In a significant ruling, the Islamabad bench of the Appellate Tribunal Inland Revenue (ATIR) has declared the sealing of a taxpayer’s retail outlet as unlawful, citing a clear failure by tax authorities to adhere to proper procedural requirements and a disproportionate exercise of power. The tribunal emphasized that such punitive actions must be employed with restraint to avoid harming legitimate businesses and the broader economy.
The judgment, authored by senior judicial member M M Akram, sternly noted that the tax department had bypassed fundamental legal steps, including the issuance of a show-cause notice and the verification of the invoices in question, before proceeding to seal the business premises.
The case stemmed from a complaint received by the tax department alleging the issuance of invoices without the required QR codes, totaling a value of PKR 10,359. The sealing order was ultimately approved by the Chief Commissioner of Large Taxpayer Office (LTO) Islamabad and executed without providing the taxpayer an opportunity to present their case.
Despite the taxpayer later seeking to withdraw their appeal, the ATIR opted to proceed with the decision, recognizing the critical legal questions and the importance of the matter for broader tax administration.
The tribunal’s ruling highlighted that the absence of due process, including the failure to grant a hearing and lack of proper authorization for the action taken, rendered the sealing order invalid. The ATIR also found the measure to be disproportionate to the alleged violation, pointing out that alternative legal mechanisms, such as those available under Section 40B of the Sales Tax Act, 1990, could have been utilized to ensure compliance without resorting to such coercive measures.
This decision is widely seen as a strong reaffirmation of the principle that tax enforcement actions must be conducted fairly, be proportionate to the alleged offense, and strictly adhere to established legal procedures. Legal experts have lauded the judgment as a crucial step towards curbing potential overreach by tax authorities and upholding taxpayer rights within the legal framework.
