Wednesday February 21, 2024

FBR offers audit closure on penalty payment

November 15, 2018

ISLAMABAD: Government on Wednesday decided to wind up audit cases of a little over one million taxpayers if they are willing to pay certain penalties.

The Federal Board of Revenue (FBR) announced the automatic closure of audit if they pay penalty of up to Rs20,000 or higher tax than the previously filed returns for the last three tax years. The selected taxpayers could avail the offer up to December 31.

Nausheen Javaid Amjad, member taxpayers’ audit of the FBR said all the taxpayers who were automatically selected for audit (u/s 214D) due to late filing of returns for tax years 2015, 2016 and 2017, have now an opportunity for automatic closure of audit by paying the penalty or higher tax than the previously-filed return, “whichever is applicable under the law”.

FBR said a law (section 214D, Income Tax Ordinance, 2001) allows automatic selection for audit if an individual had not filed returns of income within the date it was required to be filed under section 118 of the ordinance or within the time extended by the board under section 214A of the ordinance or further extended by the commissioner under section 119 of the ordinance or if the individual had not paid the tax payable along with return under sub-section (1) of section 137 of the ordinance.

The section 214D was omitted through the Finance Act 2018 with effect from July 1. Therefore, the cases which were selected for audit under section 2140 prior to July 1 are still pending.

The government inserted a new section 214E into the Income Tax Ordinance 2001, through the Finance Supplementary (Amendment) Act 2018, which provides an option to taxpayers for conclusion of their pending audits automatically selected upon the fulfillment of certain conditions.

Firstly, the taxpayer was selected for audit under sub-section (1) of the omitted section 214D. Secondly, notice under section 122 has not been issued till October 10. Thirdly, the taxpayer voluntarily revises return by December 31 along with payment of higher tax.

The tax payment should be 25 percent higher than the one paid with return on the basis of taxable income. If no tax is payable, two percent of the turnover needs to be paid.

Member Audit Amjad announced the FBR’s decision while addressing separate gatherings of taxpayers, tax lawyers and tax practitioners in Lahore and Faisalabad.

She said the salaried individuals or those whose income falls under the category of final or presumptive tax regimes have to pay penalty only to close their audits.

Taxpayers whose income falls under any other head of income have, however, to apply for revision of returns (u/s 214E) in the FBR’s online tax system. A tab has been made available in the system for the task. The relevant commissioner will approve the request within three days or the system will automatically allow revision on the fourth day. The system will automatically calculate the due tax in both the categories.

Once the payment is made and relevant computerised payment slip is attached and submitted, the system will automatically close the audit proceedings.

The member further said the Section 214D, under which late filers were automatically selected for audit, has been deleted from the Income Tax Ordinance 2001 in the Finance Act 2018 due to undue hardships faced by new taxpayers and to facilitate the process of broadening of tax base.