Documentation of economy: E-notices to be used as an effective tool

The system-based issuance of legal notices would be used as an effective tool for documentation of economy by the Federal Board of Revenue to electronically ensure compliance by the non-compliant persons. Sources told Business Recorder on Monday that the FBR has developed the capacity to issue electronic intimations to the e-filers of returns.
Despite legal backing under the tax laws, the FBR has yet to start issuing system-generated legal notices to the non-compliant persons. In case the FBR is able to electronically serve legal notices, it would not only reduce the manual work of the Regional Tax Offices, but bulk of the job would be done electronically.
According to sources, the system-generated legal notices to the non-filers for imposition of penalty could play a key role in on-going drive of documentation. The FBR has yet to issue a standard operating procedure (SOP) or mechanism for issuance of system generated notices to the taxpayers. So far, the FBR has not used this tool to electronically issue notices in bulk to the registered persons or non-compliant persons. The issuance of legal notices in bulk through the electronic system would also play an important role in the documentation exercise on national basis.
The Board is legally empowered under the Finance Act 2010 to issue system generated notices to the non-compliant taxpayers including non-filers of sales tax returns, income tax returns, advance taxpayers, withholding statements. Sources said that an important amendment to the Finance Act 2010 has empowered the FBR to issue system generated notices to the non-compliant taxpayers, providing them opportunity to explain their position on non-payment of taxes or non-filing of returns. The FBR has to issue the rules for implementation of the provision of section 217(3) of the Income Tax Ordinance as introduced through Finance Act 2010.
The section 217 (3) of the Income Tax Ordinance says, a notice or other document issued, served or given by the Commissioner under this Ordinance shall be sufficiently authenticated if the name or title of the Commissioner, or authorized Officer of Inland Revenue, is printed, stamped or written on the notice or document or if it is computer generated and bears the authentication in the manner prescribed by the Board.
The persons receiving system generated notices would have no option other than to timely respond to notices to avoid penalties. In the manual environment, there are arguments that notices have not been properly served at the declared business addresses of the taxpayers.
Details revealed that through Finance Act 2010 amendments have been passed for authorising issuance of system generated notices under section 217(3) of the Income Tax Ordinance 2001. The automated intimation letters would be sent to the non-compliant taxpayers before application of penalties. This will enable the IT system of the FBR to issue notices to the taxpayers without requiring authorisation by an officer to have the same effect as those notices currently issued by the field formations.
Sources said that the system-generated notice would automatically give hearing opportunity to the concerned taxpayer. The first electronic notice would be treated as an opportunity to the taxpayers to submit his viewpoint on the notice before the imposition of the penalty. The reason for introducing provision of electronic notice through Finance Act is that a large number of people become defaulters and do not file returns in due date. According to sources, the minimum penalty for non-compliance is Rs 5,000. As soon as electronically notice is being served, minimum penalty of Rs 5,000 would be due on account of late filing of returns under Ordinance 2001, sources added.