Seeking expenditure details in IT return: FBR rejects proposal

The Federal Board of Revenue (FBR) has out rightly rejected a proposal of a Member of the Board, seeking details of personal expenditure regarding Association of Persons (AOPs) and individuals through amendments in the existing income tax return form. Sources told Business Recorder here on Tuesday that the FBR had thoroughly examined a proposal to incorporate 'expenditure' column in the return of income for AOPs and individuals.
The amendment was proposed in the income tax return form for obtaining details of expenditure from the registered persons. The idea is to have maximum detail of the expenditure made by the taxpayers to determine their actual income for broadening the tax base. However, the FBR has turned down the proposal on the argument that details of expenditure cannot be obtained under the Income Tax Ordinance 2001. Any such move to get information would be an illegal attempt under the admissible laws.
In August last year, through draft of the return forms for AOPs and individuals, the FBR had proposed to collect information pertaining to personal expenditure and assets details of 'individuals', including salaried/business class. The FBR is not legally empowered to seek details of expenditure through the income tax return under the Income Tax Ordinance 2001. But the same information could be collected from wealth statement and wealth reconciliation statement, the concerned FBR Wing cleared the draft of the new forms for public comments without issuing the SRO in August 2010. At that time, the draft return form was withdrawn and subsequently all relevant columns relating to expenditure were deleted from the return.
Sources said that the details of expenditure cannot be made part of the tax return because section 116 of the Ordinance 2001 already empower the commissioners to seek details of personal expenditure and person's total assets and liabilities.
The commissioner can select any case for audit, obtaining information related to the personal expenditure of an individual/AOP, but it cannot be made part of the return. Secondly, individuals and AOPs having annual income of Rs 10 lakh have to submit wealth statement and wealth reconciliation statement along with the return of income. In the presence of section 116 of the Ordinance, there is no relevance to introduce a new Annex in the income tax return for collecting information about the personal expenditure, sources added.