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The Lahore High Court (LHC) has ruled that the Federal Board of Revenue (FBR) cannot use its information-gathering powers to pursue tax assessments after the legal deadline has expired. The court has also set aside notices seeking taxpayers’ bank account details, as the tax authorities failed to establish a valid legal purpose for their requests.
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. The petitions challenged notices that the FBR had issued to commercial banks under Section 176 of the Income Tax Ordinance, 2001.
LHC Stops FBR From Seeking Bank Records Beyond Legal Deadlines
The notices required banks to provide information about the petitioners’ accounts. Their counsel, Advocate Taffazul Haider Rizvi, argued that the taxpayers had submitted their tax returns up to tax year 2015 and paid their liabilities according to the law. He also maintained that the FBR had not selected them for audits for the relevant years and that no inquiry, investigation, or other proceedings were pending against them.
During the hearing, the bench asked the tax authorities to explain whether they intended to use the requested information for proceedings under Sections 121, 122, or 124 of the Income Tax Ordinance, or under any other legal provision. However, the authorities could not identify a specific proceeding or explain the lawful purpose behind the notices.
In its judgment, Justice Muhammad Ajmal Zahid explained that Sections 175, 176, and 177 of the Ordinance allow tax authorities to access records, collect information, and conduct audits. However, these provisions do not give the FBR the power to bypass statutory deadlines for initiating or completing tax assessments.
The court clarified that information collected under Section 176 may help authorities assess a taxpayer’s liability. However, the provision cannot extend the time limits prescribed under Sections 120, 121, 122, and 124.
The judgment stressed that statutory time limits define how long a government authority can legally exercise its powers. It noted that these deadlines are not merely procedural requirements but establish clear boundaries for lawful action.
See Also: FBR Extends Income Tax Return Filing Deadline Again For Tax Year 2026
The court further observed that issuing a notice under Section 176 cannot preserve, suspend, or restore powers that have expired under the law. Similarly, requests for information cannot replace the formal legal proceedings required to determine a taxpayer’s liability.
However, the bench clarified that its decision applied to the purpose of the notices challenged in these cases. It did not mean that the expiry of the deadline for a particular assessment automatically removes every other power available to the FBR under the Income Tax Ordinance.
After finding that the authorities had failed to establish a lawful basis for seeking the bank records, the court accepted the petitions and set aside the notices.
The ruling reinforces the importance of statutory deadlines in tax matters and clarifies that the FBR must act within the limits established by law when seeking taxpayers’ financial information.
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