ISLAMABAD: The Supreme Court has ruled that the Federal Board of Revenue (FBR) cannot arrest or initiate criminal proceedings against individuals for tax fraud without first determining their tax liability through proper legal procedures.
The judgement, authored by Justice Aqeel Ahmed Abbasi, declared that any action such as arrest, FIR registration, or prosecution without an investigative audit, issuance of a show-cause notice, or giving the accused a chance to respond, is illegal and beyond lawful authority.
The decision came from a three-member bench of the Supreme Court hearing appeals against earlier verdicts issued by the Lahore, Sindh, and Islamabad high courts.
Assessment Must Precede Prosecution
The ruling clarified that under Pakistan’s democratic and constitutional structure, taxation must be fair, justified, and respectful of fundamental rights.
Tax officers do not have the power to presume liability or act coercively without due assessment and adjudication.
Justice Abbasi emphasized that coercive measures like arrests can only follow a proper assessment process, which proves wilful default, intent, or deliberate tax evasion.
Without clear determination of a person’s sales tax liability under Section 11 of the Sales Tax Act, 1990, any penal action including arrest, FIR registration, or criminal prosecution is deemed unconstitutional.
Previous Criminal Cases Declared Unlawful
The case reviewed by the court involved a cartel discovered by FBR officials in Lahore, allegedly engaged in a Rs7.5 billion fake invoice scam involving 144 dummy companies.
FIRs had been registered and arrests made before the liabilities of the accused were assessed.
The Lahore High Court had already ruled these actions unlawful, and the Supreme Court has now upheld that view.
The apex court noted that imposing arbitrary taxes or penalising individuals without a legal foundation violates constitutional guarantees and undermines trust in tax governance.
It stated that enforcement of tax laws must be guided by transparency, due process, and non-discriminatory practices.
Accordingly, the SC allowed the petitions, declaring such criminal actions without prior assessment as without jurisdiction.
