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ISLAMABAD: The Inland Revenue officers have been empowered to arrest any person on the charges of concealment of income.

Through the Finance Bill 2021, the FBR has proposed Section 203A (Power to arrest and prosecute) in the Income Tax Ordinance, 2001. Tax experts told Business Recorder that the FBR could not arrest or prosecute the taxpayers, who had availed the tax amnesty schemes in the past.

If the provision would apply, prospectively, then the new taxpayers can raise question that why action is being taken against them when amnesties were granted in the past.

The income tax was a civil liability and could not be treated as a criminal liability for the purpose of prosecution, the tax experts stated.

In the presence of Section 192A (prosecution for concealment of income), there was no need to introduce another section in the Income Tax Ordinance, 2001.

Moreover, the FBR cannot disclose details of the suspected tax defaulters under Section 216 of the Income Tax Ordinance, 2001.

According to the Finance Bill 2021, an officer of Inland Revenue not below the rank of an assistant commissioner of Inland Revenue or any other officer of equal rank authorised by the Board in this behalf, who on the basis of material evidence has reason to believe that any person has committed offence of concealment of income or any offence warranting prosecution under this Ordinance, may cause arrest of such person.

A tax expert stated that the Finance Bill, 2021, proposes deletion of sections 202 and 203 and suggesting amendments in Section 203A besides promulgation of sections 203B, 203C, 203D, 203E, 203F, 203G, and 203H.

The 202 and 203 sections are related to powers of the chief commissioner to compound an offence with payment of tax including default surcharge and penalty; further appointment of Special Judge [SJ] by the federal government for prosecution of offences which are in nature of crime such as false statement in verification; improper use of the NTN; making false statements; obstructing tax authorities; etc, on which the Code of Criminal Procedure, 1898, (CCP) is applicable and 203A is related to procedure for filing of appeal against the order of special judge.

The substituted Section 203A proposes to empower assistant commissioner or any other equal rank officer authorised by the Board, to arrest a person who has committed an offence under the ordinance.

The arrests made shall be as per the CCP.

The section further proposes, the chief commissioner may compound the offence, if such person pays the amount of tax due with default surcharge and penalty.

In case of company, every director or officer responsible shall be arrested without absolving the Company from payment of due tax, the tax expert added.

Where any person has committed offence of concealment of income or any offence warranting prosecution under this Ordinance, the chief commissioner with the prior approval of the Board may, either before or after the institution of any proceedings for recovery of tax, compound the offence, if such person pays the amount of tax due along with such default surcharge and penalty as is determined under the provisions of this Ordinance.

The FBR stated that where the person suspected of offence of concealment of income or any offence warranting prosecution under this Ordinance is a company, every director or officer of that company whom the authorised officer has reason to believe is personally responsible for actions of the company contributing to offence of concealment of income or any offence warranting prosecution under this Ordinance shall be liable to arrest.

Provided that any arrest shall not absolve the company from the liabilities of payment of tax, default surcharge and penalty imposed under this Ordinance.

A tax expert opined that the existing law already provides 100 percent penalty for concealment of income of the amount of concealment under Section 182(12) of the Income Tax Ordinance, 2001. Further, Section 138 and 140 of the Income Tax Ordinance, 2001, provides modes and manner of recovering of taxes even through arrest of defaulters. Complete mechanism is provided in Rule 123, 135, 185 and 186 of the Income Tax Rules, 2002.

Copyright Business Recorder, 2021

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