FCC upholds tax officials' power to raid premises without prior notice

• Justice Farooq rules tax officials may carry out raids at any time.
• Court rejects argument raids conducted without case unlawful.
• Verdict says tax authorities hold broad powers to enforce the law.

In a significant ruling, the Federal Constitutional Court (FCC) on Thursday upheld the authority of tax officials to conduct enforcement raids without prior notice and without a pre-existing case against a taxpayer.

Justice Aamir Farooq, issuing the verdict, ruled that tax authorities may carry out raids at any time and that such action does not require an existing case. The court rejected the argument that raids conducted without a pending case were unlawful.

The court said in the judgment that parliament has granted tax authorities broad powers to enforce the law, and that the court cannot impose conditions that the legislature has not included.

It further observed that where the wording of legislation is clear and unambiguous, courts cannot introduce limitations, reductions or interpretations that contradict the statute.

However, the court emphasised that the commissioner must provide written reasons specifying which law has been violated when ordering a raid.

It clarified that the authority to conduct raids stems from Section 175 of the Income Tax Ordinance, 2001.

The case arose after tax authorities initiated action against a private company under Section 175. The company challenged the action in the Sindh High Court (SHC), which dismissed the petition.

An appeal against the SHC ruling was later filed before the Federal Constitutional Court, which has now been dismissed.

It may be noted that the FCC upheld the Super Tax in another ruling last month, allowing the Federal Board of Revenue (FBR) to collect an estimated Rs150–200 billion in the current quarter (January–March) to help bridge the revenue shortfall.

In the first six months (July–December), the FBR collected Rs6,161 billion, facing a revenue shortfall of Rs329 billion against the target agreed with the IMF.

For the quarter ending March 2026, the FBR and the IMF have agreed on a collection target of Rs9,917 billion, requiring the FBR to collect Rs3,756 billion during the January–March period to meet the benchmark.

The Ministry of Finance has issued budget strategy guidelines to the FBR, directing that any revenue shortfall be addressed through improved tax collection rather than new taxation measures, and that no additional taxes be imposed.