I. EXECUTIVE SUMMARY

1.     The FTO, through its consolidated order dated ----, decided complaints concerning searches conducted by FBR officials u/s 175 of ITO, 2001 at the premises of the complainants in Larkana. The complainants alleged that their laptops, books of account, documents and other records were taken into custody without proper inventories or receipts and that the searches were conducted without lawful justification.

2.     The FTO held that the search power u/s 175 is not unrestricted. For a lawful search, the authorization must identify the relevant statutory provision, establish that legal proceedings are pending against the taxpayer, and state reasons justifying the search.

3.     Finding that these requirements had not been fulfilled, the FTO declared the searches illegal and constituting maladministration. FBR was directed to return the seized records and computer hardware, refrain from using the seized material for determining tax liability, circulate the relevant judicial decisions to its field formations, and submit a compliance report within 30 days.

4.     Key takeaway: The order reinforces that FBR's search powers u/s 175 must be exercised strictly in accordance with the statutory safeguards and cannot be used as a general or unrestricted investigative tool.

II. DETAILS

A. Authentication

The document mentioned above is not available on relevant websites, although our team checks all relevant websites twice a day. However, we found the document from a reliable resources. The QC is being sent now, as we waited for authentic and could not find so far. We will share authentic version once found. 

B. Reference of issue

1. Further to KQU -----------, being an important matter, we would inform you about -----------------------------(Attachment CS4099.1) in the ensuing paragraph, with emphasis in bold & Underline for quick reading.

2. -----------

C. Brief Facts

1 to 8

C. Consolidated Order – Search u/s 175

Since the issues involved in all cases are identical i.e. the illegal & unwarranted search of the business premises of all the complainant's u/s 175 of the Income Tax Ordinance, 2001, without properly following the statutory procedure, therefore all the complaints are disposed of through this single consolidated order.

D. FTO Jurisdiction & Defence of Action u/s 175

----------------

E. Preliminary Objection on FTO Jurisdiction Overruled

-----------------

F. Hearing Conducted – Findings Recorded

-----------------

G. FTO Findings

------------------------

H. Brief Background of the FCC’s Order:

(I) Judgment by Justice Adnan Iqbal Chaudhry of High Court of Sindh, dated ------ in Suit No. ------, 

(a) to (c)

(II) The above judgement was still in the field when --------------------

(a) to (c)

(III) It is pertinent to mention that the only case falling in category D was the case of ---------------

I. FCC Order

The Taxpayer Company  ------------------- which was dismissed by FCC thus upholding the aforesaid orders of SHC, which provide the legal basis for departmental action u/s 175.

J. FTO Conclusion

Keeping in view the above trail of judicial pronouncements and the criterion set for any search u/s 175, if the ------------------. Copies of Authorizations in both cases;  ------------------- are attached herewith. Authorization in the case of  -------------------- falls in the C category, (as categorized by --HC in CP No. ---------) because;

• It is silent about the provision of the Ordinance sought to be enforced by the search

• No legal actions were reported to be pending under the Ordinance against the Complainants/taxpayers.

• --------------------

Thus, the Authorizations and search of the Complainants business premises impugned are illegal in the light of aforesaid courts orders, and reflect clear incidence of maladministration in terms of section 2(3)(i)(a) & (b) of FTO Ordinance, 2000.

K. FTO Recommendations

i) tax authorities at RTO ---- are directed to return to the Complainants all record, documents, computer hardware etc. taken into custody or impounded during the impugned search;

ii)  tax authorities at RTO ---- are restrained from using said material as evidence in determining the tax liability of the Complainants;

iii) Orders of SHC and FCC, as referred at Para 8 above, be circulated to all field formations and -------------- FBR for information, compliance and guidance; and

iv) report compliance in 30 days.

III. FURTHER DETAILS & SERVICES

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email info.kasbati@professional-excellence.com