Appellate Tribunal grants 30-days stay-order to K-Electric FBR’s decision to freeze company’s accounts is illegal

KARACHI: The decision of Large Tax-payer Units Karachi (LTUs-Karachi) of freezing K-Electric’s accounts from August 31 is against the law as an Appellate Tribunal Inland Revenue (Karachi) had already granted 30 days relief to the company restraining tax authorities not to take any action against it.

According to the court order, the FBR cannot force K-Electric for recovery of tax dues as the main appeals of the company regarding tax years 2010, 2011 and 2013 are pending for hearing before this tribunal. “The taxpayer/applicant is entitled to temporary relief of 30 days from this tribunal through the instant order,” said Muhammad Javed Zakaria senior judge and Faheem Haq Khan (member account) in an order on August 30, 2016.

Despite the tribunal order, it is learnt that LTUs ordered to freeze bank accounts of K-Electric for the recovery of Rs 677 million as outstanding under the income tax laws.

In the order, the judges of the Appellate Tribunal have clearly directed that the department should not insist upon the recovery of the tax demand, as the main appeals are pending for hearing before this Tribunal or till the decision of main appeal.

Large Taxpayers Unit (LTU)-II, Karachi – a revenue collecting arm of the FBR issued notice to the National Bank of Pakistan (NBP) for freezing the bank accounts of K-Electric and pay the default amount to the FBR, it is learnt.

K-Electric was required to collect advance tax under Sections 235 and 235A of Income Tax Ordinance, 2001 from commercial or industrial and domestic consumers and deposit it to the FBR accounts.

The sources said at least nine bank accounts worth Rs 350 million of the company were frozen. The sources further said that the FBR was also searching other bank accounts of the utility for recovery of the remaining amount.

The FBR sources said the banks are legally bound to hold and remit defaulted taxpayers’ money to the board of revenue. Any non-compliance by a bank would be treated as default made by a taxpayer and penalty could be imposed on such bank.

The learned counsel of K-Electric had already informed the Tribunal that the department may restore coercive measures for the recovery of the impugned demand and that the balance of convenience is in favour of the taxpayer, therefore, he prayed for a further period (30 days extension) in this regard, till the decision of the main appeal. According to the learned counsel the earlier order is expired on July 28, 2016.

 After the expiry of stay, the cross arguments and going the facts placed before the court which reveals that the instant appeals are regarding tax years 2010, 2011 and 2013 are fixed for hearing of main appeal on September 02, 2016 before KB-VI.

On the date of hearing the taxpayer/applicant was represented by advocate Salman Aziz while department was represented by Rana Waqar.

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