Karachi, January 27, 2024 – The Pakistan Tax Bar Association (PTBA) has issued a stern warning to the Federal Board of Revenue (FBR) concerning the alleged abuse of assessment powers by tax authorities.
In a letter dated January 25, 2024, addressed to the Chairman of the Federal Board of Revenue, the PTBA raised concerns about a growing trust deficit among tax filers, cautioning that such actions could undermine the true potential of the Pakistani tax system.
The PTBA underscored its apprehensions regarding the perceived undue pressure on tax filers, pointing to various provisions of the Income Tax Ordinance, 2001, including but not limited to Section 122(5A) of the Ordinance.
According to the letter, Section 122(5A) of the ordinance is being invoked indiscriminately, without due consideration of the conditions stipulated in the section. The PTBA asserted that the legislature explicitly intended that any notice issued under Section 122(5A) should only be done when the return is deemed erroneous and prejudicial to the interests of revenue.
PTBA President, Anwar Kashif Mumtaz, expressed dissatisfaction, stating, “The notice under Section 122(5A) of the Ordinance is vehemently being issued, even after the clear directions of the FBR and the apex courts, who have decided numerous cases, emphasizing that both conditions—erroneous and prejudicial to the interest of revenue—must co-exist.”
The PTBA highlighted the legislature’s awareness of the compliance burden on tax filers and pointed out amendments made under audit proceedings. Once a taxpayer’s audit has concluded, the legislative amendment dictates that the taxpayer should not be subjected to further audits for four years. However, Section 122(5A) of the Ordinance is perceived as a constant threat hanging over taxpayers, with the department allegedly misusing it under the notice of the FBR.
The proliferation of notices under Section 122(5A) of the Ordinance is argued to diminish the relief provided by the legislature, limiting the selection of cases for audit under the Ordinance’s provisions. “Every year, tax filers have to comply with notices under Section 122(5A) of the Ordinance, increasing the cost of doing business and creating hardships for them,” noted the PTBA President.
The PTBA called upon the FBR Chairman to intervene and direct field formations not to misuse Section 122(5A) against the clear scheme established for invoking the said section. In the event of failure to address these concerns, the PTBA warned that it would further erode the trust of tax filers and compromise the true potential of the Pakistani tax system.
The FBR is yet to respond to the PTBA’s warnings, and this development raises questions about the balance between tax enforcement and the fair treatment of taxpayers in Pakistan.
