ISLAMABAD: The Supreme Court of Pakistan has declared the issuance of recovery notices by the Federal Board of Revenue (FBR) without giving taxpayers appropriate time as illegal and against the principles of justice.
A three-member bench headed by Justice Athar Minallah heard the case, and an 18-page judgment authored by Justice Ayesha Malik was issued. The court dismissed the intra-court appeals filed by FBR.
The Supreme Court annulled an FBR recovery notice of Rs 2.92 billion issued to one private company and similarly declared void a withholding tax recovery notice of Rs 1.88 billion against another private entity. In both cases, the recovery notices were issued by tax officers on the very same day appeals were filed and decided.
Upholding the decision of a single judge of the High Court, the Supreme Court ruled that issuing immediate payment orders under Section 140 of the Income Tax Ordinance contradicts legislative intent. It emphasized that the appeal decision by a tax officer must be duly served to the taxpayer before any recovery action is taken.
The judgment clarified that the term “by the date” under the law implies providing “reasonable time” — not demanding payment “on the same day.” The court highlighted that protecting legal rights, ensuring a fair hearing, and preserving the dignity of taxpayers are essential before executing any recovery.
Justice Ayesha Malik observed that the conduct of the Commissioner Inland Revenue amounted to an authoritarian misuse of power, violating fundamental rights including dignity, fair trial, and access to justice. The court further noted that coercive recoveries could severely damage the business reputation of companies.
The verdict concluded that FBR failed to justify its actions and ruled that both the issuance of notices and the withdrawal of funds were unlawful. It emphasized the need to maintain a fair balance between tax collection efforts and citizens’ rights.
