ISLAMABAD – The Supreme Court has issued a landmark ruling emphasizing that the Federal Board of Revenue (FBR) must uphold the dignity of taxpayers and ensure due process when carrying out tax recovery.
In a detailed nine-page judgment authored by Justice Ayesha Malik, the apex court dismissed FBR’s petition challenging a high court decision and clarified that issuing a recovery notice demanding immediate payment on the same day undermines the legal safeguards provided by law.
The three-judge bench, headed by Justice Munib Akhtar, examined whether Section 140 of the Income Tax Ordinance allows the FBR to demand instant payment or whether it requires a future compliance date. The court ruled that Section 140, when read in context, does not permit immediate coercive recovery without giving taxpayers a clear deadline to fulfill their obligations.
Justice Malik noted that the requirement of issuing notice before recovery is not only a statutory obligation but also rooted in the Constitution, reflecting guarantees of due process and a fair trial under Article 10A, as well as the right to dignity under Article 14.
“Even where the law permits coercive recovery, it must be conducted in a manner that respects the taxpayer’s dignity,” the judgment stated, reaffirming that courts have consistently protected fundamental rights even in fiscal matters.
In an additional note, Justice Shahid Waheed raised critical questions about the balance between efficient tax recovery and safeguarding taxpayers’ rights. He questioned whether it was justifiable to maintain a culture of “authoritative dominance” in tax collection at the expense of dignity and due process.
Drawing an analogy, Justice Waheed likened the ideal tax recovery process to a honeybee collecting nectar without harming the flower. “Tax officers must recover dues with dignity, adherence to the law, and transparency for the taxpayer,” he emphasized.
Justice Waheed outlined the three stages of taxation: first, declaring the taxpayer’s liability; second, assessing the exact amount payable; and third, using recovery methods only if voluntary compliance fails. He stressed that the right to dignity is the foundation of all fundamental rights and must not be compromised in the pursuit of revenue.
The ruling underscores that while the state has the authority to collect taxes, it must balance this with constitutional rights, ensuring that recovery measures do not erode public trust or violate legal safeguards.
