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June 20, 2020

Govt automates tax return assessment in major policy shift

KARACHI: The government has automated tax return assessment in a major policy shift for the next fiscal year of 2020/21, bringing to an end decade-old manual procedure, tax experts said on Friday.

Auditing firm Deloitte Yousuf Adil said under the new mechanism the filed return would be subject to an automatic review and adjustment within six months of filing of return for rectification of any numerical errors or incorrect claims, losses, deductible allowances or tax credit, or wrongful carry-forward of losses that are apparent from the return of income.

“Where no such adjustments are made within the specified period of six months, the return filed shall be deemed to have been automatically adjusted on the day the return is filed and automatic intimation through IRIS (Inland Revenue Information System) shall be forwarded to the taxpayer,” the firm said in a post-budget commentary. “The existing provisions as to deemed assessment order will now apply to adjusted return rather than the original return filed by the taxpayer.”

A notice will also be issued to a taxpayer before the adjustments are effected in the return, which is required to be responded within 30 days of the date of notice.

The manual assessment system, called universal self-assessment scheme, has been in place for around two decades and would be replaced by automated examination of income tax returns filed for a year.

Zeeshan Merchant, former vice president of Karachi Tax Bar Association said this is a major policy shift in the taxation system.

“Every return of income is subject to scrutiny. In the proposed mechanism all the returns filed will be treated final after undergoing automated examination,” said Merchant. “Certain time limit for examination has been proposed through the bill to qualify a return for validity. The examination of all returns would be meant the universal self-assessment scheme is no more available.”

Presently, where a taxpayer has furnished a return of income, the Commissioner of Inland Revenue would be treated to have made an assessment of taxable income and tax due thereon equal to amounts specified in the return. Further, such return would be taken for all purposes to be an assessment order issued by the Commissioner.

The universal self-assessment scheme was introduced through launch of new Income Tax Ordinance in 2001.

Under the scheme, all the taxpayers automatically qualify for self-assessment. The returns filed by them are considered as final unless their cases are selected for audit through pre-announced audit parameters.