Section 197 of the Income Tax Ordinance, 2001, updated up to June 30, 2021, now explicitly outlines that individuals who, after receiving a notice from the Commissioner, engage in selling, mortgaging, charging, leasing, or otherwise dealing with the property to prevent its attachment, will be liable for prosecution.
The penalties upon conviction include a fine of up to one hundred thousand rupees, imprisonment for a term not exceeding three years, or both.
The Finance Act, 2021, introduced several amendments to the Income Tax Ordinance, 2001, with Section 197 being a pivotal provision in the battle against attempts to obstruct the attachment of properties. The revised text of Section 197 reads: “Prosecution for disposal of property to prevent attachment. — Where the owner of any property, or a person acting on the owner’s behalf or claiming under the owner, sells, mortgages, charges, leases or otherwise deals with the property after the receipt of a notice from the Commissioner with a view to preventing the Commissioner from attaching it, shall commit an offence punishable on conviction with a fine up to one hundred thousand rupees or imprisonment for a term not exceeding three years, or both.”
This amendment aims to address a loophole in tax enforcement by penalizing those who actively engage in disposing of their property after being notified by the Commissioner. By doing so, the FBR seeks to prevent individuals from using such tactics to hinder the attachment of assets for the recovery of outstanding taxes.
The penalties outlined in Section 197 underscore the severity with which the FBR views attempts to thwart the tax collection process. The combination of substantial fines and the possibility of imprisonment serves as a robust deterrent, signaling the gravity of engaging in activities that obstruct the enforcement of tax laws.
This amendment aligns with global efforts to combat tax evasion and reinforce the integrity of tax collection processes. It underscores the importance of ensuring that individuals comply with tax obligations and discourages tactics aimed at circumventing the legal consequences of outstanding tax liabilities.
Industry experts have welcomed this move, emphasizing the need for a proactive approach in preventing tax evasion. By explicitly addressing the disposal of property to prevent attachment, the FBR is closing a potential avenue for individuals seeking to evade their tax responsibilities.
The amendment to Section 197 of the Income Tax Ordinance, 2001, strengthening prosecution measures for the disposal of property to prevent attachment, highlights the commitment of the FBR to fortify the legal framework surrounding tax enforcement. This change is anticipated to act as a powerful deterrent against individuals attempting to obstruct the attachment of properties for the recovery of outstanding taxes, contributing to a more robust and effective tax administration system in Pakistan.
