Compliance to notices by FBR: a wealthy undocumented person deposits Rs 1.025 million tax with return

A wealthy undocumented person of Lahore has filed his income tax return and deposited Rs 1.025 million in response to the notice of the Federal Board of Revenue (FBR) for provisional assessment under section 122 (2) of the Income Tax Ordinance 2001, reflecting compliance by persons not documented earlier.
Sources told Business Recorder here on Saturday that it was a major breakthrough for the Directorate General of Intelligence and Investigation, Inland Revenue, which has issued 1,100 provisional assessments orders and income tax demand notices involving over Rs 861 million to undocumented individuals. This was the first recovery made by the tax department under the documentation of economy.
The Lahore-based person had purchased a number of properties in Lahore, but he had never obtained National Tax Number (NTN) and had never before filed the income tax return. In response to the notice of the directorate IR, he not only has filed the return but has also deposited Rs 1.025 million as tax, bringing him into the documented regime. The FBR is also in the process of recovery of income tax from other owners of assets who have purchased properties but preferred to remain out of the tax net.
Resultantly, a large number of persons have started complying with the notices issued for provisional assessment under section 122 (c) of the Ordinance 2001. Some persons have revised their income tax returns to show actual income in the presence of third-party data available with the department. These persons have concealed their income or had under-stated their income in the returns. Others filed nil returns, but compliance is visible in dozens of cases. If the trend continued, the directorate would be able to recover huge amounts and bring undocumented persons into the formal tax regime.
When asked whether persons are ready to voluntarily deposit the amount under section 122 (c), sources said that dozens of persons are in the process of submitting their actual details of income and payment of taxes due to authentic information available with the FBR. However, the exact number of persons who would voluntarily deposit amount would be known after compilation of data from the field formations next week. Definitely, many persons are now ready to voluntarily deposit the tax after expiry of 60 days period of notice served under section 122 (c) of the Ordinance 2001.
Sharing another important case of Lahore, sources said that a motorcar dealer of Lahore had used National Tax Numbers of other persons to purchase hundreds of locally manufactured cars of over 1000 cc. The car dealer was non-filer of return and a non-compliant person. The agency has detected the irregularity and issued notice under Ordinance 2001 to the dealer to file return and deposit the due amount of tax to avoid prosecution. The dealer has agreed to include Rs 25,000 per car as part of his income which would help in calculating his actual income during the business transactions of hundreds of vehicles in Lahore.
Similarly, another car dealer of Gujranwala has also decided to show Rs 25,000 per vehicle as part of his income and his income tax liability would be calculated on the basis of hundreds of vehicles sold to his customers on monthly basis. Sources said that the FBR has aggressively started recovery drive against persons to whom notices were served under section 122 (c) of the Ordinance 2001. The whole exercise was practically started in March and information was disseminated to the field formations in April, and now recovery action would be taken in May-June 2011. This process takes some time to fulfil legal formalities for recovery of the due amount of taxes.
Shahid Hussain Asad, Director General, Directorate of Intelligence and Investigation, Inland Revenue is supervising the whole exercise and sharing data with the field formations on regular basis which has enabled the Regional Tax Offices to pursue big cases of undocumentation across the country.
The directorate has also launched second phase of the documentation drive by issuing notices of provisional assessments to the rich accountholders of banks and frequent travellers abroad under section 122 (c) of the Ordinance 2001. The agency has identified account holders having millions of rupees in their bank accounts, but they have neither obtained the National Tax Number (NTN) nor filed their income tax returns. The directorate has detected several cases where certain individuals had declared income of a few lakh rupees, but they are maintaining over and above Rs 50-60 million in their bank accounts, which is a significant amount.
Similarly, the directorate would issue provisional assessment notices to frequent travellers abroad for documentation purposes. It is expected that thousands of provisional assessments orders would be issued during the current month against the accountholders maintaining huge amounts in their banks and travellers abroad, who have repeatedly travelled abroad during tax year 2010. The income tax demands to be raised against more persons would be enormous in May-June 2011 based on profiles of undocumented persons.
The Directorate General of Intelligence and Investigation, IR is working on 24 hours basis at the FBR Headquarters to collect information from Nadra and other sources of third-party data and communicate the same to the field formations for early recovery of taxes from the un-documented persons. The monitoring and verification of each case by the directorate has also expedited the whole exercise of documentation at the national level. The directorate is also constantly monitoring the actions taken by the RTOs in cases where 60 days have expired after issuance of notices of section 122 (c) and results are expected during May-June 2011, sources added.