The Act, containing several questionable elements, is promising to impugn one of the most fundamental rights of citizens by amending Article 127 subsection 1 of Income Tax Ordinance 200, which provides the right of appeal to anyone seeking redressal against the actions of Federal Board of Revenue (FBR).
This is being done to facilitate the tax authorities so they can increase their abysmal tax collection rate.
The Finance Act 2021 has made it mandatory for all persons to pay 100% tax before filing any appeal. Sub-section (2) of section 137 of the Ordinance provides that where tax is payable under an assessment or an amended assessment order — or any other order issued under the Ordinance — a notice shall be served to specify the amount of tax payable which must be paid within thirty days from the date of services of notice.
A new provision is proposed by Finance Bill 2021 which stipulates that the thirty-day limit will not be applicable in case an order is passed in consequence of or to give effect to any findings of any appellate authority. This should only be done when the order has reached finality and not before.
This has been vehemently opposed and many legal minds have highlighted that such an amendment is against the basic right of appeal. The adjudicating officers mostly pass harsh, arbitrary, illegal and excessive orders to show performance and display higher collection rates. These orders can only be quashed at the level of Appellate Tribunal Inland Revenue (ATIR), higher courts and the Supreme Court.
If this amendment is passed then it will not only violate one of the fundamental rights but also contradict the judgments of the honourable Supreme Court in which it was declared that the fundamental right of appeal was sacred and could neither be made conditional nor be removed from a person. The verdict had also set aside the tax amendments of Finance Act 2010 and Finance Act 2012.
The top court had held that the act of attaching a condition to an appeal is a violation of the fundamental rights of a person and is unconstitutional.
Demanding 100% of disputed tax payment before final adjudication by an independent appellate forum is a gross violation of fundamental constitutional rights that safeguard free access to justice as enshrined in Article 4 of the Constitution of Pakistan 1973. This displays the level of Constitutional understanding our stakeholders have.
In face of extreme criticism, the federal government and FBR have cited two major reasons in their defence. The first reason that they explained that the collection of tax liability was of the amount that the filer himself has declared on his tax return and the second was the existence of such in the statute.
Both are strawman arguments pleaded by a desperate department. FBR has repeatedly tried to utilize draconian methods which have ranged from threats to outright blackmail and in all those cases the individual was only able to seek relief from the Appellate forum and for this we simply need to peruse two judgments passed by the Honourable Courts.
In its most recent judgment cited 2020 PTD 2144 Lahore Messer Craftsmen Limited Vs Customs the court held the following
“till the decision of the appeal, no coercive measures for recovery of the disputed amount shall be taken against the Petitioner by the Respondents.”
In 2019 PTD Tribunal 1201 Messers International Enterprises vs Commissioner Revenue Zone, Karachi the court had perused the matter and passed its judgment accordingly
“Appellate authority had the power to grant interim relief whenever any appellant requested for such a relief….. When taxpayer in dispute with regard to assessment order or order pending in shape of appeal, had preferred appeal disputing whole or part of amount demanded tax payer could approach requesting not to have coercive measures taken against him and recovery proceedings could be stayed till such time appeal was pending before appellate forum.”
Both of these judgments secure the appellant from any recovery actions initiated by the FBR and It can be perused from the above that this unconstitutional and illegal amendment is not only inherently void but is also against the binding authority of the Supreme Court and the High Court as held in Article 189 and 201 respectively. This can be seen in Mehram Ali and Others v. Federation of Pakistan and others PLD 1998 SC 1445;
“That the right of ‘access to justice to all’ is a fundamental right, which right cannot be exercised in the absence of an independent judiciary providing impartial, fair and just adjudicatory framework i.e. judicial hierarchy. The Courts/Tribunals which are manned and run by executive authorities without being under the control and supervision of the High Court in terms of Article 203 of the Constitution can hardly meet the mandatory requirement of the Constitution.”
The courts have repeatedly held that the tribunals under executive control have often acted in an unjust manner and the right of appeal has allowed them to seek redressal against the injustice meted out against them and if the right of appeal is made conditional in such a coercive manner then it will infringe one of the most basic fundamental rights held by a person.
The state must take responsibility and focus on bringing forth legal amendments that would help increase the tax collection rather than bring forth draconian reforms that promise to support the predatory actions of the tax department.
The government must re-examine the Finance Act 2021 and remove this unconstitutional amendment. It would be far more prudent and beneficial to bring forth a proper and implementable finance policy that would resemble a proper financial project of a competent government that can not only enhance the tax collection but also the tax sphere, creating a proper revenue stream for the state.