ISLAMABAD: The Islamabad High Court (IHC) on Tuesday issued a stay order, restraining the federal tax authority from its move to block the SIM cards of non-filers.

The court sought a response from the Federal Board of Revenue by May 27 when the hearing will resume.

The directives were issued by Chief Justice Aamer Farooq after the initial hearing of a petition filed by Zong — one of the four telecom operators in the country.

The court’s order came against the backdrop of reports that telecom companies had agreed to block the connections of non-filers as demanded by the tax watchdog. Initially, these companies as well as the regulator had ex­­pressed reservations, calling the move “counter-productive” and vulnerable to litigation.

Barrister Salman Akram Raja, representing Zong, referred to the Income Tax General Order (ITGO) No.1/ 2024 issued by the Federal Board of Revenue under Section 114B of the Income Tax Ordinance 2001.

He argued that the amendment violated the basic right of freedom of business enshrined in Article 18, adding that there could be no legislation contrary to the fundamental rights given by the Constitution.

He said the government cannot get the power to block people’s SIM cards by amending the law, adding that if more than 500,000 SIMs were blocked, the telecom sector would face an annual loss of Rs1 billion in terms of revenues.

The lawyer was referring to Section 114B of the Income Tax Ordinance 2001 that was added to the Finance Act 2022. This section grants the FBR powers to issue ITGO concerning individuals not appearing on the active taxpayers list to block their mobile phones or SIMs, and discontinue the electricity and gas connections.

The controversy had risen when the FBR issued the IGTO on April 30, releasing the list of 506,671 individuals who failed to file their tax returns for 2023. PTCL — the parent company of Ufone — announced that the company was in close coordination with the PTA to address this issue effectively and responsibly. It had said that safeguarding the interests of the consumers was its priority.

Though there was no statement from the other three telcos, senior officials in the telecom companies had confided in Dawn that the FBR was trying to hide its failures and instead of giving absolute powers to their commissioners, the tax watchdog needed to concentrate on expanding the tax base. They said they would go to court if necessary.

On May 4, the PTA refused the FBR’s demand to block the mobile phone SIMs, saying its execution did not fall within its jurisdiction and thus the order would have no “binding effect” since it was inconsistent with the applicable legal framework.

The telecom companies had even forwarded their concerns to the Ministry of Information Technology that the FBR’s decision to block the SIMs of non-filers was made in undue haste and would adversely impact customers.

Published in Dawn, May 15th, 2024

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