Commissioner Inland Revenue asked to avoid annulment of orders

KARACHI: The Federal Board of Revenue (FBR) issued instructions to Commissioner Inland Revenue (Appeals) for avoiding annulment of orders in a bid to control the first appellate forum available to taxpayers, it was learnt on Saturday.

The office of CIR (Appeals) is the first appellate forum available to taxpayers where they seek remedy against orders passed by tax officers.

The FBR, through a letter dated February 15, 2021, issued directives to CIRs (Appeals) to avoid unnecessary annulment of orders with directions.

The CIRs have been authorised to exercise powers under Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 for grievance redressal of taxpayers against adverse orders passed by IR officers. Through the letter, the FBR noted: “… frequent annulled with directions orders will reflect adversely on the performance of the officers.” Tax practitioners termed the move of the FBR as an attack on independence of judiciary and violation to Article 10A of the Constitution.

The Article 10A of the Constitution provides for ‘Rights to fair trial’ stating: “For the determination of his civil rights and obligations or in any criminal charge against him a person shall be entitled to a fair trial and due process.”

The appellate mechanism under tax codes provides the right to appeal before the CIR Appeals in case a taxpayer is aggrieved by the assessment made by the adjudication officer. In case either of the parties, the taxpayer or the commissioner is aggrieved of the decision of the Commissioner Appeals, the aggrieved party can carry the matter further in appeal before the Appellate Tribunal Inland Revenue (ATIR) as the case may be.

The Commissioner Appeals are under administrative control of the FBR and is the first appeal forum out of the 4-tier appellate system, which also includes ATIR, high courts and the Supreme Court.

In the past the FBR made certain tactics to influence the Commissioner Appeals, which caused distrust amongst the taxpayers.

A high powered Tax Reform Commission in its report released in 2015, noted: The first appeal under the prevalent 4-tier appellate system lies before the Commissioner of Appeals/Collector Appeals working under the administrative control of Federal Board of Revenue. It is prima facie a travesty of justice in eyes of a taxpayer: an aggrieved taxpayer is to seek relief from the departmental authorities which could be susceptible to overt and covert pressures from FBR.

“The annual Performance Evaluation Reports (PER)—vital for further promotion in the service—of these Commissioner (Appeals) and Collector (Appeals) are written by their bosses in FBR. Due to this constraint, they cannot impart full justice. The recent perception of attempts by the FBR to influence the Commissioner (Appeals) and Collector (Appeals) have added to the distrust in the taxpayers in the first appeal forum.”

The commission in its recommendations stated: “Appeal Commissioners will be relieved of overt pressure from FBR and worry about the future of their cases. The commissioner appeals should be placed under the Ministry of Law.”

The tax practitioners said that the latest directives of the FBR would encourage the tax officers in misuse of powers besides it would open the doors for corruption.

Ali A Rahim, former president of Karachi Tax Bar Association (KTBA) said the fair trial is a fundamental right of taxpayers. “The FBR should avoid interfering with appeal matters,” he added.

Another former president of the tax bar requesting not to be named said the KTBA had filed a constitutional petition before the Sindh High Court regarding independence of tax forum.

Through CP # 1691/2011 KTBA vs Federation of Pakistan, it is prayed that the tax appellant forum should be brought under the ministry of law. Further, Commissioner Appeals should be appointed on the bench of the ATIR as the accountant member of the tribunal is also under the administrative control of the FBR, which should also be brought under the ministry of law.

The president said the CIR Appeals is an independent forum and settlement of cases in a fair manner is also a big relief for taxpayers.

The Tax Reform Commission pointed out that once a taxpayer has faith in the effectiveness of the legal remedies against what a person perceives as an unjust tax levy or unjust action of the taxation authorities, he is more likely to be truthful and honest to the taxation authorities in declaring his income, and to accept a reasonable levy of tax.

“The degree of taxpayer satisfaction does therefore go up, which in turn, in a sine qua non for better voluntary compliance resulting in greater resource mobilization for the nation.

“… A tax administration which disposes of appeals promptly and reaches a fair and final settlement speedily is itself entitled to be classified as a tax incentive.”