Field formations of the Federal Board of Revenue (FBR) have allegedly adopted an illegal practice to pressure registered sales tax payers into making payments without any judicial proceedings or due legal process. According to leading tax experts, this practice violates the Supreme Court’s established principles, which state that any tax fraud action can only be initiated after tax assessment under Section 11 of the Sales Tax Act, 1990.
Sources revealed that a major taxpayer — who pays over Rs 12 billion annually and is registered with LTO Lahore, Zone-IV — has filed a jurisdiction transfer application, highlighting how tax officials are using unlawful methods to collect taxes without following legal procedures.
In this particular case, the Commissioner issued a notice on September 15, 2025, suspending the company’s registration and leveling two allegations of tax fraud. The first allegation pertained to inadmissible input tax amounting to Rs 11,097,347, while the second involved treating tax-free supplies worth Rs 872,792,811 in the former FATA/PATA region as taxable, creating a sales tax liability of Rs 157,102,705.
The taxpayer submitted a response on September 20, 2025, clarifying that most of the disputed amount (Rs 10,260,681) had already been voluntarily returned, while the remaining Rs 836,666 was fully justified in line with Supreme Court and higher judicial precedents. Regarding the FATA/PATA issue, it was explained that under the Sixth Schedule applicable at the time, these supplies were exempt from sales tax.
Despite the explanation, the Commissioner suspended the registration on September 24, 2025, and marked it as inactive in the IRIS system. The suspension order did not include any details of the taxpayer’s response, violating principles of natural justice.
The affected company approached the Appellate Tribunal Inland Revenue, which on September 30, 2025, suspended the Commissioner’s order for 30 days and directed the restoration of registration. However, according to the company’s representative, the Commissioner refused to consider the restoration request and reiterated the demand for upfront tax payment of Rs 500 million, later increasing it to Rs 700 million.
Tax consultant Shahid Jami stated that suspension notices have now become widespread within the department, serving as a shortcut to force taxpayers into immediate payments. He emphasized that the FBR should audit all such notices and take action against officers who unlawfully suspend registrations.
