IR dept accused of deviating from statutory provisions

ISLAMABAD: In an apparent move to achieve budgetary targets, the Inland Revenue Department has been accused of resorting to attachment of foreign currency accounts of the directors of the company for recovering amount due from the company, deviating from the statutory provisions and the FBR’s instructions.

Tax experts told Business Recorder that as per facts of a case, Wisal Kamal Fabrics (Pvt) Limited has filed a representation before the Chief Commissioner Inland Revenue, Corporate RTO, Lahore that the officer had issued attachment notice to the bank wherein bank account of the directors were also attached for recovery of the tax due from the company, wherein, appeal was pending.

As per section 58 of the Sales Tax Act, 1990 recovery of any tax due from the private limited company can be made from the directors only in case the Company has been wound up, whereas, in this case, the Company was operational and the situation envisaged under section 58 was not attracted.

When it was learnt from the bank that bank account of the Directors have also been attached, the Company filed an application with the Commissioner Inland Revenue, Zone-II pointing out the illegal action.

It was further explained by the representative of the Company that the bank account of the directors includes foreign currency accounts and attachment of the foreign currency account for recovery has been forbidden by the FBR.

However, no action on the application was taken by the Commissioner Inland Revenue to withdraw the illegal notice issued in the case of director, rather department pursued the attachment notice and forced the banker to convert the balance in the Foreign Currency Account of the director to Pak rupees and issue a pay order in favour of the Commissioner Inland Revenue. Immediately, on receipt of pay order, the same was encashed before the taxpayer could agitate the matter at some other forum.

When contacted, Shahid Jami Advocate, counsel of the company observed that in the past, certain tax officials at Multan were suspended for pursuing information and recovery from the foreign currency accounts of the taxpayer.

He remarked that on one hand, the government is very concerned with the low level of foreign exchange reserves and is making all out efforts to increase the same, and on the other hand, the functionaries of the government are frustrating their efforts through recovery from the foreign currency account by converting their balances into Pak rupees and resultant decrease into the foreign exchange reserves.

He observed that it has been practice of the department based upon the FBR’s instructions that while enforcing recovery or seeking information from the bank, it was specifically mentioned that Foreign Currency Accounts are to be excluded.

Jami urged the FBR that facts of the case and maladministration by the field formation should be investigated and fresh instructions with strict warning should be issued to the field formation that firstly, in case, the company is not wound up, the recovery notice would not be issued to the directors, and secondly, when law would permit recovery from the directors under section 58 of the Sales Tax Act, even then the banks would be clearly told that foreign currency accounts are not to be attached.—SOHAIL SARFRAZ