Refund pleas not needed for tax recovered wrongfully

The Islamabad High Court (IHC) has held that the tax recovered illegally could not be held up subject to processing of any refund applications.

The court has also ruled that its payer could not be obliged to then follow the procedure for seeking a refund and join a queue to regain the wrongfully collected amount.

It has been reliably learnt that landmark observations were recorded in an order dated March 28 this year by the IHC while hearing of a constitutional petition filed by the Islamabad Electric Supply Company (IESCO) against the Federal Board of Revenue (FBR) Large Taxpayers Office (LTO) for snatching away funds from the power firm’s bank accounts under the “guise” of tax collection without following the due process of law.

When contacted, tax lawyer Waheed Shahzad Butt said earlier, the IHC had also summoned the LTO member (operations-inland revenue) and chief commissioner to appear in person for violating its order in tax recovery matters.

The primary officer, involved in the matter was Masood Akhtar, who is presently posted as FBR chief (policy).

Waheed said earlier, notices were issued to Akhtar as well as the commissioner (inland revenue) at the LTO Islamabad to satisfy the court as to why penal action should not be taken for coercively collecting funds from the accounts of the petitioner illegally and its refusal to return the funds after the IHC had taken notice and brought the matter to their attention to take corrective action.

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The IHC order read: “Once it is admitted that the amounts were coercively recovered in breach of the court’s orders, the taxpayer cannot be obliged to then follow procedural requirements for seeking a refund and get in a queue to regain control over such wrongfully collected amount.”

What emerges from the submissions of the parties is that the refund in the amount of Rs2.387 billion had already been sanctioned, but not been credited to the account of the petitioner.

A further amount of Rs1.06 billion, which was collected during a period when an injunctive order was in the field, remains with the FBR LTO, which seeks to adjust such it against a subsequent tax demand that has been generated against the petitioner.

The petitioner’s grievance before the court is that an amount was forcibly recovered from its accounts.

The recovery was affected through coercive means in breach of an order of the court and that is why it should be declared void.

The IHC ordered that the amounts of Rs2.378 billion and Rs1.06 billion should be credited to the accounts of the petitioner from which they were wrongfully expropriated or another account as identified by the petitioner within a period of 15 days.