Tax authorities accused of prejudging tax evasion as bid to launder money

LAHORE: The Intelligence and Investigation (I&I) Wing of the Inland Revenue is prejudging tax evasion as an attempt of money laundering and issuing notices against the taxable income not accounted for tax purposes by taxpayers, said sources.

They said the I&I wing staff was already making up its mind that it is not only a case of tax evasion but also that of money laundering. According to the sources, the department was not seeking any explanation from taxpayers before issuing notices and preferring to travel beyond the provisions of Anti-Money Laundering law without bothering about the availability of evidence with regard to the laundered money.

They said the department was preconceiving the idea that an amount not taken into consideration by a taxpayer for taxation purposes is an attempt to carry out money laundering. They said no explanation is being sought from the taxpayer before clubbing any such amount with an attempt of money laundering.

It may be noted that non-declaration of an asset by a taxpayer is not a scheduled offence under the Income Tax Ordinance unless proved otherwise as required under the Anti-Money Laundering Act, 2010, which requires an independent exercise.

Under the Act 2010, a person is presumed to be guilty of offences of money laundering if he acquires, converts, possesses, uses or transfers property, knowing or having reason to believe that such property is proceeds of crime or conceals or disguises the true nature, origin, location or if he holds or possesses on behalf of any other person any property with knowledge that such property is proceeds arising out of some offences and lastly participate and associates or conspires to commit or attempts to commit the commission of the acts specified and explained in the Act.

The Act also requires constitution of a National Executive Committee to oversee suspicious transaction and the finances that concerns with terrorism. However, sources said, the tax department takes this requirement as extraneous one, which is a gross misconception about the law. Especially, when not a single provision of the Income Tax Ordinance declares that any amount of money not accounted for or not considered by the taxpayer as taxable income would laundered money.

Tax experts believe that the department should inquire about and seek explanation about the unexplained amount coming in or going out of the account of a taxpayer. Unless an explanation is forwarded by the taxpayer does not qualify the satisfaction of the tax officer concerned, they said, it is inconceivable at such a premature stage that it was laundered money. Not every amount which is not accounted for or considered as taxable amount could be taken as the laundered money, they stressed.

Copyright Business Recorder, 2023