ISLAMABAD:
In another legal reprieve for the government, the Federal Constitutional Court (FCC) has ruled that tax authorities can conduct raids without prior notice and without the existence of a pending case against a taxpayer, a decision that significantly strengthens enforcement powers under the tax code.
The judgment, authored by Justice Aamer Farooq, noted that Parliament has conferred far-reaching powers on tax officials to ensure compliance with tax laws.
The court stated that it cannot read any condition into a law which the legislature has not expressly provided.
The court rejected the argument that a raid conducted in the absence of a formal pending case should be considered illegal, stating that “the existence of a pending case against a taxpayer is not a prerequisite for such action” and that “the tax authorities are competent to proceed in accordance with the law”.
However, the court introduced a procedural safeguard requiring the commissioner to record in writing the specific statutory provision invoked and the alleged violation underlying the raid.
“This requirement,” the ruling noted, “ensures procedural transparency and accountability.”
The court further held that tax authorities have the power to seize computers, documents and accounts during such operations, provided the action remains within the ambit of the law.
The ruling is considered an important precedent regarding the scope of powers conferred on the tax authorities and the enforcement architecture of the tax legislation.
Relief in Contempt Proceedings
In another development, the FCC stayed contempt proceedings initiated by the Islamabad High Court (IHC) against the defense and interior secretaries in a missing persons case.
A division bench of the FCC, headed by Justice Aminuddin Khan, issued notices to the respondents while hearing appeals against the IHC order.
This is not the first case of relief granted by the FCC to the federal government. Earlier this month, a bench headed by Chief Justice Aminuddin Khan restrained the IHC from proceeding in a contempt case against Prime Minister Shehbaz Sharif and federal ministers.
The case concerned an alleged lack of support for Dr. Fowzia Siddiqui’s legal efforts in the United States regarding the release of Aafia Siddiqui.
Additional Attorney General Munawar Iqbal Duggal represented the federal government in both cases.
A senior lawyer believes that the government’s claims in both cases are strong and that the relief granted by the FCC was justified.
Last month, the FCC also upheld Sections 4(b) and 4(c) of the Income Tax Ordinance, 2001 – a decision estimated to add Rs310 billion to government revenue. However, that judgment has drawn sharp criticism from parts of the legal community.
Legal fraternity divided
A former attorney general noted that the FCC’s decision on Section 4© was difficult to justify and seemed unduly supportive of the Federal Board of Revenue (FBR) and the government.
“The function of the court is to interpret law on settled principles and not act as the recovery wing of the government, which appears to have happened here,” he said.
He further argued that with respect to the alleged discrimination against 15 industries subject to a higher super tax, the FCC should have deleted the relevant provision from the schedule.
According to him, single and division benches of three high courts, comprising experts in tax law, were unanimous in declaring the discrimination ultra vires.
“The only relief the FCC is giving is to the extractive companies that had foreign arbitration clauses in the agreements with the government, which would have resulted in international awards against the government,” he added.
The former lawyer also stated that the court that decided the case admittedly lacked experience and expertise in tax matters as well as constitutional law.
Debate over the FCC’s three-month performance has intensified in legal circles. It is noted that the current FCC judges were appointed by the executive branch. Critics argue that the court appears to be more focused on deciding pending cases than enforcing fundamental rights under Article 175 E (1) of the Constitution.
Renowned lawyer Faisal Siddiqi observed: “In the parlance of criminal justice: For the FCC, the government is the preferred litigant, the opposition is the neglected litigant, and the ordinary citizen is the forgotten litigant”.
Another senior lawyer described the court’s performance as disappointing in light of the goals cited by its supporters.
“A massive backlog continues to accumulate with little promise for the future. All the high principles invoked for its creation, including its representative federal character, have been compromised and betrayed,” he said.
He observed that apart from the few rulings regarding the interpretation of the constitution, there is not one detailed judgment worth quoting as jurisprudence of the apex court.
The focus, he noted, has been on reiterating their technical superiority over the Supreme Court as a matter of precedence. “Even with respect to the few orders the FCC has passed, I have serious reservations about the tenability of the principles on which the orders are based. The detailed ruling on the super tax is awaited.”
Another former lawyer was even more pointed in his assessment.
“No court or institution is inherently good or bad. It is the quality and character of the people who run the institution that determines its stature and acceptance in the public eye,” he said, adding that the creation of the FCC was highly questionable.”
“Its credibility was seriously compromised when the executive was allowed to pick and choose the first court.”
He said that the prime minister acted in haste and in a highly biased manner by filling the seats, adding that the worst part is that it is not even making any effort to command people’s trust and respect by asserting its authority.
“More executive-minded than the executive itself. If it continues on its current course, it is doomed. Just a matter of time, as there cannot be two Supreme Courts in one country.”
Observers note that the FCC has yet to address dozens of cases involving PTI, which continues to face pressure from the executive branch. It has also been observed that PTI’s legal team seems to place more reliance on the Supreme Court than the FCC for enforcement of fundamental rights.
Despite lacking jurisdiction to enforce fundamental rights in certain contexts, the Supreme Court has continued to hear cases relating to Imran Khan and through its judgments develops jurisprudence on matters of public interest.
Conversely, critics argue that while the FCC possesses jurisdiction in such cases, it has not taken up cases that might dispel the perception that it is dominated by executive-minded judges.
A section of the legal community has demanded that the government disclose details of salaries and perks given to FCC judges.
Former Additional Solicitor General Punjab Chaudhry Faisal Hussain stated that the judiciary in Pakistan has lost the trust of the common citizen.
“In our country, Parliament and bureaucracy always behave like a monarch and courts used to be proactive protectors of fundamental rights.”
He added that the FCC is increasingly viewed as an extension of the executive branch and must make strong judgments on larger public interest issues to regain credibility.
“The appointments in the judiciary must also be more transparent and on merit.”
However, some advocates argue that the FCC faces significant logistical challenges and requires time to become fully operational. The debate over its role, independence and direction, it seems, is far from settled.
