In a significant ruling, the Islamabad bench of the Appellate Tribunal Inland Revenue (ATIR) has declared the sealing of a taxpayer’s retail outlet without proper procedural compliance as unlawful, citing violations of natural justice and a disproportionate use of power by tax authorities.
The judgment, authored by senior judicial member M M Akram, emphasized that punitive actions like sealing should be used with restraint, as they risk damaging legitimate business operations and the wider economy. The tribunal ruled that the tax department failed to follow basic legal requirements such as issuing a show-cause notice or verifying the invoices in question before sealing the premises.
The case pertained to a complaint received by the tax department alleging issuance of invoices without QR codes worth Rs10,359. The Chief Commissioner of LTO Islamabad ultimately approved the sealing order, which was executed without giving the taxpayer an opportunity to respond. Despite the taxpayer later seeking to withdraw the appeal, the tribunal proceeded to decide the case due to the important legal questions involved.
The tribunal held that the failure to follow due process—including the absence of a hearing and proper authorization—rendered the sealing order invalid. It also noted that the action taken was disproportionate to the alleged violation and that alternate legal mechanisms, such as Section 40B of the Sales Tax Act, 1990, were available to ensure compliance without resorting to coercive measures.
The decision is seen as a reaffirmation of the principle that tax enforcement must be fair, measured, and within the bounds of established procedure. Legal experts view this as a landmark step in curbing high-handedness and promoting taxpayer rights.
