The Lahore High Court (LHC) has voiced strong objections to the Federal Board of Revenue (FBR) being excused from paying court fees for Tax References, contrasting this sharply with the mandatory Rs. 50,000 fee levied on ordinary citizens for each reference. The court highlighted this discrepancy as potentially discriminatory against Pakistani citizens.
In a ruling by its Rawalpindi bench concerning the removal of the Commissioner Inland Revenue (Appeals) position under the 2024 Tax Laws Amendment Act, the LHC asserted that this legislative change is significantly detrimental to the judicial system. The court reasoned that the amendment disrupts the normal administration of justice and generates unnecessary bottlenecks in the processing of other court matters.
The court elaborated that the standard tax appeal procedure conventionally involves a three-tier process: initial appeal to the Commissioner (Appeals), followed by an appeal to the Appellate Tribunal, and ultimately reaching the High Court through a Tax Reference as per Section 133. The recent amendment eliminates the initial appeal stage.
The LHC expressed surprise at the justification provided by the Ministry of Law and Justice. The Ministry claimed that approximately 2 trillion Pakistani Rupees in tax revenue are currently held up in cases before the Appellate Tribunal, citing issues like understaffed or improperly constituted tribunals and sluggish case management.
To remedy this, the Ministry proposed that removing an appeal level would streamline and expedite the overall process, minimize paperwork, and generate cost savings. They further argued these adjustments would discourage frivolous appeals and lessen the burden on the system, according to the LHC’s summary of their presented rationale.
The LHC countered by pointing out that the FBR is the governing body for all tax regulations in Pakistan and is primarily responsible for tax collection. However, the court argued that the new amendment inadvertently places excessive strain on the court system. Currently, the availability of specialized tax benches is limited, with only a single bench in Bahawalpur and Multan respectively, two in Rawalpindi, and three at the main Lahore court location.
The court has consistently observed that decisions originating from Commissioners (Appeals) often suffer from poor drafting, inadequate justification, and fundamental flaws. This, in turn, contributes to a higher volume of cases progressing to the High Court. Frequent grounds for FBR appeals include: (1) omission of references to pertinent legal provisions, (2) lack of proper hearing procedures, (3) carelessly prepared rulings, and (4) insufficient consideration of case details.
Consequently, the court frequently has to send cases back to the Commissioners for proper reconsideration. This practice leads to an inefficient use of judicial resources, exacerbates the backlog of pending tax cases, and impedes the progress of other legal matters.
In light of these concerns, the LHC has summoned Dr. Ishtiaq A. Khan, the Director General of the FBR, to personally appear in court. He is required to provide a comprehensive explanation concerning the introduction of this amendment, including its background, intended purpose, and objectives. Furthermore, he must clarify how this alteration is contributing to delays within the justice system and impacting citizens’ rights.
