The Supreme Court of Pakistan has ruled that issuing tax recovery notices without providing reasonable time is illegal, setting a landmark precedent in favour of taxpayers' rights. According to media reports, in a detailed 18-page judgment authored by Justice Ayesha Malik, a three-member bench headed by Justice Muneeb Akhtar dismissed intra-court appeals filed by the Federal Board of Revenue (FBR).

The court upheld the earlier verdict of a Lahore High Court single bench, terming FBR’s recovery notices against two private companies—worth Rs 2.92 billion and Rs 1.88 billion, respectively—as illegal and void. According to the judgment, the Commissioner of Inland Revenue’s issuance of appeal decisions and recovery notices on the same day was a violation of due process and natural justice.

 “The taxpayer must receive the appeal decision before any recovery action is initiated,” the court noted, highlighting that Section 140 of the Income Tax Ordinance does not allow same-day recovery notices. The ruling stressed that the use of coercive powers without giving sufficient notice undermines taxpayers’ dignity, fair trial rights, and access to justice. The court further observed that the FBR’s conduct amounted to an abuse of authority, potentially damaging the business reputation of companies through arbitrary recovery.

 “Recovery should be preceded by a lawful notice and adequate time. No law requires immediate payment on the same day,” the court stated. The FBR failed to justify its actions and could not prove its legal standing in court. The Supreme Court emphasised the need to strike a balance between tax recovery and protection of civil liberties.This decision is expected to serve as a crucial judicial guideline on how taxation authorities should exercise their powers within the framework of justice.

Credit: Independent News Pakistan (INP)