LAHORE: The Lahore High Court (LHC) has held that the Federal Investigating Agency (FIA) cannot initiate inquiry against the Inland Revenue Service (IRS) officers without prior approval of the Federal Board of Revenue (FBR) and satisfying the procedural requirements.
The court also observed that if the FBR refuses to grant approval or access to the protected records, the parties may have recourse to the Rules of Business for resolution through the Prime Minister.
The court passed this order in a petition of a FBR officer Abdullah Zulfiqar against the notices and the record obtained under protest from him.
The court declared the impugned notices as ultra vires and added the failure to obtain prior approval from the FBR before initiating enquiry renders the action without lawful authority.
The court directed to return the original record forthwith to the Large Taxpayers Office. The court also directed the FIA not to retain any copies or derivative records thereof.The court; however, observed that nothing in this judgment shall preclude the FIA from initiating proceedings afresh in accordance with law, provided that it first satisfies the applicable jurisdictional requirements and obtains prior approval from the FBR.The court said the FIA is established for the inquiry and investigation of offences specified in the schedule to the FIA Act, evidently, neither the Income Tax Ordinance (ITO) nor the Sale Tax Act (STA) is included in that schedule.
The court observed that the FIA sought to justify the impugned notices on the basis of section 25 of the Anti Money Laundering Act (AMLA).
Refund processing under the ITO or the STA does not, by itself, attract the application of the AMLA, the court added.
That provision also applies where there is a predicate offence specified in the schedule to the Act, the court added.
The court also observed that the proceedings have been initiated by the FIA under the Act, which does not confer overriding authority over fiscal statutes nor dispense with permission requirements expressly stipulated by Parliament.
In the absence of any offence identified under the FIA Act itself, the protections under provisions of the ITO and the STA continue to apply, the court added.
The court said allegations of corruption or abuse of authority may constitute such a predicate offence, the impugned notices do not identify any scheduled offence with legal specificity, nor do they disclose a factual nexus between the refund transactions in question and any offence falling within the schedule to the Act.
The court also observed that in the absence of a clearly identified predicate offence, section 25 of the Act cannot validly be invoked as an independent source of investigative authority.
The court noted that in the present case, the record was obtained through generalized notices and coercive processes, without satisfying the preconditions in Section 227(2) of the Act.
The court also observed that even if clauses (o) or (p) of section 216(3) of ITO were otherwise attracted, they do not justify the impugned notices and impugned actions.
The court also observed that these provisions do not operate in isolation and must be construed strictly and harmoniously with the rest of the statute.
In particular, they do not override the requirement under provisions of the ITO or the STA that prior approval be obtained from the FBR before initiating any inquiry or investigation against an officer for acts done in his official capacity.
The respondents exceed the investigative mandate of the FIA and offended the rule of law, the court concluded.
Copyright media, 2026
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