Tax notices demanding bank statements of citizens were cancelled by the Lahore High Court on the grounds that the Federal Board of Revenue lacks the authority to gather data for assessments after the legal deadline has passed.
Justice Hassan Nawaz Makhdoom and Justice Muhammad Ajmal Zahid formed the division bench that sustained two constitutional petitions, containing one from Syed Naved Amjad Andrabi, challenging directives sent to commercial banks through Section 176 of the Income Tax Ordinance, 2001.
Account information regarding the petitioners was demanded by the notices. Their legal representative, Advocate Taffazul Haider Rizvi, stated that his clients submitted returns up to tax year 2015 and cleared their dues legally. He mentioned that the petitioners faced no audit selections for those years and no ongoing inquiries or investigations.
Tax officials faced questions from the bench during court proceedings regarding whether the notices aimed to support actions under Sections 121, 122 or 124 of the ordinance, or any other section. The written verdict noted that the legal counsel representing the authorities failed to point to any exact proceeding or valid reason for the demands.
Writing the decision, Justice Zahid explained that while Sections 175, 176 and 177 outline tools for gathering documents, requesting data and performing audits, these rules do not bypass legal boundaries placed on starting or finishing tax evaluations.
Data gathered via Section 176 might apply to an assessment, the verdict noted, but this rule cannot stretch the authority given by Sections 120, 121, 122 and 124 past their legal limits.
Justice Zahid observed that limitation is not a mere procedural formality, it defines the temporal boundaries within which a statutory authority may lawfully exercise its jurisdiction.
Authority that expired due to statutory time limits cannot be saved, paused or brought back by a notice issued under Section 176, according to the court. Information requests cannot substitute the formal legal steps needed for calculating a taxpayer liability.
The judges specified that the decision applied strictly to the disputed notices in these specific lawsuits and did not imply that missing a deadline for one assessment cancels every other power granted by the ordinance.
Because the authorities could not prove a valid reason behind the notices, the court accepted the petitions and struck down the directives.
