ITO Sec 175: FBR DI&I is legally competent to issue opinions: IHC – Pakistan

ISLAMABAD: The Islamabad High Court (IHC) ruled on Tuesday that the Intelligence and Investigations Directorate of the Federal Revenue Board (FBR) can take notice of and has legal jurisdiction to issue opinions under Section 175 (1 ) of the Income Tax Ordinance (ITO) 2001 for the enforcement of any provision of the Ordinance.

A divisional bench of the IHC comprising Judge Aamir Farooq and Judge Ejaz Ishaq Khan, while accepting the claims in an intra-judicial appeal (ICA) from the FBR Intelligence and Investigations Directorate, overturned the judgment to judge unique from 18-03-2016.

Attorney Hafiz Ahsaan Ahmad Khokhar represented the Intelligence and Investigations Directorate before the divisional bench.

Taxpayer M/S KK Oil and Ghee Pvt Ltd had challenged the Intelligence and Investigations Directorate opinion issued under Section 175 of the ITO.

He argued that the notice was illegal, based on a wrong assumption of jurisdiction and misapplication of the law, and that it should be declared ultra vires the law and set aside.

The single judge accepted the taxpayer’s claims in brief and decided against the judgment of the tax agency dated 18-03-2016, and ruled that the opinion issued by the Directorate of Intelligence and Investigations under section 175 of the ITO was incompetent. The tax investigation agency challenged the impugned judgment before the IHC division bench.

Khokhar said that the FBR Intelligence and Investigations Branch was established under Section 230 of the Income Tax Ordinance 2001 to deal with all matters relating to taxation and collect information on the tax evasion, tax evasion and loss of income.

He further stated that FBR on 09-02-2015 issued SRO 115/2015 regarding more detailed duties with reference to different provisions of the Income Tax Ordinance, where also Section 175 was included.

Khokhar argued that a notice issued under section 175(1) of the ITO was lawful and within the jurisdiction because certain facts had been concealed and upon inspection following the notice that the taxpayer had incorrectly claimed exemption under Section 65-D of the Ordinance read with Section 159 of the ITO. , which caused huge losses to the public treasury, but this aspect was completely ignored by the single judge in chambers when delivering the judgment.

He further argued that a U/S 175(1) Notice of Order may be issued by the Intelligence and Investigations Branch to enforce any provision of the Income Tax Order of 2001 to collect information for the purpose of investigation relating to tax evasion and fraud and that Section 175 of the Income Tax Ordinance gave ample authority to the Intelligence and Investigations Directorate and specified very clearly that section 65-D of the Ordinance cannot be read in isolation, thus the proceedings under section 175(1) of the Ordinance were lawfully conducted by the tax agency and fell within the jurisdiction legal.

Counsel for the respondent taxpayer was of the view that the Intelligence and Investigations Branch could not issue a U/S section 175 notice of the order to the taxpayer and that the order issued by a single bench was lawful and lawful .

The bench, after hearing both parties, entered judgment and found that the only issue before the court was whether the notice issued under Section 175 of the Intelligence and FBR investigations were legal and in accordance with the law.

Copyright Business Recorder, 2022

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