ISLAMABAD: Pakistan Tax Bar Association (PTBA) has expressed serious concerns that the Tax Laws (Amendment) Bill, 2024 is a complete failure and taxpayers have lost confidence in the dysfunctional Appellate Tribunal Internal Revenue (ATIR).

PTBA asked Law Minister Azam Nazeer Tarar to intervene in this matter and constitute an oversight committee and also demanded that the recruitment and appointment process of new member be expedited on war footing; Any delay in this regard will further deteriorate the Appeal forum. The taxpayer will also be deprived of his most fundamental rights, fair trial and natural justice.

Refer to our previous letter on the challenges faced by taxpayers after the passage of the Tax Laws (Amendment) Bill, 2024, according to a communication sent by PTBA to Islamabad Law and Justice Minister Azam Nazeer Tarar.

Along the same lines, significant amendments have been introduced to revamp the two-tier appeal system where pecuniary jurisdiction in appeal has been introduced in the entire appeal system falling under the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 and Customs Act, 1969. Even the long-established system of merely referring legal questions to the High Courts has broken down. All this was done with the assurance that it would expedite the disposal of tax cases worth an estimated Rs 2.7 trillion pending in the courts. New members of the Internal Revenue Service (ATIR) must be appointed in a transparent manner and will be paid a competitive salary package, the Court of Appeals said.

It has been six months since the Tax Laws (Amendment) Bill, 2024 came into force, and it is time to do a reality check and reflect on whether the Tax Laws (Amendment) Bill, 2024 has achieved the target it was envisaged to achieve. Some questions and facts indicate that the Tax Laws (Amendment) Act, 2024 is a complete failure and the tax judicial forums up to the Internal Revenue stage of the Court of Appeal have become dysfunctional at the very least.

(1) What is the actual total so-called tax revenue stuck until May 2024 and judged and decided in the last 6 months?

What was the outcome of the decisions before the Commissioner of Inland Revenue (Appeals) and the Court of Appeal Inland Revenue:

i) how many cases were decided in favor of the taxpayer and the amount of tax.

ii) how many cases were decided in favor of the tax authorities and the amount.

iii) how many cases were sent back for retrial and quantum.

iv) What is the total number of appeals where judgments were reserved and decisions were not made? So why?

(2) Why has the Court of Appeals not been fully recruited and completed for new members of the Internal Revenue Service after six months? The question came to the fore.

Currently, Karachi has only three Treasurer members and one judicial member instead of the approved Six Treasurer members and Six Judicial members. The situation is similar in other stations like Lahore, Islamabad, Peshawar.

Our members are suffering because the hearings start slowly at 11:00 and in some cases continue until 15:00. According to the rules, the Internal Revenue Service of the Appellate Tribunal will adopt the times of the High Court and the Sindh High Court in the respective provinces and the hearings will begin at 8.30 am.

Even after the conclusion of the hearings, verdicts are not given for reasons that can only be guessed, and the reporting of the disposition of cases by the court is misleading; because orders to extend the short-term stay are also considered as liquidation. There are serious complaints from our members regarding the functioning of the Internal Revenue Court of Appeals.

PTBA stated that everything will become clear when a detailed board/member report is received from the Courts about the cases heard from May 2024 to date and their results.

PTBA pointed out that the objection fees have been increased significantly with the assurance that the number of the Board will be increased, new members will be recruited in a transparent manner, and the new members will be highly competent and have high ethical values. “What is actually happening is that the number of desks has decreased: in the Karachi Appellate Tribunal Internal Revenue Court, for example, instead of the six rows that normally operate, three rows are now operating, and there are serious complaints from our members about the desks. Internal Revenue Court of Appeals highlighted in our letter quoted above. These complaints still persist and things have even gotten worse. “Taxpayers and their councils are losing confidence in the Income Tax Tribunal and that is very disturbing,” he said.

The provisions of paragraph (2) of Article 132 of the Income Tax Ordinance, 2001 provide that the Tribunal shall notify the taxpayer of the Alternative Dispute Resolution option on the date of the first hearing. This is not being done and this fact can be confirmed by the fact that almost no cases are referred for Alternative Dispute Resolution.

The Bar Association stated that there were many appeals pending before the Commissioner of Inland Revenue (Appeals), but unfortunately these were not decided and even if they were decided, the orders were either returned or approved. In addition, Appeals Commissioner positions are not fully functional, which delays appeal proceedings at this level.

The Internal Revenue Service Court of Appeals is primarily handling cases filed in 2024, and over 80% of cases fixed for trial are cases filed in 2024, resulting in cases pending since 2014 being further withdrawn.

Court of Appeals The Internal Revenue Service needs solid leadership and strategy that will light the way to the bygone glory days when the agency was respected and taxpayers trusted it.

An honest assessment and answers to the above questions will clearly show that the Tax Laws (Amendment) Act 2024’s objective of streamlining the appeals system under tax laws has badly failed to achieve its objectives. Taxpayers continue to suffer. PTBA members’ complaints about ATIR continue to increase. Providing justice has become difficult and expensive. The Court of Appeals has serious and significant complaints and reservations regarding the functioning of the Internal Revenue Service.

The general view is that the Internal Revenue Service Court of Appeals has fallen far short of its glorious past, when cases were decided according to substantive law and precedent was respected.

PTBA reiterates our serious reservations regarding the following changes made by the Tax Laws (Amendment) Act, 2024, which are contrary to the fundamentals of impartial, cheap and speedy justice.

The reference to the Supreme Court against the CIT Appeal decision creates difficulty and cost for the taxpayer and this situation needs to be reconsidered to resolve this difficulty. PTBA said it should therefore allow tax filers whose alleged tax claim falls below the CIT (Appeal) threshold to file an appeal before the Tribunal instead of an Application to the High Court.

It is advisable to withdraw the 30% payment requirement at the time of reference application and keep this at the discretion of the court, reference is made to Article 133 (10) of the Income Tax Ordinance, 2001.

(8) PTBA added that reference fee of Rs 50,000 may be withdrawn or retained at the discretion of the court, reference was made to Section 133 (12) of the Income Tax Ordinance, 2001.

Copyright Business Recorder, 2024