System-based scrutiny of IT returns: Alvi upholds FTO’s decision

ISLAMABAD: President Arif Alvi has upheld the decision of the Federal Tax Ombudsman (FTO) to implement system-based scrutiny of income tax returns.

An own motion investigation was initiated by Federal Tax Ombudsman while exercising powers under Federal Tax Ombudsman Ordinance ,2000 on account of inattention, delay and incompetence of FBR’s functionaries, in the administration or discharge of duties and responsibilities in dealing with the case of M/S sprint Oil and Gas Service Islamabad.

Brief background of the case is that, M/s Sprint oil & Gas Service, FZC had filed Income Tax Return for TY 2014 to 2018 in time yet the Department had issued Notices so as to invalidate the said return. Taxpayer also alleged that all this had been done with design to block company’s legal/admissible refunds. However, despite repeated efforts of the complainant, the department failed to provide positive response, the complainant thereafter approached the FTO for re-dressal of his grievances.

When Federal Tax Ombudsman sought Secretary Revenue Division’s comments, it had been observed from record that from TY 2014 to 2018 almost all Tax returns had been filed without notes, an integral part of mandatory Audited Accounts. Timelines of all earlier Notices of Income Tax Ordinance, 2001 clearly indicated perpetual filing of incomplete tax returns.

It was further found that from TY 2014 to 2018, department never took up the issue of non–filing of notes electronically. Though LTO Islamabad claimed that all returns filed are examined, scrutinized through desk audit, incomplete returns are segregated, and Notices were issued yet TY 2018 is the classical example wherein Taxpayer Company claimed to have filed notices manually and evidence submitted by AR could not be rebutted by the Department. Moreover, the company in question has the history of filing manual response.

While deciding the complaint, the FTO ordered the FBR to ensure that notices for TY 2014 to 2018 being legally valid needs to be complied with, as per prescribed Rules, FBR’s IT wing is to review IRIS application so as to generate “System Alerts/ Reminders” in all cases where notices remain non-complied. The FBR was also directed to immediately implement system based scrutiny of returns, (at least at LTOs and CTOs), identifying short documents cases, generating necessary notices, maintaining updated profile for all concerned officers and invalidating incomplete returns. However, FBR preferred representation to the President against above directions of FTO.

Accordingly, the President, while deciding these representations, has upheld the orders of FTO with directions to FBR to make necessary changes /improvements in IRIS system in 60 days.

Copyright Business Recorder, 2022