FBR Warns Commissioners Against Taking Coercive Recovery Measures Before Time

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The Federal Board of Revenue (FBR) has warned the Chief Commissioners that coercive recovery measures including attachment of bank accounts are taken only after exhausting the 30 days time period available to the taxpayers for voluntary deposit of the assessed liability.

The FBR on Wednesday issued instructions to the Chief Commissioners Inland Revenue on the measures to avoid unnecessary litigation. In this connection, the FBR announced two major decisions to avoid litigation and unnecessary freezing of the bank accounts of the taxpayers. Firstly, coercive recovery measures like attachment of bank accounts should be avoided until a case passes the test of the appeal at the level of Commissioner Inland Revenue (Appeals). Secondly, a committee comprising of Senior Commissioner IR headed by Chief Commissioner IR may be constituted at the formation level to deliberate on the cases before according approval of the coercive measures.

According to the FBR instructions, litigation, whenever it occurs, involves costs of various types including opportunity cost, legal remuneration and man-hours spent on preparing appeals and defending cases before various appellate fora, both on part of the department as well as the taxpayer. It is, therefore, essential to avoid entering into protracted litigation by exercising prudence and ascertaining the potential of a case to pass the test of appeal, so as not to divert resources from other potential cases involving substantial revenue.

Furthermore, in order to forestall potential litigation by taxpayers on procedural lacuna, it is also important to ensure that no procedural lacuna is left during the proceedings of the case. It has been observed that in certain cases, officers tend to initiate recovery proceedings without giving statutorily available time of 30 days to the taxpayers by resorting to attachment of the bank accounts. Subsequently, taxpayers being aggrieved by the recovery proceedings before the expiry of a grace period, obtain stay orders from higher courts, resulting in a vicious circle of litigation at multiple fora, instructed the FBR. “Therefore, the situation warrants that prudence is exercised both in terms of identifying the cases and deciding if a case has to be pursued at higher legal fora and to what level,” read the instructions.

In order to avoid unnecessary “hazards of litigation,” the FBR further says:

The Zonal Commissioners are expected to exercise their good judgment and propose filing of reference and civil appeals in those cases where substantial revenue or a question of law critical to maintaining the essence of the fiscal statutes and tax machinery is involved, and to enter into litigation in other cases only after due consideration of the probability of success and cost involved.

The instructions read: “The Zonal Commissioners shall also ensure, in respect of officers of Inland Revenue subordinate to them that the jurisdiction in respect of a taxpayer or class of taxpayers is exercised by the concerned officers:

All notices issued are properly served as envisaged in the fiscal statutes:

Orders including ex-parte orders are passed after affording of opportunity of being heard.”

Besides, the FBR adds, the Chief Commissioners are also expected to oversee the entire process with the objective of ensuring “prudence litigation” and taxpayer facilitation.

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