ISLAMABAD - The Supreme Court of Pakistan Monday suspended the judgment of Sindh High Court (SHC) regarding the declaration of foreign income assets and liabilities of resident taxpayers.

A three-member bench of the apex court headed by Justice Umar Ata Bandial conducted hearing of the Commissioner Inland Revenue AEOI Karachi’s appeal against the SHC verdict.

Advocate Hafiz Ahsaan Ahmad Khokhar, representing the Federal Board of Revenue, informed that the resident taxpayers have challenged the show cause notices proceedings issued under new legal amendments in the Income Tax Ordinance 2001 introduced through Finance Act 2018 whereby every resident taxpayer under Section 116A (1),  Section 109A of ITO, 2001 was required to separately declare their foreign assets, incurring foreign expenditure, earning foreign income and owning foreign liabilities through separate Foreign Income and Asset Statement, starting from tax year 2019. He said the default consequences for failing to comply are mentioned under new Section 182(1) at Serial 1AAA of the Income Tax Ordinance (ITO) 2001. Hafiz Ahsan argued that the respondents are resident taxpayers and undoubtedly have foreign assets and foreign income, but failed to file their tax returns being resident taxpayers for the tax year 2019 as per Section 116A (1) of ITO.

According to the FBR appeal, after the amendments in ITO, under the jurisdiction of AEOI Zone Karachi alone, 650 taxpayers were required to file the foreign income and assets statement under Section 116A (1) along with tax return for tax year 2019. The counsel submitted that out of the total 433 taxpayers duly complied and filed the Statement in time as required under the amended law. The department issued show cause notices to the remaining 217 taxpayers upon established default. Out of them, 182 taxpayers complied with the notices. Hafiz Ahsaan said that the high court invalidated show cause notices proceedings in constitutional jurisdiction. He also submitted that the SHC ought to have looked into the matter with different angles as to whether compliance of law at the time of invoking show cause notices proceedings has been made or if any of the provisions has been omitted or violated then what prejudice is likely to cause to the taxpayer to whom show cause notice was given.

The bench after hearing the arguments accepted the contentions of FBR and issued a leave granting order and suspended the judgment of the Sindh High Court.