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ISLAMABAD: In order to reduce litigation between the taxpayers and the Federal Board of Revenue (FBR), the government is likely to review different time-limitation provisions provided in the Income Tax Ordinance, 2001.

Tax experts told Business Recorder that the Section 122(5A) of the Income Tax Ordinance, 2001, which empowers the commissioner to exercise revisionary jurisdiction is at present being massively misused, and there are serious complaints about this misuse; especially, arbitrary notices are being issued for those tax years, the limitation of which is to expire on June 30th, 2020.

The tax experts are of the view that the provisions of Section 122 (5A) should only be invoked, if the two conditions, i.e., erroneous and prejudicial to the revenue are proved beyond a shadow of doubt.

At present the notices are being issued without corroborating evidence but on assumptions.

Huge demands are created to meet the collection targets.

Thus, the section needs to be re-worded, so that it is only invoked when erroneous is available.

It is suggested that prior written approval from the commissioner should be made mandatory before invoking this revisionary provision.

Another tax expert said that the taxpayer was required to retain records for a period of six years whereas without giving any reason to go beyond prescribed time, the officers are issuing notices; especially, in case of monitoring of withholding of taxes and that to on the basis of assumptions.

In a recent judgment of the Sindh High Court (SHC) and duly upheld by Supreme Court of Pakistan it has been categorically held that the proceedings beyond limitation can only be initiated after giving solid reasons to do so; which means identified default on the part of tax payer must be established.

The department is now initiating the proceedings without giving any reason, so as to meet its collection targets.

Similarly, notice for filing of tax return u/s 114 of the Income Tax Ordinance, 2001 can be asked to be filed for any of the last five completed tax years, provided that this limitation is extended to last 10 years, where a person has not filed any tax return in the last five years.

The department is misusing this provision also to its benefit.

Section 116A of the Ordinance was introduced by Finance Act, 2018, to enforce filing of foreign income and foreign assets by a resident person.

Apparently there is no limitation provided and may be misused to ask for return for any tax year.

A limitation to the extent of six years or 10 years must be linked to the said provision.

This is in excess of the statute of limitation provided under the STA and the ITO.

It will not only put excess burden on the taxpayer, but also dis-incentivizes the tax authorities from taking timely action.

The time period for retention of records and assessment of tax should be reduced to five years.

This would save taxpayers from practical difficulties and unnecessary burden, while pushing the tax authorities to take more timely action.

There are large number of cases of de-registration on account of closure of business, deceased persons, etc., which are pending since more than five years and no comprehensive scheme of de-registration is available till the date.

Taxpayers suffer from uncertainty, mental torture and suspense about the fate of their cases.

The law is cumbersome as the tax officer may reopen the case without any time limitation after de-registration.

The process of de-registration should be completed within three months.

If the application for de-registration is not disposed of within the prescribed time period then applicant be considered as de-registered automatically.

The conversion of the temporary registration into permanent registration should be instant and the time lag should be minimum so that the registered persons do not suffer.

The sales tax liability of the registered person after de-registration should be restricted to six months for which he failed to filed the sales tax returns instead of unlimited period.

It is proposed that a De-Registration Scheme of such cases should be announced like introduction of scheme u/s 214E of ITO, 2001.

Copyright Business Recorder, 2020

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