Mohsin Siddiqui (Chief Reporter)

The Federal Board of Revenue (FBR) has initiated measures to restrict tax recovery through bank account attachments, in response to a notice from the Islamabad High Court (IHC) regarding previous order violations.

According to the directives issued by the FBR, field formations are now required to seek prior approval from a committee led by the Chief Commissioner Inland Revenue before initiating recovery under Section 140 of the Income Tax Ordinance 2001. This committee, comprising two senior commissioners, will meticulously review each case before granting approval for bank account attachments aimed at tax recovery.

These directives replace the previous instructions from October 2021 and October 2022, which had eased restrictions on tax recovery methods.

The recent directives follow the IHC’s scrutiny of FBR’s consistent breach of its 2016 order in the Pakistan LNG case, which prohibited tax recovery through coercive measures.

As per the new guidelines, field officers are prohibited from taking any recovery action upon receiving a restraining order from the Supreme Court, High Courts, or appellate forums such as the Appellate Tribunal Inland Revenue.

Prior to initiating action under Section 140, notices under Section 138(1) will be issued in all cases, allowing a grace period of seven days for voluntary tax payment.

Moreover, the FBR has instructed Chief Commissioners to exercise discretion when filing appeals and references before higher courts, reserving such actions only for cases involving substantial legal questions.

This move is aimed at preventing undue harassment of taxpayers through arbitrary tax recovery measures, with its effectiveness yet to be fully realized.