The Federal Board of Revenue (FBR) has introduced a Standard Operating Procedure (SOP) outlining how tax officials should exercise the powers granted under Section 37A of the Sales Tax Act, 1990. The move is aimed at ensuring that investigations into tax fraud are carried out in a structured and legally sound manner across the country.
Section 37A of the Sales Tax Act empowers authorized officers to investigate cases involving tax fraud and related offences. It also grants them certain powers similar to those exercised by civil courts, including the authority to summon individuals, examine evidence, and in specific circumstances, make arrests. Because of the seriousness of these powers, the FBR has now defined a clear process to guide field officers and investigation units.
According to the newly issued SOP, if evidence of tax fraud emerges during proceedings—particularly under Section 11E of the Sales Tax Act or during any other examination—the case must immediately be referred to the Directorate of Intelligence and Investigation (Inland Revenue) in the relevant jurisdiction. This ensures that specialized investigation units handle cases involving potential fraud rather than leaving them solely to routine field formations.
Once the Directorate of Intelligence and Investigation receives a case referral, the concerned Director is required to review the matter within 30 days. The purpose of this review is to determine whether action under Section 37A(1) is justified. If the investigation directorate concludes that there are sufficient grounds for action, the relevant Commissioner will be formally notified so that further proceedings can begin. However, if the case does not warrant action under Section 37A, it will be returned to the concerned tax office for continuation of proceedings under Section 11E, which typically deals with recovery and assessment matters.
The SOP also explains the next stage of the process. After an inquiry is conducted under Section 37A(3), a report must be submitted to the relevant Director in accordance with Section 37(5) of the Act. If the Directorate General of Intelligence and Investigation determines that a full investigation should be initiated under Section 37A(6), the procedures outlined in Sales Tax General Order No. 2 of 2025 must be strictly followed.
By issuing these guidelines, the FBR aims to ensure that powers related to tax fraud investigations are used responsibly and consistently throughout the Inland Revenue system. The SOP is also intended to strengthen the legal foundation of investigations so that actions taken by tax authorities remain sustainable when challenged before appellate forums or courts.
The directive has been circulated to Chief Commissioners of Inland Revenue across Large Taxpayer Offices (LTOs), Medium Taxpayer Offices (MTOs), Corporate Tax Offices (CTOs), and Regional Tax Offices (RTOs) for immediate compliance. It has been issued with the approval of the Member Inland Revenue (Operations), signaling the FBR’s intention to standardize procedures for handling tax fraud cases and improve coordination between field formations and investigation units.
Overall, the introduction of this SOP reflects the tax authority’s effort to bring greater clarity and discipline to the process of investigating tax fraud while ensuring that the exercise of legal powers remains transparent and within the framework of the law.