The Lahore High Court (LHC) has struck down Federal Board of Revenue (FBR) notices seeking taxpayers’ bank statements, ruling that the tax authority cannot use its powers to collect information to bypass expired legal deadlines for tax assessments.
A division bench comprising Justice Hassan Nawaz Makhdoom and Justice Muhammad Ajmal Zahid accepted two constitutional petitions, including one filed by Syed Naved Amjad Andrabi, against notices issued to commercial banks under Section 176 of the Income Tax Ordinance, 2001.
The notices sought details of the petitioners’ bank accounts. Their lawyer, Advocate Taffazul Haider Rizvi, argued that the taxpayers had filed their returns up to tax year 2015 and paid their tax liabilities. He also said they had not been selected for audits for the relevant years and that no inquiry, investigation or other proceedings were pending against them.
During the hearing, the court asked the tax authorities to identify the proceedings for which the bank information was required, including any action under Sections 121, 122 or 124 of the ordinance. According to the judgment, the authorities failed to identify a specific proceeding or lawful purpose for seeking the information.
Justice Muhammad Ajmal Zahid, who authored the judgment, said Sections 175, 176 and 177 allow the FBR to access records, obtain information and conduct audits. However, these powers do not override the statutory deadlines governing tax assessments.
The court explained that information collected under Section 176 may help determine tax liability, but the provision cannot extend the time limits imposed under Sections 120, 121, 122 and 124.
The judgment emphasized that statutory deadlines determine how long tax authorities can legally exercise their powers. A notice seeking information cannot preserve, suspend or restore powers that have expired under the law.
The bench also clarified that requests for information cannot replace the formal legal proceedings required to determine a taxpayer’s liability.
However, the court said its ruling was limited to the purpose of the notices challenged in these cases. It did not mean that the expiry of the deadline for one tax assessment automatically ended every other power available to the FBR under the ordinance.
Finding that the tax authorities had failed to establish a lawful purpose for the notices, the LHC allowed both petitions and set aside the notices.
