Tax experts divided on FBR’s powers in Justice Isa’s case

Authorities can't probe Justice Isa's wife especially if she is not dependent on her husband

ISLAMABAD: Leading tax experts appeared divided on Saturday on the Federal Board of Revenue (FBR)’s powers in connection with probing and seeking the record older than six years from the wife and children of Justice Qazi Faez Isa regarding their London properties.

Though the top court has given the FBR two months’ time to finalise a report by initiating tax proceedings against Justice Isa’s family, the debate has already started whether the tax authorities can seek the record after a certain period of time because, for some, it is a time-bound thing. The experts also say that there are other laws that give “blanket exemption” to the money transferred through a foreign currency account.

To a question whether the FBR could seek record from Justice Isa’s wife under the Income Tax Ordinance, 2001, renowned tax expert Ashfaq Yousuf Tola said that the law prohibits the authorities from opening five-year-old records. He expressed these views in the talk show, The Review.

He said that Section 177 of the Income Tax Ordinance, 2001, states, “Provided further that the commissioner shall not call for record or documents of the taxpayer after expiry of six years from the end of the tax year to which they relate.”

If you read the Supreme Court’s short order, Tola said, you will see that the court has ruled that the FBR would work only within the limits of the ordinance and the respondents have the right to appeal under the ordinance because the proceedings under 2001 Ordinance and before the Supreme Judicial Council (SJC) are “distinct and separate from each other”.

“The order has made is clear that one can’t travel beyond the set jurisdiction,” Tola said. “It is very clear that the FBR can’t go beyond the six-year limit.”

He further explained that the FBR will examine if the judge’s wife was a resident or not, adding that the FBR has the power under Section 116(1) of the 2001 Ordinance to call the record if she was a resident and did not file wealth statement.

In addition, Tola said, the income tax commissioner has the power to ask anyone to present record under Section 116(1). However, he added, no penalty could be imposed because that would be the use of discretionary powers of the commissioner to show the record of the previous years. For penalty under discretionary powers, he said, she must be a resident during the period.

Referring to the video statement of Justice Isa’s wife before the top court, Tola said, she had shown the documents pertaining to the year 2018 but the officials will see her status before 2018.

Contrary to what Tola said, eminent tax expert Dr Ikramul Haq, who is also a lawyer and visiting professor at LUMS, while talking to The Express Tribune said that notices can be issued because the law was amended in 2019 and neither issuing notice was a time-barred thing nor the matter could be considered a past and closed transaction.

He said that the FBR can issue a notice under Section 122(5) of the 2001 Ordinance, as they earlier did in this case. Since, spouse and children of the judge are non-residents, Haq added, no notice can be issued by the FBR inland revenue commissioner to them without first appointing a representative for them in Pakistan under Section 172 of the 2001 Ordinance.

Haq, however, revealed that Section 5 of the Protection of Economic Reforms Act, 1992, would create hindrance for the FBR authorities as it provides blanket exemption to foreign currency accounts.

Referring to Justice Isa’s wife’s statement before the top court where she said that money was transferred from her foreign currency accounts to her account in London, Haq said, “Neither FIA nor income tax authorities can ask for the source of money under the 1992 law.”

He said that a public-office holder is bound to disclose sources but the authorities can’t probe further if the wife takes the plea that she is not bound to answer, especially when she is not even dependent on her husband.

At this point, Haq predicted that the FBR authorities would make an “adverse report” on the “assumption” that the money transferred belonged to the judge and it will then land before the SJC, which will decide if it should proceed on the basis of a presumption. “The FBR won’t be able to sustain pressure. It will send an adverse report,” he said.