The Federal Board of Revenue (FBR) has indiscriminately issued electronically generated notices to thousands of taxpayers for the verification of movable or immovable properties, including un-declared or under-reported immovable properties.
Tax consultants and tax advisers told ProPakistani that the FBR’s Pakistan Revenue Automation Limited (PRAL) system issued notices under section 176 of the Income Tax Ordinance 2001. The last date for filing of revised wealth statements is December 31, 2020.
The notices have been issued to the taxpayers, who are regularly filing their income tax returns. However, their declared information does not match the data collected by the FBR from various external and third-party sources.
Another leading expert told ProPakistani that FBR has provided an opportunity for the taxpayers to explain the discrepancies in their returns. The FBR is empowered to issue the notice under section 122 (Amendment of assessments) of section 122B of the Income Tax ordinance. In this case, the FBR will have to pass an order for imposing tax or amendment in returns, leaving no option for the taxpayers.
The existing notices only require the taxpayers to explain the discrepancy to the tax department and avoid litigation. The notices cannot be termed as ‘bias’ because these are not manual notices but computer-generated notices by the system.
Under section 176, the tax department can issue a notice to anyone to obtain information or evidence. The Commissioner may, by notice in writing, require any person, whether or not liable for tax, to furnish any information relevant to any tax leviable. The notices have directed the taxpayers to explain the reason for not declaring the property and also revise the wealth statement and wealth reconciliation statement by December 31, 2020.
These notices are computer generated and mainly based on withholding tax data and transactions. The system has detected cases of withholding tax deductions at the time of registry or transfer of properties and issued notices to the buyers of such properties.
They said that such notices are not of concealment or tax evasion but to submit the relevant information to the FBR.
In most cases, notices have been issued if the property is declared in one past year, but data skipped in any other subsequent year at the time of filing of return. In other cases, the property specified in the notices has not been purchased by the concerned taxpayer who received the notice. There are cases where notices have been served even when the tax has been paid on DC Value, but the actual value of the property has been declared in the income tax return due to mismanagement of data, tax advisers informed.
The system has also picked cases for issuance of notices where there is a mismatch of information, or the declared value of the property is not matching with the information available with the FBR.
Taxpayers are advised not to panic and simply inform the department about the factual status of the property in question.
Tax experts further stated that in the first phase, the taxpayer has to disclose his/her un-declared or under-valued immovable property. However, later he/she must have to explain the source of investment in the said property.
Special Assistant to the Prime Minister (Minister of State) on Revenue, Dr. Waqar Masood, has repeatedly said that the Federal Board of Revenue (FBR) was fully committed to utilizing data of 100 million persons received from mobile phone companies; of 7.4 million persons whose withholding taxes were being deducted but they were not filing returns; data from electricity and gas companies, and data on return filers declaring below taxable income with actual withholding tax deductions of huge amounts, for increasing government revenue.
The FBR has asked its IT Wing and officials utilizing technology and maintaining the database, to check from the withholding tax record that whether withholding tax has been deducted from these one million persons having no taxable income. There are almost 0.24 to 0.26 million persons who are getting Rs. 14 billion to Rs. 20 billion worth withholding tax deducted.
Waqar Masood stated,
On average, it has been worked out that around Rs. 60, 000 withholding tax is being paid by each person within the population of 0.24 to 0.26 million persons. If a person is getting Rs. 60, 000 worth withholding tax deducted, which is 10 percent, we can safely conclude from this data that he is making an expenditure of around 0.6 million, and if a person is making an expenditure of Rs. 0.6 million and our taxable income is Rs. 0.4 million, this clearly reflects that the person’s income is much higher for a person making expenditure of Rs. 0.6 million.
6.4 million persons are having NTNs, who are legally bound to file their annual income tax returns under the law. There are 3.7 million persons, who are registered but are not filing their income tax returns. It is their legal obligation to file their income tax returns, he said.
“The third initiative is that we have our own database and data of other federal and provincial government departments engaged in public dealings such as land records, and registration of vehicles. All these departments have now started sharing data of the purchase and sale of immovable properties, and registration of new cars with the FBR,” he added.
He further stated,
The FBR found that 8.9 million withholding has been deducted during the last three years. On average, we have received returns of around 1.5 million persons only during the last three years. If we minus 1.5 from 8.5, we are left with 7.4 million people. It is mandatory for these 7.4 million people (whose record of withholding is available) to also file their income tax returns with the FBR, but they are not filing their returns.
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