The Federal Board of Revenue has started issuing notices for filing of Annual Reconciliation Statement (ARS) under rule 44(4) of the Income Tax Rules, 2002, albeit the last date for submission of income tax returns is December 31, 2012. According to tax experts, tax departments are asking taxpayers to ensure compliance to notices relating to the monitoring of withholding tax for tax year 2012. However, the last date for filing of return is December 31, 2012.
Tax experts said it is impossible for the taxpayer to prepare ARS before December 31, 2012, adding that despite various complaints sent by the taxpayers in respect of monitoring of withholding taxes (WHT), the issues are still unsolved. Munawwar H. Shaikh, President, Karachi Tax Bar Association (KTBA) in his letter to Asrar Rauf, Member Tax Policy (Direct Taxes), FBR said the tax departments are directing taxpayers to produce hard and soft copies of the statements and issuing notices in case of non-compliance. However, the same have already been filed through e-filing process and also available in the FBR's database. He said the jurisdiction for monitoring of withholding taxes assigned to the taxation officer should be publicised amongst the taxpayers and their representatives. However, if inadvertently notices were issued by the taxation officer, the matter may be taken up with the commissioner for appropriate action and copy of such letter be marked to the concerned officer.
Moreover, he said the orders in the cases where reconciliation was furnished and hearing was also concluded should be passed within 30 days and added that the monitoring of WHT should be conducted for one time for a particular year only and if any taxpayer was found guilty, the monitoring of other years would be allowed.
Moreover, he said tax should be deducted at the time of payment and in the cases of large taxpayers; it is more than difficult to reconcile the figures of statement with audited accounts as required under Rule 44(4) of the Income Tax Rules, 2002, due to accounting on accrual basis.
In such cases where preparation of reconciliation of withholding taxes required under prescribed rule is difficult; the taxation officer with prior approval of commissioner of income tax and consent of taxpayer may examine the records of withholding taxes at the taxpayer's premises, he maintained.