Karachi, January 11, 2025 – The Sales Tax Act, 1990, empowers officers of Inland Revenue (IR) to arrest and prosecute individuals for non-compliance with tax laws, strengthening enforcement mechanisms for tax evasion and fraud.
Powers Under Section 37
Section 37 of the Sales Tax Act grants IR officers the authority to summon individuals to provide evidence or produce documents during inquiries. Key provisions include:
1. Summoning Authority: Any IR officer can summon individuals to appear and provide evidence or documentation related to ongoing inquiries under the Act.
2. Obligation to Attend: Summoned individuals must attend in person or via an authorized representative as directed by the officer. However, exemptions apply to those protected under Sections 132 and 133 of the Code of Civil Procedure, 1908.
3. Judicial Proceeding Status: Inquiries conducted by IR officers are considered judicial proceedings under Sections 193 and 228 of the Pakistan Penal Code, 1860.
Arrest and Prosecution Under Section 37A
Section 37A specifically empowers IR officers to arrest individuals suspected of tax fraud or other prosecutable offences under the Act. Notable provisions include:
1. Authority to Arrest: Officers of IR, not below the rank of Assistant Commissioner or equivalent, can arrest individuals based on substantial evidence indicating involvement in tax fraud or similar offences.
2. Arrest Procedure: Arrests are conducted in accordance with the Code of Criminal Procedure, 1898, ensuring procedural compliance.
3. Compounding Offences: The Commissioner can compound offences if the accused pays the evaded tax, default surcharge, and penalties either before or after recovery proceedings commence.
4. Corporate Accountability: For corporate tax fraud, directors or officers of the company deemed personally responsible may also face arrest. This does not absolve the company of its liability to pay the evaded tax, surcharge, and penalties.
Strengthening Compliance
These provisions underline the government’s commitment to curbing tax fraud and enhancing compliance. By equipping IR officers with arrest and prosecution powers, the Sales Tax Act reinforces deterrence against tax evasion.
Taxpayers are urged to adhere to tax laws to avoid legal repercussions. The FBR continues its efforts to ensure transparency and accountability in the tax system, emphasizing voluntary compliance to avoid the stringent penalties outlined in the Act.