Penalty imposition: Tax officers accused of failing to prove concealment of income

LAHORE: Taxation officers are accused of not proving deliberate deduction by taxpayers while disallowing expenditures under the provision-related concealment of income to impose penalties, said sources.

They said the taxation officers do not take pains to first determine the actual guilt warranting a penal action. The sources said the relevant provisions of law provide a clear exception that mere disallowance of any expenditure shall not constitute concealment of income or furnishing of inaccurate particulars of income, unless it proved that a taxpayer deliberately claimed deduction in respect of such expenditure not actually incurred by him.

It is duty of the department to establish the same before levying any penalty, they said, adding that the burden to prove such act of a taxpayer is also on the department and mere failure to determine correct income and pay tax accordingly would not lead to imposition of penalty until it is a result of fraud or willful gross neglect.

According to the sources, tax officers prefer to take the falsity of an explanation on the part of taxpayer as sufficient cause to pose penalty. They believe that it is duty of the taxpayer to prove innocent, which is not the spirit of tax laws, they added. It is for the department to establish his guilt, as penalty could be imposed only when the department establishes a case indicating dishonest motive of taxpayer in filing a return.

According to the sources, the taxpayers must be conscious of having concealed particulars of his income in case the department has decided to pose a penalty. They said the tax officers fail to produce tangible evidence, independent of taxpayer’s explanation, before the appellate forums and ultimately fail to get a favourable decision.

Generally, they said, the department considers it sufficient to impose penalty if a taxpayer agrees with the higher assessment by the department then the returned income submitted by him. However, any such situation fails to qualify touchstone of tax laws, especially when the taxpayer is not ready to admit is as concealment of income on his part.

Copyright Business Recorder, 2023