Lapses in FBR’s asset assessment inflict over Rs900m loss on exchequer

LAHORE: Oversight in assessing concealed assets of taxpayers by the Federal Board of Revenue (FBR) officers in the Regional Tax Offices (RTOs) of Lahore and Islamabad has caused a loss of Rs930.08 million to the national exchequer, according to the Auditor General of Pakistan’s (AGP) report for the year 2023-24.

The report states that during the audit of tax records of 81 taxpayers under the jurisdiction of Commissioners Inland Revenue in RTO Islamabad and RTO Lahore, it was observed that the taxpayers had derived income from construction and completion of buildings in the Islamabad Capital Territory (ICT) and Lahore.

Out of the 81 cases, 79 taxpayers had purchased properties but failed to file income tax returns or explain the sources of their investments as required by law. Additionally, two taxpayers under-declared their sales and consequently paid less tax in their income tax returns.

According to the AGP report, assessing officers were legally required to enforce the filing of income tax returns and assess concealed assets declared, or not declared, by taxpayers. However, they failed to take action, resulting in revenue loss amounting to Rs930.08 million. The AGP pointed out these lapses between March and May 2024, but the department did not furnish any reply until the finalization of the report.

Under the heading “concealment of assets and income from contracts,” the Audit noted that income tax law imposes obligations on both sellers and purchasers of immovable property to comply with documentation requirements and declare the fair market value of assets. Sellers must provide accurate information on property value, while purchasers are responsible for verifying declared values and ensuring proper documentation. If either party conceals asset particulars, assessing authorities are empowered to tax concealed income and investments.

The Audit further observed that neither purchasers nor sellers filed income tax returns, thereby concealing their income and assets. Contractors were also required to declare the square footage of completed construction and pay tax accordingly, but the department failed to enforce these legal provisions.

Moreover, the report highlighted that Section 111 of the Income Tax Ordinance, 2001, lays out procedures for taxing concealed income. It says: “If a person owns money, a valuable article, or has made an investment without adequately explaining the source, the amount becomes taxable.” In this case, the concerned officers ignored these procedures, resulting in the underassessment of concealed properties and a substantial loss to the national treasury.

Copyright Business Recorder, 2025