ISLAMABAD: Pakistan Tax Bar Association (PTBA) has requested Federal Board of Revenue (FBR) to immediately resolve technical issues in filing of income tax return form for tax year 2022, submission of tax payment challans and give 90 days statutory period to taxpayers to submit returns from the day, the IRIS portal is error-free.
In a communication to the FBR Chairman Asim Ahmad, the President PTBA Rana Munir Hussain has highlighted serious issues in the existing return form including hurdles in the preparation of tax payment challans, filing of the revised wealth statement and the downloading of Computerized Payment Receipts (CPRs). Moreover, the simplified return for small and medium enterprises (SME) sector was uploaded without issuing the draft return.
The PTBA has also pointed out the blockage of column for adjustment of refund against tax liability; wrong calculation of normal/ initial depreciation allowance on the purchase of plant/ machinery; incorrect/ excess tax liability calculated on gain on sale of immovable properties and incorrect tax calculations of profit/ yield on Bahbood Certificates/ Pensioner’s Benefit Account/ Shuhada Family Welfare Account.
According to the communication of the PTBA to the tax authorities, the PTBA endorsed the stance/ pinion and observations about system errors and glitches highlighted by the regional affiliated bars including the Karachi Tax Bar Association. “It is regretted to say that till to date, the present IT team has failed in providing efficient, user-friendly, hassle error-free and smooth IT system in professional manner.”
Under the scheme of the Income Tax Ordinance 2001, there are certain obligations on the part of the taxpayers in filing of income tax returns but at the same time there are also some obligations to be fulfilled by the tax machinery to facilitate the taxpayers by providing flawless return form and hassle-free filing thereof.
The PTBA stated that attention is invited to the provision of section 114 of the Income Tax Ordinance 2011whereby every person is obliged to file tax return for a tax year on the form and manner as would be prescribed by the FBR for the relevant Tax Year, i.e., September 30 of each year as provided under section 118 of the Income Tax Ordinance, 2001. Non-submission of the returns by the taxpayers within due dates not only entails the penalties but exclusion of name from the Active Tax Payer List (ATL).
The obligations have been placed by law on the relevant officials of FBR through Rule 34A of the Income Tax Rules, 2002 as notified vide SRO1185(1)2020 whereby certain timelines in notifying the income tax return forms have been laid down.
As per sub-rule (2) to (4) of Rule 34A the draft of income tax return has to be notified for suggestions from all persons likely to be affected thereby on or before December 1 of the financial year following the financial year to which the return relates by observing following timelines and procedure prescribed therein.
Vide clause (e) of sub-rule (4) of Rule 34A it is clearly provided that income tax return shall be made available on portal IRIS by January 31 of the financial year following the financial year to which the return relates. “From January 31 till June 30 is the period wherein all the deficiencies or corrections in the system can be taken care of and from July 1 every taxpayer would have a clear 90 days’ time to submit his/ it return”, PTBA maintained.
As against the legal requirement as prescribed by law the draft of income tax return for the Tax Year 2022 had notified on June 21, 2022 and final return had been notified and made available on portal IRIS on June 30, 2022 which is still deficient, whereas it was required to be made available on January 31.
The communication says following issues in the return need FBR Chairman’s immediate action: -
First, as per law the taxpayer is entitled to claim adjustment of his previous refunds against as liability for the current tax year but the relevant column for adjustment of refund has illegally been blocked, which is against the fundamental rights and present scheme of law under the Income Tax Ordinance 2001.
Second, the draft of manual return of income for the Individuals and AOPs for the Tax Year 2022 was issued as late as on August 26, 2022 whereas the final SRO. 1733(1)/2022 has been issued on September 13, 2022 meaning thereby only 17-days’ time has been allowed to file the manual returns which is insufficient as provided under law supra.
Third, the income tax return form introduced for SMEs sector has been issued on the IRIS system without sharing a draft of the same as required under sub-section (2) of section 100E read with section 237 of the Ordinance. However, it has also been noted that the simplified return for SME uploaded without issuing the draft return, the same may lead to illegality. It is; therefore, suggested that issue draft followed by final return be issued to meet with the requirement of law; enabling the taxpayers to avail the benefits for SME sector provided under section 2(59A) of the Ordinance.
Fourth, the IRIS portal is calculating incorrect normal, as well as, initial depreciation allowance on purchase of plant/ machinery against the provisions, of section 23 read with the part-II of the Third Schedule of the Income Tax Ordinance. 2001.
Fifth, the IRIS portal is calculating incorrect/ excess tax liability on gain on sale of immovable properties in violation of section 37(1A) of the Income Tax Ordinance. 2001.
Sixth, the rate of tax collection u/s 153(1) c) for Individuals & AOPs contractors is 7percent, which is a minimum tax. In the relevant part of Return for working of attributable income neither there is any row having rate at 7% rate of tax nor the system is allowing credit to the said deduction.
Seventh, presently IRIS portal is calculating/ charging the excess/ incorrect tax liability on income covered under section 153 of the Ordinance, on the basis of fixed/ predefined wrong formulas due to which the taxpayers are bound to pay high tax instead of their actual tax liability, which is against the spirit of self-declaration and present scheme of law. The de-freezing of attribution tabs and enabling the taxpayers to enter correct figures/ data to file their return in time may resolve the issue.
Eighth, the IRIS portal is calculating incorrect tax at profit/yield on Bahbood Certificates/ Pensioner’s Benefit Account/ Shuhada Family Welfare Account, whereas clause (c) of sub-section (1) of section 39 provides that tax shall not exceed 10 percent of such Profit/ Yield read with clause (6) of Part-III, 2nd Schedule of the Income Tax Ordinance, 2001.
Ninth, the IRIS portal is treating normal income for the Tax Year 2022 instead of final income at interest/ profit on debts on Government Securities as per clause (20) of Part-III, Second Schedule of the Income Tax Ordinance, 2001 wherever, the said clause was omitted vide Finance Act, 2022 and is applicable for the Tax Year 2023, which can’t be applied retrospectively.
Tenth, the MIS under the tab payment detail against the tax deposited, value of taxable amount is not showing.
Eleventh, the taxpayers in general and legal fraternity in particular are facing acute hurdles in the preparation of tax payment challans because response of the system in this regard is deadly slow. Most of the time it requires many attempts for preparation of the tax challan due to website issues and preparation of tax challan in single attempt is difficult and it is very common practice/ issue faced by almost every taxpayer while preparing the tax challan, hence the website/ system issue should be resolved immediately and sufficient time is also required for timely filing of returns.
In cases where a revised wealth statement under section 116(3) of the Income Tax Ordinance, 2001 for the Tax Year 2021 resulting into change in the closing balance of Net Wealth for the Tax Year 2021 has been filed, the system does not carry forward opening balance of Net Wealth for the Tax Year 2022 (showing the opening balance of original wealth statement of last year’s closing balance).
The PTBA has also highlighted another issue regarding the downloading of Computerized Payment Receipt (CPR), the system shows the message “Challan / CPR does not Exist” against the valid CPR duly deposited in the national exchequer.
In the light of the submissions made above it is requested that the taxpayers be provided the statutory period of clear 90 days for submission of their income tax returns from the day, the portal is error-free. Moreover, timely decision taking in this regard by the FBR would not only be appreciated by the taxpayers/ legal fraternity, who are working very hard day & night by playing their part towards the legal responsibility for contributing towards national exchequer but also in the collection of taxes at the appropriate time, PTBA added.
Copyright Business Recorder, 2022