ISLAMABAD: The Federal Board of Revenue (FBR) has revised key provisions governing the arrest authority of Inland Revenue officers within the Finance Bill 2025. This redrafted legislation, which introduces crucial safeguards against potential misuse, is now awaiting formal approval by the National Assembly (NA).
The revised framework underscores a shift towards more controlled and transparent enforcement, particularly in cases of tax fraud under the Sales Tax Act, 1990.
Key Amendments and Oversight Mechanisms:
Three-Member Committee for High-Value Cases: A central feature of the new draft is the establishment of a three-member committee within the FBR. This committee will be empowered to authorize the Commissioner to issue an arrest warrant, but exclusively in high-value tax fraud cases where the alleged loss exceeds Rs50 million.
Threshold for Committee Involvement: For tax fraud cases falling below the Rs50 million threshold, arrests will not be authorized by this committee. Instead, such arrests will only occur under specific, exceptional conditions.
Stringent Conditions for Lower-Value Arrests: In cases below Rs50 million, an arrest can only be made if the accused:
Fails to respond to three investigation notices.
Is found attempting to abscond.
There is credible evidence suggesting tampering with evidence.
Rank and Prior Approval: Arrest powers can only be exercised by Inland Revenue officers holding a rank of Assistant Commissioner or above, and crucially, they must obtain prior approval from the Commissioner based on material evidence.
Structured Inquiry Process: The inquiry process under these powers will align with the Code of Civil Procedure, 1908. Inquiry officers will have powers akin to a civil court, including summoning witnesses, examining individuals on oath, and requiring document production. The inquiry must conclude within six months, providing the accused an opportunity to respond. The inquiry officer will then submit a detailed report to the Commissioner.
Investigation and Warrant Issuance: After the inquiry, the Commissioner can approve an investigation (to be completed within three months), seek further documentation, or close the case. If an investigation is approved, the three-member committee may authorize an arrest warrant during this phase for high-value frauds (exceeding Rs50 million), again, subject to the conditions of non-cooperation, risk of absconding, or evidence tampering.
Judicial Oversight for Lower-Value Frauds: For lower-value frauds, arrest powers remain but require approval from a Special Judge, subject to the same stringent conditions.
Liability of Directors and Officers: The legislation extends personal liability to directors and officers of companies found responsible for tax fraud, though this does not release the company from its financial obligations.
Compounding of Offences: A new provision allows the Commissioner to compound offenses—either before or after an inquiry or investigation—if the accused agrees to pay the evaded tax, along with surcharges and penalties.
Due Process Adherence: Individuals arrested under this Act must be informed in writing of the grounds for their detention at the time of arrest. All arrests must conform to the Code of Criminal Procedure, 1898, aligning FBR’s powers with established Pakistani legal due process.
With these significant revisions, the FBR aims to strike a crucial balance, enabling effective enforcement against tax fraud while simultaneously upholding constitutional safeguards and promoting transparency in the exercise of its powers.
