notice in writing, require any person, including a banking company, to furnish such information or such a statement in connection with any investigation or inquiry in cases of tax fraud, as may be specified in such notice:
Provided that the Commissioner may require any regulatory authority to provide information concerning the licenses and authorizations issued by it.
This provision marks a significant departure from previous norms, giving the Commissioner the explicit power to demand information from individuals and entities, including banking institutions. The move is seen as a strategic response to the evolving nature of financial transactions and an increased focus on combating tax fraud.
Under the new amendment, the Commissioner, a key figure in the Inland Revenue setup, can issue written notices requiring specific information or statements from any person. This authority extends to banking companies as well, reflecting the recognition of the pivotal role played by financial institutions in the modern economy.
The provision explicitly mentions that the Commissioner’s power to call for information is in connection with investigations or inquiries related to tax fraud. This targeted approach indicates a commitment to using this authority judiciously and solely for matters of tax fraud, underlining the importance of maintaining a balance between enforcement and protecting individual rights.
Moreover, the provision includes a proviso allowing the Commissioner to call upon regulatory authorities to provide information concerning licenses and authorizations issued by them. This additional power emphasizes the collaborative approach between tax authorities and regulatory bodies, recognizing the interconnected nature of financial oversight and taxation.
While this amendment is hailed as a positive step toward bolstering the tools available to combat tax evasion and fraud, concerns have been raised about the potential misuse of such authority. Striking a delicate balance between empowering tax officials and safeguarding individual rights remains a key challenge. Critics argue that clear safeguards and oversight mechanisms must be in place to prevent arbitrary use of this newfound power.
In conclusion, the inclusion of Section 38A in the Sales Tax Act, 1990 represents a proactive move by the FBR to equip IR officials with enhanced authority to combat tax fraud. As the authorities move forward with these amendments, the proper implementation and monitoring of this power will be crucial in ensuring that it is used judiciously, effectively targeting tax fraud while safeguarding the rights and privacy of individuals and businesses.