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ISLAMABAD: The Federal Board of Revenue (FBR), Wednesday, directed Chief Commissioners that the coercive measures including attachment of bank accounts should be avoided until case has been decided at the level of first forum of appeals i.e. Commissioner Inland Revenue (Appeals).

The FBR has issued instructions to the Chief Commissioners Inland Revenue, here on Wednesday, on the measures to avoid unnecessary litigation.

The FBR has also warned 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.

According to the sources, the decision for barring tax officials till case has been decided by the Commissioner Appeals would check the past practice in the field formations of issuing back dated orders for attachment of bank accounts or non-serving of notices of recovery of tax.

The FBR has taken two major decisions to avoid litigation and unnecessary freezing of bank accounts of the taxpayers.

First, the coercive measures like attachment of bank accounts should be avoided until a case has passed the test of the appeal at the level of Commissioner Inland Revenue (Appeals).

Second, a committee comprising Senior Commissioner IR headed by Chief Commissioner IR may be constituted at formation level to deliberate on the cases before according approval of the coercive measures.

The FBR’s instructions said that litigation, whenever 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 of the recovery proceedings before expiry of the grace period, obtain stay orders from higher courts resulting in vicious circle of litigation at multiple fora.

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, the FBR stated.

In order to avoid unnecessary “hazards of litigation”, the FBR has advised the field formations that:

(i) Coercive measures until case has passed the test of the appeal at the level of Commissioner Inland Revenue (Appeals) may be avoided. Moreover, in order to utilize collective wisdom, a committee comprising Senior Commissioner IR headed by Chief Commissioner IR may be constituted at formation level to deliberate on the cases before according approval of the coercive measures.

(ii) While preparing fining of references and civil appeals, the Zonal Commissioners are expected to exercise their good-judgement 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 enter into litigation in other cases only after due consideration of the probability of success and cost involved.

(iii) 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.

Coercive recovery measures under relevant provisions of the fiscal statutes are taken only after exhausting the time period statutorily available to the taxpayers for voluntary deposit of the assessed liability.

The chief commissioners are expected to oversee the entire process with the objective of ensuring “prudence litigation” and taxpayer facilitation, the FBR’s instructions added.

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