ISLAMABAD: The Federal Board of Revenue (FBR) has defended its decision to recover Rs. 30 million (Rs. 3 crore) directly from a taxpayer’s bank account, stating that the recovery was carried out in accordance with the Income Tax Ordinance, 2001, after the individual allegedly failed to pay outstanding tax liabilities.
In an official statement, FBR said the taxpayer publicly claimed to be a non-resident Pakistani, but had declared himself a resident individual in his income tax returns for tax years 2017 and 2018. Under Pakistan’s tax laws, resident individuals are generally liable to pay tax on their worldwide income.
According to the tax authority, the individual declared Rs. 23.52 million in foreign income as exempt in each of the two tax years. However, FBR maintained that the claimed exemption exceeded the applicable threshold of Rs. 5 million.
FBR Issued Notices Before Recovery
FBR stated that it issued notices under Section 122(9) of the Income Tax Ordinance, 2001, seeking documentary evidence to support the taxpayer’s exemption claim. The department said multiple opportunities were provided, but no satisfactory evidence was submitted.
Following the assessment process, FBR amended the taxpayer’s returns and raised a tax demand of Rs. 30 million. After the outstanding amount remained unpaid, recovery proceedings were initiated under the Income Tax Ordinance, allowing the authority to recover unpaid taxes directly from the taxpayer’s bank account.
Alleged Forged Appeal Orders Submitted to Bank
According to FBR, the taxpayer later attempted to stop the recovery by sending alleged forged appellate orders to his bank through WhatsApp.
The tax authority claimed the documents had never been issued by FBR, contained no official barcode, were absent from the Inland Revenue System (IRS), and were therefore fraudulent. FBR released copies of the documents marked as “FAKE” as part of its statement.
Legal Basis for Bank Account Recovery
Tax expert Amer Sharif explained that the Income Tax Ordinance permits FBR to recover unpaid taxes directly from a taxpayer’s bank account, but only after completing the prescribed legal process.
He noted that Section 82 determines a person’s tax residency. Individuals who remain in Pakistan for 183 days or more during a tax year are generally treated as residents and are taxable on their worldwide income, while non-residents are generally taxed only on Pakistan-source income.
According to the expert, Section 122(9) authorizes FBR to amend a tax assessment if it believes incorrect information has been provided or sufficient evidence has not been produced. Before finalizing any amendment, the taxpayer must be notified and given an opportunity to present supporting documents.
Once the amended assessment is finalized, Section 137 makes the tax payable, while Section 138 authorizes FBR to issue a formal demand and recovery notice if the liability remains unpaid.
Section 140 Allows Direct Recovery From Bank Accounts
Amer Sharif explained that Section 140 empowers FBR to instruct a bank to transfer funds from a taxpayer’s account to recover outstanding tax dues.
However, he emphasized that this authority can only be exercised after the assessment process has been completed, a demand has been raised, and the taxpayer has failed to pay the outstanding amount within the prescribed time.
FBR maintains that it followed all required legal procedures before initiating the direct recovery.
Section 111 Not Invoked
The tax expert also clarified that Section 111, which deals with unexplained income and assets, was not cited in FBR’s official statement.
Although social media discussions linked the case to Section 111 because it involved foreign income, FBR stated that the assessment was conducted under Section 122(9) due to the taxpayer’s failure to provide documentary evidence supporting the claimed exemption.
The case has attracted significant public attention, raising broader questions about tax enforcement, taxpayer rights, and FBR’s powers to recover outstanding dues directly from bank accounts under Pakistan’s tax laws.
