Faulty e-returns: FBR told to determine, recover lost revenue

RECORDER REPORT

Islamabad: The Federal Tax Ombudsman (FTO) Dr Muhammad Shoiab Suddle has directed the Federal Board of Revenue (FBR) to direct its field formations to determine revenue losses that has occurred because of defective e-Returns for companies (IT-1) for Tax Year 2010.

He also urged the FBR to take steps to retrieve the loss, without charging any penalty or default surcharge to the taxpayers concerned.

According to him, a defectively-designed electronic Return for corporate taxpayers (service sector) showed incompetence, inefficiency and inaptitude on the part of the dealing officials and is thus tantamount to systemic maladministration under section 2(3)(ii) of the FTO Ordinance, 2000. The complainant, a Lahore-based leading tax lawyer Waheed Shahzad Butt, filed the Complaint No.627/LHR/IT(483)/1310/2011, highlighting tax computation defects in the electronic income tax return (IT-1) placed on the FBR's web portal required to be e-filed by service sector corporate taxpayers in Tax Year 2010.

The complainant contended that for corporate taxpayers deriving income by providing/rendering services chargeable under Section 153(1 )(b), read with Section 153(6) of the Income Tax Ordinance, 2001 (the Ordinance), the electronic Income Tax Return (IT-1) for Tax Year 2010 placed on the FBR web portal gave misleading information to taxpayers and tax payable by them was not being correctly computed.

Specifically, the electronic income Tax Return understated a taxpayer's due income tax liability for Tax Year 2010 and was not designed to take into account receipts/income liable to tax under Normal Tax Regime, besides the income taxable under the Minimum Tax Regime.

The matter, the complainant said, was brought to FBR's notice by the complainant, but the department did not give him a satisfactory response, compelling him to refer the issue to the Federal Tax Ombudsman. He said it involved FBR's maladministration in failing to design an error-free Return.

The complaint was sent to the Secretary, Revenue Division, for comments which were filed on 19-01-2012 and on in- 16-04-2012.

In response, the Secretary, IR (General) FBR, submitted that 9,887 taxpayers had filed their returns, showing income from services sector (AOP: 1436, Business Individual 3828, Company: 2707 and Salary Individual: 1916) for the Tax Year 2010. He submitted that directions had been issued to field formations to carry out the desk audit in all cases for the purpose to point out any short payment to guard against any possible loss of revenue.

Earlier, a similar complaint No158/ISD/IT(88)1346/2011 was decided by the FTO office with the recommendation that the FBR to ensure that in future, a foolproof electronic Return should be placed on FBR's official web portal. The FBR should further direct field formations to determine revenue loss that has occurred due to defective e-Return.