FBR Gets Power to Arrest Company Directors, CEOs and CFOs

The Federal Board of Revenue (FBR) has granted extraordinary powers to Inland Revenue officers, enabling them to arrest directors, chief executive officers, chief financial officers of companies, and abettors of tax fraud. These powers have been conferred upon Inland Revenue officials through the Finance Bill (2025-26). According to the new arrest powers, an officer of Inland Revenue, during an investigation and having reason to believe—on the basis of evidence—that the actions of any person may have caused or attempted to cause tax fraud or any other offence warranting prosecution under this Act, may arrest such person with the prior approval of the Commissioner. If an officer of Inland Revenue is of the opinion that a delay in arrest may enable the accused to evade the process of law, or if circumstances exist in which obtaining prior approval of the Commissioner is not practicable, he may arrest the accused without prior approval and must immediately report the arrest to the Commissioner. Such a report shall contain a summary of all material facts to be entered in the register of arrests and detentions, and shall be accompanied by a copy of the grounds for the arrest. The Commissioner may, if he believes that there was insufficient evidence or reasonable ground for the arrest without approval, or that the arrest was made with mala fide intent, direct the officer of Inland Revenue to release the accused forthwith. The Commissioner shall then refer the matter to the Chief Commissioner for a fact-finding inquiry if he believes that the arrest was made without sufficient evidence or reasonable grounds, or was made with mala fide intention. Where the person suspected of tax fraud or any offence warranting prosecution under this Act is a company, every director, chief executive officer, or chief financial officer—regardless of title—whom the officer of Inland Revenue has reason to believe is personally responsible for the company’s actions in committing tax fraud or any offence warranting prosecution under this Act, shall be liable to arrest. Provided that any such arrest shall not absolve the company from liabilities relating to the tax sought to be evaded, default surcharge, or penalty under this Act. All arrests made under this Act shall, unless inconsistent with its provisions, be carried out in accordance with the relevant provisions of the Code of Criminal Procedure, 1898. An officer of Inland Revenue, not below the rank of Assistant Commissioner, or any other officer authorized by the Board in this regard, who, on the basis of material evidence, has reason to believe that any person is an abettor of tax fraud or any offence warranting prosecution under the Act, may arrest such person upon approval for investigation and arrest by the Commissioner, the Finance Bill added.