FBR’s Online Notices Are Now Legally Valid in Courts
Sharing the legal implications about the withdrawal of the letter, Asif S Kasbati, a leading Karachi-based tax advisor and ICAP Fiscal Laws Committee Member informed the media here on Friday that following the withdrawal of the legal clarification, now the electronic service of notices is legally valid as per FBR. This would also result in a substantial increase in litigation in courts.
Keeping in view the serious practical difficulties due to changes made in section 218 through Finance Act 2017, the FBR had issued a ‘Facilitation & Practical’ letter in 2018 whereby electronic service was declared as an additional means of service and will not be treated as a legal mode of service. The said letter has now been withdrawn through a new letter issued by the FBR on Feb 3, 2021.
Through a new letter addressed to the Chief Commissioners of Inland Revenue, the FBR now stated that the old clarification is in contradiction to the following provisions of Income Tax Ordinance (ITO), 2001:
- Clause (d) of sub-section (1) of section 218, Income Tax Ordinance 2001;
- Clause (d) of sub-section (2) of section 218 of the Income Tax Ordinance 2001
- Rule 74 of the Income Tax Rule, 2002.
In order to bring consistency in the administration of the Income Tax Ordinance 2001 and to remove anomaly from the statutes, the FBR’s Clarification of 2018 has been withdrawn with effect from Feb 3, 2021, FBR letter added.
Tax expert specified that the FBR’s clarification of 2018 has been withdrawn with effect from Feb 3, 2021, without considering its serious repercussions on the taxpayers and the business community.
Asif S Kasbati stated that the FBR has withdrawn this past clarification wherein it was stated that electronic mode of service may be resorted to as an additional means of service for the facilitation of the taxpayers and may not be treated as a legal mode of service.
Regarding the history of the FBR letter of 2018, he highlighted that it was issued as ICAP, Bar matters, etc made representations before the FBR the status prior to Finance Act 2017 and due to changes in Order V of the First Schedule to the Code of Civil Procedure, 1908 by Finance Act 2017 affecting income tax law as well, the FBR letter of 2018 was issued keeping in serious issues.
Asif Kasbati informed that there were certain issues that led to FBR facilitation direction vide letter dated Feb 22, 2018.
Firstly, as per several representations made before the FBR by tax bar associations, etc. In various cases, the Email ID of a high-level official is given, who may not check the email or may not take timely action. In certain cases, tax manager, etc. Email ID is given, who may be on leave when the notice or order is sent by email. It is not possible to visit the e-folder every day by the relevant authorized person, just to check as to whether or not notice or order is received.
Tax expert highlighted that owing to the said withdrawal of FBR clarification, if the taxpayers, associations, and bars etc will remain silent, the draft insertion of Rule 74(2A) is likely to be finalized in spite of the following difficulties for the taxpayers:
- The SMS has been sent but due to any reason, the SMS is either not been delivered or the person remains unaware of the message.
- To keep such an SMS service when Mobile Snatching is very common.
- For a taxpayer or any other individual, it is difficult to keep an SMS trail for a long time like records for six years; and in a case, pending appeals at any forum may be more too.
- The taxpayer is out of the country and the cell is switched off.
- The taxpayer is out of signal coverage.
- The cell phone message memory does not permit the receipt of the message.
- The Cell phone is in the name of the Taxpayer but under the use of children or any other family member who may not be aware of the same and take this message to ‘scam’.
Asif Kasbati added that owing to the difficulties stated, the tax advisers and taxpayers are confident that the FBR’s letter dated 3.2.2021 will be withdrawn by the FBR and the new Draft insertion of Sub-rule (2A) in Rule 74 vide SRO 1250 about electronic SMS service is likely to be unsuccessful, as it will lead difficulties for the taxpayer as well as tax consultants.
Hopefully, the tax bars will also raise their concern against the FBR letter dated 3.2.21 as well as the proposed insertion of Sub-rule 2A in Rule 74, he added.
Kasbati also referred to another similar issue whereby FBR proposal about the insertion of Sub-Rule 2A about SMS Services in Rule 74 of the Income Tax Rules, 2002 vide SRO 1250 which is opined to be unsuccessful owing to 2018 FBR letter.
Owing to the difficulties stated above, Kasbati is of the view that letter dated 3.2.2021 is likely to be withdrawn by the FBR and the new Draft insertion of Sub-rule (2A) in Rule 74 vide SRO 1250 about electronic SMS service is likely to be unsuccessful, as it will lead serious issues for the Taxpayer as well as Tax Consultants and will lead matter to the Appellate Forum and Courts, where several appeals are pending since long.
Kasbati concluded that the tax bars, ICAP, etc are expected to raise their concern against the FBR letter dated 3.2.21, as well as proposed insertion of Sub-rule 2A in Rule 74, pursue the status of service of Notices, etc was prior to the Finance Act 2017. Hence, he sent his concern to the FBR Chairman & Member IR, etc as well as tax bars and relevant associations.
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