Non-appearance in ATL: Persons to be subjected to 100pc increased rate of tax

The Federal Board of Revenue (FBR) has said that persons whose names are not appearing in the Active Taxpayer List (ATL) will be subjected to 100 percent increased rate of tax. The FBR has explained the collection of tax, computation of income and tax payable of persons not appearing in the ATL [Section 100 BA, the Tenth Schedule] through an income tax circular issued here on Tuesday.
Prior to the Finance Act, 2019, a concept of non-filer existed in the Income Tax Ordinance whereby higher tax rates of withholding were prescribed for persons who were non­filers. Such non-filers could claim adjustment of the higher tax collected at the time of filing of income tax returns. The aim was to compel the non-filers to file their returns of income. However, it was observed that the non-filers, even though subjected to higher withholding rates, still had a propensity not to file their returns. This proved detrimental to the exercise of expansion or tax base. This was due to the absence of an explicit provision specifying a standard procedure for action against such persons.
Through the Finance Act, 2019, the concept of "non-filers" has been done away with and a new concept regarding persons not appearing in the active taxpayers' list has been introduced. This concept is a major paradigm shift from the erstwhile non-filer higher tax regime is that it not only penalises those persons not appearing in the ATL but also introduces an effective mechanism for enforcing returns from such persons. In this regard, a new section 100BA has been introduced which provides that collection or deduction of advance income tax, computation of income and tax payable thereon shall be determined in accordance with the rules in the newly introduced "The Tenth Schedule" which envisages the entire path to be adopted by the Inland Revenue Department to enforce returns from persons who make financial transactions yet choose not to file their returns of income.
The salient features of this scheme are as under:-
i. Persons whose names are not appearing in the ATL will be subjected to hundred percent increased rate of tax.
ii. Where a withholding agent is of the opinion that hundred percent increased tax is not required to be collected on the basis that the person was not required to file return, the withholding agent shall furnish a notice to the Commissioner having jurisdiction over withholding agent setting out the name, CNIC or NTN and address of the person not appearing in the ATL and the nature and amount of the transaction on which tax is required to be collected or deducted; and reason on the basis of which it is considered that the person was not required to file return or statement, as the case may be.
The Commissioner shall accept or reject the contention on the basis of existing law within thirty days. In case the Commissioner fails to respond within thirty days, permission shall be deemed to be granted not to deduct tax at hundred percent increased rates. Withholding agent shall however be responsible for any inaccurate furnishing of such information and penal action may be undertaken against diligent withholding agents.
Where the person's tax has been deducted or collected at hundred percent increased rate and the person fails to file return of income for the year for which tax was deducted, the Commissioner shall make a Provisional Assessment within sixty days of the due date for filing of return by imputing income so that tax on imputed income is equal to the hundred percent increased tax deducted or collected from such person and the imputed income shall be treated as concealed income. However, the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub­ section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, selection of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.
The provisional assessment shall abate if the person files its return within forty five days of completion of provisional assessment. Where the return is not filed within forty five days of provisional assessment, it shall be treated as final assessment and the Commissioner shall initiate penalty proceedings for concealment of income, the FBR added.