Tax advisors in Pakistan have called upon the Federal Board of Revenue (FBR) to implement a more comprehensive approach to serving tax notices to taxpayers. This follows concerns raised by Javed Iqbal Qazi, a Supreme Court Advocate, in a letter to the FBR Chairman.
Central Issue: Limited Reliance on IRIS System
The core of the issue revolves around the FBR’s current practice of primarily relying on the IRIS system for serving tax notices. While the IRIS system plays a role in communication, Qazi argues that it shouldn’t be the sole method. Section 218 of the Income Tax Ordinance, 2001, outlines various acceptable modes for serving notices.
Modes of Notice Service as per Law:
The Income Tax Ordinance clearly defines acceptable methods for serving notices:
- Personal Service: Directly delivering the notice to the taxpayer (including those with legal disabilities) or their representative.
- Registered Post or Courier: Sending the notice via registered mail or courier service to the taxpayer’s usual or last known address in Pakistan.
- Civil Procedure Code Service: Following the procedures outlined in the Code of Civil Procedure, 1908, for serving summons.
- Electronic Service: Delivering the notice electronically in a prescribed manner.
The Ordinance further clarifies the acceptable methods for serving notices on non-individuals:
- Representative Service: Serving the notice on the taxpayer’s authorized representative.
- Registered Office/Address: Sending the notice by registered post or courier to the taxpayer’s registered office or designated address for receiving tax notices within Pakistan. In the absence of such an address, registered post can be used to deliver the notice to any office or place of business the taxpayer maintains in Pakistan.
- Civil Procedure Code Service: Similar to individuals, the procedures outlined in the Code of Civil Procedure, 1908, can be followed.
- Electronic Service: Similar to individuals, electronic service is also an option, provided the prescribed procedures are adhered to.
Importance of Diverse Service Methods:
Qazi emphasizes that relying solely on the IRIS system for notice service poses a risk. There could be situations where taxpayers miss essential notices if they haven’t accessed the system recently. Utilizing a combination of the methods outlined in the Ordinance provides a more robust approach and ensures taxpayers are properly informed.
Time Constraints and Potential Consequences:
The urgency for improved notice service stems from the approaching deadline for completing tax assessments for the 2018 tax year, set for June 30, 2024. Qazi warns that FBR’s overreliance on the IRIS system could lead to a significant number of ex-parte assessments.
Ex-Parte Assessments: A Cause for Concern
Ex-parte assessments are those made without the taxpayer’s participation. These situations can arise when a taxpayer fails to receive or respond to a tax notice. While this expedites the assessment process, it can be detrimental to taxpayers. Without an opportunity to present their case, they may face unfair assessments based on incomplete information.
Potential Benefits of Improved Service Procedures:
Implementing a more comprehensive notice service approach offers several advantages:
- Reduced Ex-Parte Assessments: By ensuring taxpayers receive notices through various channels, the number of ex-parte assessments can be minimized.
- Fairer Assessments: Taxpayers with proper notification can participate in the assessment process, leading to fairer and more accurate tax assessments.
- Improved Workload Management: A more efficient service approach could streamline the workload for FBR field officers.
- Reduced Burden on Appellate Authorities: Fewer ex-parte assessments translate to a lighter workload for appellate authorities who handle taxpayer appeals.
- Enhanced Tax Collection: Fair and accurate assessments, combined with taxpayer participation, can potentially lead to improved tax collection.
Call for Additional Measures:
Beyond improved notice service, Qazi proposes further directives for FBR field officers. He advocates for assessments based solely on merit and a focus on avoiding harsh or unlawful determinations based on conjecture.
