PTBP Web Desk
The Sindh High Court (SHC) has issued a critical directive to the Federal Board of Revenue (FBR), emphasizing the need to train and educate officers in the adjudication and appellate hierarchy. The court highlighted the importance of passing well-reasoned orders in tax matters, aligning with Section 24A of the General Clause Act, 1897, and settled legal precedents.
This directive came in response to reference applications filed under Section 133 of the Income Tax Ordinance, 2001. The applicant had challenged the decision of the Commissioner (Appeals-VI), Karachi, dated July 31, 2024, citing inadequacies in the reasoning provided by the assessing officer and the appellate authority.
The crux of the case revolved around a dispute regarding the applicable tax rate. The applicant was served a show-cause notice under Section 122(9) of the Ordinance, which argued for a 1% turnover tax on the product in question. However, the applicant contended that the correct tax rate should be 0.2%, as the product falls within the category of “Fast Moving Consumer Goods.”
Despite the applicant’s detailed response, the assessing officer issued an adverse order without sufficient reasoning, a shortfall that was later echoed in the order issued by the Commissioner (Appeals).
The SHC noted that both the assessing officer and the Commissioner (Appeals) failed to address the factual and legal aspects of the case adequately. The court remarked that such omissions compel litigants to approach the High Court, increasing the burden of tax litigation.
The SHC stated:
“The officers of the department, including the Commissioner (Appeals), as a matter of routine are passing orders in a slipshod manner without even discussing the law or facts of a particular case.”
Instead of reducing litigation through well-reasoned orders, the court observed that such practices lead to repeated remands and fresh proceedings, further delaying the resolution of tax disputes.
The SHC underscored the necessity for the FBR to implement structural reforms within its adjudication and appellate hierarchy. It recommended the following measures:
- Training Programs: Officers must receive comprehensive training on drafting detailed and legally sound orders.
- Issuance of Instructions: Clear guidelines should be provided to ensure compliance with Section 24A of the General Clause Act, 1897.
- Enhanced Reasoning: All orders should reflect a thorough analysis of the facts and legal aspects of each case.
The court’s directive aims to facilitate swifter disposal of tax matters while ensuring justice for litigants.
The SHC highlighted that changes introduced through the Finance Amendment Acts of 2024 have expanded the scope of reference applications under Section 133 of the Ordinance. Courts can now address both questions of law and facts, further increasing the complexity and volume of tax-related cases.
However, the lack of detailed reasoning in the orders passed by assessing officers and appellate authorities has counteracted the intended benefits of these legislative amendments. Instead of streamlining litigation, it has led to an increase in pending tax matters.
In its ruling, the SHC set aside the orders issued by the Commissioner (Appeals) and the assessing officer. The matter has been remanded to the original authority for a fresh decision. The court directed that the new order must be:
- Well-reasoned and detailed.
- Based on a comprehensive examination of all factual and legal issues raised by the applicant.
- Issued after providing the applicant with an opportunity for a hearing.
The SHC’s directive emphasizes the need for administrative and legal reforms within the FBR to prevent the recurrence of such issues. By addressing these deficiencies, the FBR can reduce litigation, improve efficiency, and ensure that tax matters are resolved fairly and promptly.
This development serves as a wake-up call for the FBR and its officers to adopt a more meticulous and legally sound approach to handling tax disputes.
