FBR reopens audit cases of non-filers

KARACHI: The Federal Board of Revenue (FBR) re-opened audit cases related to non-filing of tax returns after legal changes were introduced under the latest mini-budget, officials said on Friday.

The officials said the cases were automatically selected before the budget for the current fiscal year of 2018/19 as the taxpayers failed to file income tax returns.

“The cases were, however, closed after a provision (allowing the audit) was deleted through the Finance Act 2018,” a senior officer at Large Taxpayers Unit (LTU) Karachi said.

The official added that the law was, however, restored under the Finance (Supplementary) Act 2018 and therefore, “the processing resumed”.

The official was unable to give the exact number of audit cases and the amount involved in the cases.

The FBR managed to net 55 percent more income tax returns till October 10 as filing of income tax returns increased compared to the same period last year.

“FBR has until October 10 received 482,275 income tax returns for 2017/18,” the revenue body said in a statement. “FBR in the same period of the corresponding year received 312,067 returns.”

The FBR said increase in filing envisaged the confidence of taxpayers on the government. The government also slaps additional withholding tax on non-filers when they conduct banking transactions – a measure that is also inducing them to file returns.

The LTU official said an amendment (section 214D) was introduced into the Income Tax Ordinance 2001 through Finance Act 2015 under which an individual is automatically selected for audit of its income tax affairs for a tax year if she or he fails to meet filing obligation.

The official said the section also contained many other provisions to initiate audit. The section was completely deleted from the ordinance through the Finance Act 2018.

The automatic selection of audit was withdrawn on the recommendation of stakeholders as it was creating problems for taxpayers and counterproductive to the broadening of tax base drive.

Besides, the gap between holders of national tax number and return filers happened to be very huge, creating large amount of audit cases for the FBR as well.

The official said a new amendment (section 214E) was introduced through Finance (Supplementary) Act 2018, which stated that the section 214D was deleted but proceedings would continue in the cases in which the notices were served under Section 122 of the ordinance, which implies that a tax department issued amended assessment order to a taxpayer.

The latest section also said audit under section 214D will be concluded if a taxpayer voluntarily revises his return by 31 December, 2018, along with payment of 25 percent higher tax than the tax paid with return on the basis of taxable income and where not tax is payable two percent of the turnover and where no turnover is declared penalty has voluntarily been paid.