ISLAMABAD: The Director Law of the Federal Board of Revenue (FBR) has initiated significant action against senior tax officials following a landmark order issued by the Appellate Tribunal Inland Revenue (ATIR) Islamabad. The ATIR’s ruling sharply criticized the poor quality of tax assessments, highlighting their detrimental effect on taxpayer confidence and the overall performance of the tax authority.
The action was prompted by an ATIR order that underscored instances of inadequate assessment practices. In response, the Director Law has reportedly written to the FBR Chairman, recommending measures against the senior officials involved.
According to tax circles, including observations by tax lawyer Waheed Shahzad Butt, the FBR had previously issued a circular stipulating that the reversal of five assessments in appeal would constitute misconduct. However, it is noted that this directive has seen limited implementation, with only one known case where a senior officer faced consequences by being directed to retake examinations in accounting and tax laws.
The recent ATIR order specifically highlighted a case where a taxpayer’s appeal was upheld. The Tribunal found that the assessing officer had disregarded documentary evidence provided by the taxpayer to reconcile discrepancies related to revenue, contractual receipts, and declared salary expenses. This led to the creation of an arbitrary tax demand. Despite being given multiple opportunities by the Tribunal to verify the taxpayer’s claims with supporting documents, the department failed to submit a reconciliation report. Consequently, the ATIR annulled the assessment order entirely and deleted a tax demand amounting to Rs43,977,137.
The ATIR’s order also directed that a copy be sent to the Director General (Legal) of the FBR for necessary corrective action to prevent the recurrence of such instances of what the Tribunal described as “high-handedness and procedural lapses.”
Echoing the ATIR’s concerns, the Director Law’s communication emphasized that such a state of affairs not only erodes the confidence of taxpayers but also negatively impacts the department’s performance.
To address this, the Director Law has directed that a report be obtained from the concerned Chief Commissioner. Depending on the findings of this report, further instructions may be issued to field formations across the country to prevent the recurrence of poorly conducted and unsubstantiated assessments.
This move is seen as a crucial step towards addressing the issue of what is described as “frivolous poor assessments” and is aimed at improving the overall efficiency and credibility of the FBR.
