Business Recorder
ISLAMABAD: The Federal Tax Ombudsman (FTO) has conveyed to the Federal Board of Revenue (FBR) that investigative provisions of the Income Tax Ordinance do not independently authorise coercive recovery or collection of tax without determination of tax liability. According to an FTO order issued on Monday, a complaint has been filed under Section 10 (1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), alleging an unlawful invocation of Section 175C of the Income Tax Ordinance, 2001, and forcible recovery of Rs1,500,000 from the complainant without due process and lawful authority. The departmental plea that the deposit was “voluntary” is devoid of illegality, substance, and cannot automatically cure substantive or procedural irregularities, especially where the surrounding circumstances indicate the incidence of coercive proceedings by revenue authorities possessing dominant statutory powers. The FTO held that Section 175C of the Income Tax Ordinance, 2001, primarily empowers the Inland Revenue authorities to conduct an inquiry, obtain information, and enforce the production of records for purposes of determining due tax liability. The provision is investigative in nature and does not independently authorise coercive recovery or collection of tax without determination of liability under the relevant charging and assessment provisions of law. It is an established principle of fiscal jurisprudence that taxes can only be levied, assessed, and recovered strictly in accordance with law. Any recovery during inquiry proceedings must remain traceable to a lawful statutory framework and supported by due process. The record reveals that after the initiation of proceedings, the taxpayer deposited Rs 1,500,000, after which the department discontinued monitoring and thus failed to pursue the proceedings to their logical conclusion. This conduct on the part of the Respondent department is legally indefensible. The superior courts of Pakistan have repeatedly deprecated extra-legal recoveries and coercive collection practices unsupported by statutory determination. Needless to emphasise, the act of extracting “voluntary deposits” during inquiry proceedings creates a serious presumption of unequal bargaining position between the taxpayer and revenue authorities, the FTO added. In view of the foregoing, the complaint is accepted. The actions of the Respondent department in obtaining a deposit during the proceedings under Section 175C and thereafter failing to conclude the proceedings through a lawful adjudicatory process are held to constitute maladministration within the meaning of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. Accordingly, it is recommended that the Federal Board of Revenue should conduct a fact-finding inquiry regarding the circumstances under which the amount was obtained from the complainant. The FBR should also, where warranted, fix responsibility against officers found to have acted beyond lawful authority and issue appropriate directions to the concerned Chief Commissioner to ensure that no adverse coercive or punitive action is initiated against the complainant, except strictly in accordance with law and due process. The FBR should issue appropriate administrative guidelines regulating acceptance of so-called “voluntary deposits” during inquiry or monitoring proceedings and ensuring that any such deposit remains subject to transparent, lawful determination under the relevant statutory framework, the FTO added. Copyright Business Recorder, 2026
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