In a significant judgment that reinforces procedural transparency in tax administration, the Appellate Tribunal Inland Revenue (ATIR) has ruled that an income tax assessment order must be communicated to the taxpayer within the legally prescribed timeframe to attain legal efficacy.
The Tribunal emphasized that an order merely signed or finalized internally on a file does not fulfill the legal requirement unless it is formally communicated to the affected party. Without such communication, the order cannot be considered validly passed within the statutory deadline.
This important ruling was issued by the ATIR in a case argued by noted tax lawyer Waheed Shahzad Butt, where the tribunal held that procedural fairness is paramount and legal deadlines must be strictly adhered to.
“This judgment is a reaffirmation that tax authorities are duty-bound to operate within the legal framework and uphold the rights of taxpayers,” Butt stated. “It sets a precedent that decisions must be made and shared transparently and within the stipulated period.”
Key Observations from the ATIR Order:
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A show cause notice (SCN) was issued on January 8, 2024, and the amended assessment order was passed on November 8, 2024 — totaling 305 days from issuance.
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The Income Tax Ordinance, 2001, under Section 122(5A), permits a maximum of 240 days for passing an assessment order following a show cause notice.
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It was admitted in the case that the extension in time was sought from the Commissioner only after 239 days, on September 3, 2024, which the Tribunal found procedurally defective.
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Crucially, no opportunity of hearing was given to the taxpayer before granting the extension, which is a mandatory requirement under law.
As per the Tribunal’s findings:
“It is now a settled principle that before granting any extension of time, it is the bounden duty of the Commissioner Inland Revenue (CIR) to act impartially and provide a fair hearing to all concerned parties. The failure to do so renders the extension order illegal and void ab-initio.”
Legal Implications:
This decision highlights the importance of procedural compliance by tax authorities. It underscores that:
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Taxpayers must be kept informed of orders affecting their rights;
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Extensions for assessments must follow due process, including providing the affected party an opportunity to be heard;
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Orders passed outside the statutory period, without proper communication, are liable to be declared time-barred and unenforceable.
