ATIR Declares Unlawful Sealing: Know Your Taxpayer Rights

The Islamabad bench of the Appellate Tribunal Inland Revenue (ATIR) has delivered a landmark ruling, declaring the sealing of a taxpayer’s retail outlet by tax authorities as unlawful, a decision that reinforces taxpayer rights and due process. Our tax law firm views this as a critical precedent for clients facing overzealous tax enforcement.

In a judgment by senior judicial member M M Akram, the tribunal criticized the tax department for bypassing procedural compliance, such as issuing a show-cause notice or verifying invoices, before sealing the premises over alleged non-compliant invoices worth Rs10,359. The Chief Commissioner of LTO Islamabad approved the sealing without granting the taxpayer a hearing, violating natural justice and displaying a disproportionate use of power.

The ATIR ruled that such punitive actions must be restrained, as they risk harming legitimate businesses and the economy. The tribunal highlighted that alternatives under Section 40B of the Sales Tax Act, 1990, could ensure compliance without coercive measures, invalidating the sealing order due to the absence of due process and proper authorization.

For our clients, this ruling underscores the importance of knowing your rights under Federal Board of Revenue (FBR) regulations. Businesses facing similar tax enforcement actions can now demand fair procedures, protecting their operations from unlawful disruptions. The decision also signals a need for tax authorities to adopt measured enforcement, potentially reducing the risk of disproportionate penalties for minor violations.

Our firm advises clients to review tax notices, ensure compliance documentation is in order, and challenge unlawful actions, leveraging this ruling to safeguard their business interests and uphold taxpayer rights.