Neglected concept of Jurisdiction under the Income Tax Ordinance, 2001

1.1) Most of the notices served by the tax authorities are often recurring in nature and have various similarities among the issues raised.

1.2) The taxpayers getting used to these sort of procedures is almost always willing to submit reply without ascertaining the proper jurisdiction of the notices served by the tax officer.

1.3) Most of the time these notices are without jurisdiction, illegal and unwarranted in law. It is, therefore, very important for taxpayers or consultants to see if the notice being served have proper jurisdiction or not.

1.4) The most common sort of jurisdiction issues relate to the tax offices, circles and zones. Most oftenly the notices served are outside the jurisdiction and relates to irrelevant Zone or instead of Regional Tax Office the notice might be sent by Large Taxpayers Unit or Vice versa. 

Exception: information under section 176 of the Income Tax Ordinance, 2001 may be requested by any zone or tax office and issue of jurisdiction does not arise in such case. 

1.5) The jurisdiction discussed above relates to physical or structural jurisdiction of tax authorities dependent on relevant zones and tax offices. However, there is also a theoretical and legal aspect of the matter of jurisdiction. It is often observed that the notices served under certain various sections are either out of the scope of such sections or are irrelevant to the highlighted issue. This is also considered to be a matter of jurisdiction.  

1.6) A very common example of notices issued without jurisdiction we often come to see is incase of notices served under section 122 of the Income Tax Ordinance, 2001.  As per subsection 5 and 5A of section 122 of the Income Tax Ordinance, 2001 following two conditions must be present in order to assume proper jurisdiction of the tax officer for the said notice:

• The assessment order to be amended must be erroneous based on definite information; and

• The order sought to be revised should simultaneously be prejudicial to the interest of the revenue.

1.7) Until and unless the above two conditions are met the tax officer cannot assume proper jurisdiction over issuing of notices under section 122 of the Income Tax Ordinance, 2001.

1.8) In the light of above discussion it is very important before submitting reply to any of the notices  is to ascertain if the notices served have proper jurisdiction over the following:

• relevant Zone, Circle or tax office i.e. Regional Tax Office or Large Taxpayers Unit; and
• legal and theoretical aspect of the jurisdiction 

1.9) If the notices served do not have proper jurisdiction as discussed above the same becomes illegal, unwarranted by law and void ab initio. 

1.10) Section 209 of the Income Tax Ordinance, 2001 details the issue of jurisdiction of tax authorities. Federal Board of Revenue publishes regularly the jurisdictions vide circulars and the same are frequently updated and can be accessed from the web portal of FBR.