Tax laws in Pakistan have allowed authorities to arrest defaulting taxpayers. This power has is granted under the Income Tax Ordinance, of 2001.
Federal Board of Revenue (FBR) issued Income Tax Ordinance, 2001 updated up to June 30, 2022.
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The FBR has been empowered to recover tax out of a property and through the arrest of taxpayers under Section 138 of the Income Tax Ordinance, 2001.
(1) to recover any tax due by a taxpayer, the Commissioner may serve upon the taxpayer a notice in the prescribed form requiring him to pay the said amount within such time as may be specified in the notice.
(2) If the amount referred to in the notice issued under sub-section (1) is not paid within the time specified therein or within the further time, if any, allowed by the Commissioner, the Commissioner may proceed to recover from the taxpayer the said amount by one or more of the following modes, namely:—
(a) attachment and sale of any movable or immovable property of the taxpayer;
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(b) appointment of a receiver for the management of the movable or immovable property of the taxpayer;
(c) the arrest of the taxpayer and his detention in prison for a period not exceeding six months; and
(d) as specified under clauses (a), (ca), and (d) of sub-section (I) of section 48 of the Sales Tax Act, 1990.
(3) For recovery of tax under sub-section (2), the Commissioner shall have the same powers as a Civil Court has under the Code of Civil Procedure, 1908 (Act V of 1908), for the recovery of any amount due under a decree.
(4) The Board may make rules regulating the procedure for the recovery of tax under this section and any other matter connected with, or incidental to, the operation of this section.
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Section 138A of the ordinance explained the recovery of tax by the District Officer (Revenue).
(1) The Commissioner may forward to the District Officer (Revenue) of the district in which the taxpayer resides or carries on business or in which any property belonging to the taxpayer is situated, a certificate specifying the amount of any tax due from the taxpayer, and, on receipt of such certificate, the District Officer (Revenue) shall proceed to recover from the taxpayer the amount so specified as it were an arrear of land revenue.
(2) Without prejudice to any other power of the District Officer (Revenue) on this behalf, he shall have the same powers as a Civil Court has under the Code of Civil Procedure, 1908 (Act V of 1908), for the recovery of the amount due under a decree.
Section 138B of the Income Tax Ordinance, 2001 explained the state in bankruptcy.
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(1) If a taxpayer is declared bankrupt, the tax liability under this Ordinance shall pass on to the estate in bankruptcy.
(2) If tax liability is incurred by an estate in bankruptcy, the tax shall be deemed to be a current expenditure in the operations of the estate in bankruptcy and shall be paid before the claims preferred by other creditors are settled.
