Tax offices issue over 278,000 audit notices to late filers

KARACHI: Tax departments have so far issued more than 278,000 audit notices to the taxpayers who failed to file their returns for the past three years, sources said on Friday.

The sources said the offices of Large Taxpayers Units (LTUs) and Regional Tax Offices (RTOs) in Karachi served the notices on November 16 -17.

The break-up of the notices showed that LTU and LTU-II Karachi having jurisdictions over big corporate entities and high net-worth individuals sent 2,008 and 650 notices, respectively. Similarly, Corporate RTO Karachi having jurisdiction over small companies issued 62,686 notices.

Meanwhile, RTO-II and RTO-III mainly having jurisdictions over salaried individuals issued 51,601 and 161,251 audit notices to the taxpayers, respectively.

The sources said tax officials were asked to ensure compliance to the audit notices and recover penalties under concessionary Section 231E, which envisaged offer to close audit by paying penalty amount.

Salaried class has received audit notices under Section 214D and concerned commissioners called for record and reconciled accounts under Section 177(1) of the Income Tax Ordinance 2001.

Section 214D of the Ordinance was introduced through the Finance Act, 2015 under which non-filers or late filers would automatically be selected for mandatory audit. Previously, tax authorities had not taken any action during the past three years due to opposition from various stakeholders. The previous government, in its last budget for fiscal year 2018/19, withdrew the section.

The new government, however, introduced Section 214E on the argument that cases were selected under Section 214D and there should be a way to dispose thousands of cases.

The total number of pending cases up to October 31 is around 1.02 million, out of which over 319,000 cases are of salaried individuals.

Salaried individuals have expressed annoyance over the Federal Board of Revenue’s (FBR) action. It is injustice to compliant taxpayers, they said.

Salaried class said they couldn’t file returns on time due to errors in the FBR’s online system. Some of them were called for audit even though they managed to file returns very next day of the filing deadline.

In the past, the FBR’s online system came under severe criticism due to frequent glitches and errors in online return forms. Last year, it detected calculation mistakes in its online system when it comes to tax demands related to returns or wealth statements.

Tax experts said the FBR’s prime objective is to recover penalty amount of Rs20,000/case from late filers. The apex court has already ordered that penalty amount should not be higher than the tax liability, they added.