Tax officials accused of ignoring rules while charging WWF out of audit proceedings

LAHORE: The tax authorities are accused of ignoring the condition of passing a written order while dealing with income tax returns selected for audit and reassessment of Workers Welfare Fund (WWF).

This practice on the part of tax officers, said tax experts, is leading to excessive legal controversies causing undue delay in charging the due WWF and waste of financial resources in frivolous litigation at the appellate tribunals. No tax officer can charge the WWF by selecting a tax return for audit and reassessing the amount without passing a written order and issuing prior notice to provide the opportunity of defence to an industrial establishment, said the sources.

However, an order in writing does not necessarily mean a separate order, as the tax officer is authorized under the law to make an order relating to WWF while finalizing the assessment proceedings through a written order which would be considered a part of the assessment of order to charge WWF, they added.

According to the sources in tax practitioners, the appellate tax tribunals do not entertain a reassessment made as a result of the selection of a case for audit under the relevant provisions of the Income Tax Ordinance (ITO) unless the taxpayer is confronted through a show-cause notice and provided with an opportunity of defence as per the WWF Ordinance. They said the tax officer ignored the provisions of WWF Ordinance and treated it under the ITO while selecting it for audit and reassessment of the Fund amount.

Tax practitioners have pointed out that an industrial establishment is under a legal duty to pay the due amount of WWF at 2% of its total yearly income and furnish proof of such payment along with a copy of income tax return to the taxation officer having jurisdiction over the industrial establishment for the purpose of WWF Ordinance 2001. However, a tax officer is bound by the Ordinance to determine the actual payable amount of WWF through a written order if he does not agree with the payment made by the industrial establishment along with his return.

Tax experts have added that the tax officers make an assessment in pursuance of the audit proceedings while deeming it as an assessment order under the ITO at the time of amended adjustment of the amount of WWF already paid at the time of filing of return of income, which is a violation of the WWF Ordinance. They said it is a settled principle that a tax officer cannot demand an amount without issuing a show-cause notice and providing the opportunity of hearing and fixing liability in terms of the relevant provisions of law.

They said it is needless to say that provision of notice to a person, who is being proceeded against, must be read in every statute, irrespective of the fact that whether or not such provision was incorporated therein.

Copyright Business Recorder, 2023