FBR Orders Revenue Officers to Follow Tribunal Guidelines in Withholding Tax Cases

The Federal Board of Revenue (FBR) has directed all Inland Revenue assessing officers to follow the procedural and legal framework laid down by the Appellate Tribunal Inland Revenue for passing assessment orders against withholding agents.

In this regard, the FBR has issued instructions to the Chief Commissioners of Inland Revenue.

According to the FBR’s instructions, refer to the subject and find enclosed a copy of the Order received from Appellate Tribunal Inland Revenue, ATIR (ITA No. 1889/113/2024 wherein the learned ATIR has dilated upon in detail the contents of the order passed by the assessing officer under section 161/205 of the Income Tax Ordinance, 2001 wherein procedural and legal framework as contained in the law has totally been ignored which is detrimental to the cause of due diligence, compliance, adherence to legal process and revenue security thus leading to unnecessary litigation at various fora.

The aforementioned judgment of the ATIR has not only pointed to the process of initiation of proceedings in the contest of a withholding agent/prescribed person as defined u/s 153 of the Income Tax Ordinance, 2001 but has also pin-pointed a step-wise process to proceed with an assessment order related to the realm of withholding regime as stipulated below: –

1. Status of Return filed U/S 114.
2. Status of statement filed U/S 165.
3. Identification of Non-Compliance.
4. Verification of Taxpayer’s Compliance.
5. Initiation of Reconciliation proceedings under Rule 44.
6. Conclusion of reconciliation proceedings tinder Rule 44.
7. Issuance of Show Cause Notice u/s 161(1) or 161(1 A).
8. Consideration of Taxpayer’s Explanation and Decision Making.
9. Issuance of speaking order u/s 161
10. Imposition of Default Surcharge u/s 205
11. Mention right to Appeal in ATIR or high Court.
12. Recovery proceedings (If Necessary).

The learned ATIR in this regard has relied upon certain case laws i.e., (CIR Vs. Islam Steel Mills, (2015 PTD 2335) and M/s Nishai (Chunian) vs. Federal Board of Revenue, (2015 PTD 1385), Pepsi Cola International (PTCL 2023 CL 71) and Marwal Enterprises (2023 PTD 732) and has emphasized that any proceedings conducted under the Ordinance are deemed to be judicial proceedings within the meaning of section 224 of the Ordinance ibid.

In view of the above, it is, therefore, instructed that all assessing officers working under your administrative control be directed to follow the procedural and legal framework thus identified to avoid frivolous litigation and frame quality orders that can stand the test of appeals.

The Chief Commissioner IR will ensure that the aforementioned instructions are duly served upon all the assessing officers for future compliance, FBR added.