Tax authorities accused of issuing ‘implausible’ audit notices

LAHORE: Tax authorities are accused of issuing notices without clarity and explicit reasons for selection of tax cases for audit, said sources.

They said the reasons for selection of cases for audit should be as transparent as one’s eye could easily catch them at the first glimpse instead of keep leaping in a dark or finds oneself a subject of fishing and roving expedition in the absence of sound principles of law for audit proceedings. They said the department is legally obliged to muster those grounds before conducting audit after proper application of mind and thereafter, while confronting taxpayer about selecting the case for audit, mindful as well as meaningful reasons have to be advanced, which have to be convincingly intimated to taxpayer to enable the latter to furnish a suitable reply and advance objections, if any.

According to sources from among tax practitioners, these reasons should be based on independent application of mind and not on the basis of some unfounded notions, or capricious believes. They said tax officers bring section 25 of the Income Tax Ordinance, 2001 into operation without intimation of proper, just and identifiable reasons to taxpayers with regard to selection of their cases for audit.

Instead of doing so, they said, tax authorities hastily bring all other parameters into play in the name of procedural requirements but avoid to offer tangible reasons.

Renowned tax expert Dr Ikram ul Haq said rather than reforming the capacity of revenue generation and improving enforcement capability, the government has preferred to burden the already struggling middle-income families and push many below the poverty line.

It may be noted that tax authorities are fully authorized under the law that if they require certain material for selecting case of taxpayer for audit, the same should be communicated to taxpayers for the initiation of formal proceedings. The appellate forums have declared in a number of cases that if the procedure prescribed in section 25 is not followed, the action of the department would be rendered an illegality. Arbitrary actions on the part of tax officials are harmful to the revenue generation exercise of the Board.

Tax officials believe that simply informing a taxpayer about selection of his case for audit is enough to meet the requirements of section 25, which is not legal.

The law requires solid reasons to be intimidated to taxpayers before initiating the process. All such notices talk about furnishing details/documents to the department but not a single word is attributed to the reasons behind the action of the department.

Copyright Business Recorder, 2023