The Lahore High Court (LHC) has set aside tax notices seeking taxpayers’ bank statements, ruling that the Federal Board of Revenue (FBR) cannot use its information-gathering powers to pursue assessments after the legal deadline has expired.
A division bench comprising Justice Hassan Nawaz Makhdoom and Justice Muhammad Ajmal Zahid allowed 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 counsel, Advocate Taffazul Haider Rizvi, argued that the taxpayers had filed returns through tax year 2015 and paid their liabilities in accordance with the law. He said the petitioners had not been selected for audits for the relevant years and that no proceedings, inquiry or investigation was pending against them.
During the hearing, the bench asked the tax authorities whether the notices were intended to facilitate proceedings under Sections 121, 122 or 124 of the ordinance, or any other provision. According to the judgment, the authorities’ counsel could not identify a specific proceeding or lawful purpose for the requests.
Justice Zahid, who authored the judgment, held that Sections 175, 176 and 177 provide mechanisms for accessing records, seeking information and conducting audits, but do not override legal limits on the authority to initiate or complete tax assessments.
The judgment stated that information obtained under Section 176 may be relevant to an assessment, but the provision cannot extend the powers granted under Sections 120, 121, 122 and 124 beyond their statutory limits.
“Limitation is not a mere procedural formality, it defines the temporal boundaries within which a statutory authority may lawfully exercise its jurisdiction,” the judge observed.
The court further held that a notice issued under Section 176 cannot preserve, suspend or revive authority that has expired because of statutory time limits. Requests for information cannot replace the formal legal proceedings required to determine a taxpayer’s liability.
The bench clarified that its ruling was limited to the purpose of the notices in these cases and did not mean that the expiry of a deadline for one assessment automatically extinguished every other power available under the ordinance.
Finding that the authorities had failed to establish a lawful purpose for the notices, the court allowed the petitions and set them aside.
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