SHC Judgement on the Disclosure of Foreign Assets Suspended

ISLAMABAD: The Supreme Court has delayed the decision of the Sindh High Court (SHC) requiring resident Pakistani taxpayers to disclose overseas income, assets, and liabilities by December 22, 2020, which ruled on Monday.
In response to a joint petition filed by the Federal Board of Revenue (FBR), the commissioner of Inland Revenue (CIR), the AEOI Zone, the Large Taxpayers’ Office (LTO), the deputy commissioner of CIR and the finance secretary, a three-judge SC bench led by Justice Umar Ata Bandial issued the suspension order. Hafiz Ahsaan Ahmad Khokhar, a renowned lawyer, filed the petition.
Using Section 116A (1) of the Income Tax Ordinance (ITO) 2001 as amended by the Finance Act of 2018, the government now requires all residents with foreign assets, international expenditure, income from abroad, and international liabilities to file a separate foreign income and asset statement beginning with the 2019 tax year. On July 13, 2018, SRO No 880 (I)/2018 was released in this respect. Section 182 (1) Serial 1AAA was also amended in the event of a default, wherein a two per cent penalty was applied on the foreign income or value of foreign assets for each year of nonpayment.
In AEOI Zone Karachi, 650 persons alone had to file such statements together with their tax returns for the tax year 2019, and 433 of those taxpayers did so on time as required by the changed law by filing their statements.
As a result, the FBR sent show-cause notifications to the remaining 217 taxpayers who were in arrears.
While 182 taxpayers responded, submitted their responses and followed ITO procedures as required, just 35 people filed petitions in the SHC to challenge the notices.
On December 22, 2020, the SHC threw out 35 show-cause notice procedures, even though their adjudication had been pending before the authority under the ITO.
Taxpayers may use the Inland Revenue (appeals) commissioner and the Inland Revenue Appellate Tribunal, or they might take their case to the high court, as per the petition’s assertion. The petition stated that legal remedies were accessible to the taxpayers.
Despite the Finance Act 2018’s apparent aim, the high court failed to recognise that the alteration in law ensured that Pakistani residents submit a separate foreign income and asset declaration for the tax year 2019 beginning with the Finance Act 2018, according to the petition. The petition asserted that Pakistani residents are now required to submit a separate declaration of foreign income and that the high court failed to recognise the purpose of the foreign income and assets declaration, which is to promote financial openness throughout Pakistan.
Since it was not qualified to hear petitions against ordinary show-cause notifications sent to taxpayers, it was susceptible to be set aside, it said, citing alternative remedies under the International Trade Organization (ITO).
Specifically, the appeal pointed out that the AEOI Zone, Large Taxpayers’ Office in Karachi, issued the show-cause notifications following the ITO regulations and under the legally mandated jurisdiction.
There were possibilities for taxpayers to provide a thorough response, as well as any legal objections they may have had, the petitioners added. The petitioners would have acted entirely in line with the law in these procedures, it said.
Since these show-cause notifications have yet to be adjudicated or assessed, the petition said they are incomplete since no cause of action has accrued to the taxpayers nor has any breach of fundamental rights been established, which allows them to submit the current petitions before the Supreme Court.
As a result, it was suggested, the high court decision could be overturned based on this standard.