In a significant decision, the Peshawar High Court has ruled against the Federal Board of Revenue’s (FBR) practice of issuing notices solely through the online IRIS portal, particularly when it pertains to companies and Associations of Persons (AOPs). This ruling clarifies the proper procedures for FBR notice delivery under Section 218 of the Income Tax Ordinance, a crucial aspect for ensuring due process and compliance.
The decision underscores the importance of adhering to legal provisions for communication, distinguishing between individual taxpayers and corporate entities.
Understanding Section 218: How FBR Should Send Notices
Section 218 of the Income Tax Ordinance governs the methods by which the FBR must deliver notices to taxpayers. The recent court ruling has brought renewed focus on the interpretation and application of this section, particularly concerning digital vs. physical communication.
Notice Delivery for Individuals (Resident and Non-Resident)
For individual taxpayers, whether resident (those who have spent more than 183 days in Pakistan) or non-resident (those who hold NICOP/POC and have spent more than 183 days outside Pakistan), the law provides for multiple valid methods of notice delivery:
- Physical Mail: A notice sent to the available physical address of the individual is considered valid.
- IRIS Portal: A notice issued on the FBR’s IRIS portal is also deemed acceptable. Even if the physical copy arrives a few days later, the date of the IRIS portal notice is considered the official date of receipt.
- Personal Delivery: If an individual visits an FBR office for a query or is personally served a notice by an FBR official, it is considered valid.
- Court Summons: Notice received through court summons is also a valid method.
Given the potential for delays in physical mail (often sent via post office, leading to late or non-receipt), individuals (resident or non-resident) are strongly advised to log in to their IRIS accounts or check their registered email addresses weekly or bi-weekly. Notices issued on IRIS are often simultaneously sent to the registered email.
Crucial Distinction for Companies and AOPs
The Peshawar High Court’s decision primarily impacts companies and Associations of Persons (AOPs). While Section 218 also covers “persons,” the court has clarified that this does not extend to non-resident individuals in this specific context.
For companies and AOPs, the ruling states that a notice received solely through the IRIS portal is NOT considered valid. Instead, physical dispatch of the notice to the company’s or AOP’s designated address from the FBR office is mandatory.
This means that if a company or AOP receives an FBR notice only on its IRIS portal, it can challenge its validity. The FBR would need to provide proof, such as a dispatch slip, confirming that the notice was physically sent to the designated address. Similar to individuals, personal delivery to an authorized company representative or court summons would also be valid.
Significance of the Court’s Decision
This reported judgment provides a critical safeguard for companies and AOPs against potential misuse or miscommunication by the FBR. It addresses concerns where the department might issue backdated notices on IRIS without physical dispatch, leading to unfair actions against taxpayers.
Tax professionals and businesses can now cite this judgment if they face situations where the FBR attempts to take action based solely on an IRIS portal notice for a company or AOP. It reinforces the legal requirement for proper, verifiable communication, ensuring transparency and due process in tax matters. Taxpayers are encouraged to stay vigilant and consult legal or tax experts if they encounter such discrepancies.
