Income Tax Ordinance 2001: offences and penalties

KARACHI: Any person who commits any offence under provisions of Income Tax Ordinance, 2001, he may be liable to penalty.

According to updated Income Tax Ordinance, 2001 issued by Federal Board of Revenue (FBR), Section 182 explains the offenses and penalty under the Ordinance:

01. Where any person fails to furnish a return of income as required under section 114 within the due date. Section 114 and 118

— Such person shall pay a penalty equal to 0.1 percent of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50 percent of the tax payable provided that if the penalty worked out as aforesaid is less than twenty thousand rupees or no tax is payable for that tax year such person shall pay a penalty of twenty thousand rupees:

Explanation.— For the purposes of this entry, it is declared that the
expression “tax payable” means tax chargeable on the taxable income on the basis of assessment made or treated to have been made under section 120, 121, 122 or 122C.

01A.Where any person fails to furnish a statement as required under section 115, 165, or 165A, 165A or 165B within the due date. Sections 115, 165 and 165A, 165A and 165B

— Such person shall pay a penalty of Rs.5000 if the person had already paid the tax collected or withheld by him within the due date for payment and the statement is filed within ninety days from the due date for filing the statement and, in all other cases, a penalty of Rs.2500 for each day of default from the due date subject to a minimum penalty of Rs. 10,000.

01AA. Where any person fails to furnish wealth statement or wealth reconciliation statement. Sections 114, 115 and 116

— Such person shall pay a penalty of “0.1 percent of the taxable income per week or Rs.20,000 whichever is higher.”

01AAA. Where any person fails to furnish a foreign assets and income statement within the due date. Section 116A

— Such persons shall pay a penalty of 2 percent of the foreign income or value of the foreign assets for each year of default.

02. Any person who fails to issue cash memo or invoice or receipt when required under this Ordinance or the rules made thereunder. Section 174 and Chapter VII of the Income Tax Rules.

— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.

03. Any person who is required to apply for registration under this Ordinance but fails to make an application for registration. Section 181

— Such person shall pay a penalty of five thousand rupees.

04. Any person who fails to notify the changes of material nature in the particulars of registration. Section 181

— Such person shall pay a penalty of five thousand rupees.

05. Any person who fails to deposit the amount of tax due or any part thereof in the time or manner laid down under this Ordinance or rules made thereunder.

Provided that if the person opts to pay the tax due on the basis of an order under section 129 on or before the due date given in the notice under sub-section (2) of section 137 issued in consequence of the said order, and does not file an appeal under section 131 the penalty payable shall be reduced by 50 percent. Section 137

— Such person shall pay a penalty of five per cent of the amount of the tax in default.
For the second default an additional penalty of 25 percent of the amount of tax in default.

For the third and subsequent defaults an additional penalty of 50 percent of the amount of tax in default.

06. Any person who repeats erroneous calculation in the return for more than one year whereby amount of tax less than the actual tax payable under this Ordinance is paid. Section 137

— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of the tax involved, whichever is higher.

07.Any person who fails to maintain records required under this Ordinance or the rules made thereunder. Sections 174 and 108

— Such person shall pay a penalty of ten thousand rupees or five per cent of the amount of tax on income whichever is higher.

08. Where a taxpayer who, without any reasonable cause, in non-compliance with provisions of section 177—

(a) fails to produce the record of documents on receipt of first notice.

— Such person shall pay a penalty of twenty-five thousand rupees;

(b) fails to produce the record or documents on receipt of second notice;

— such person shall pay a penalty of fifty thousand rupees; and

(c) Fails to produce the record or documents on receipt of third notice.

— such person shall pay a penalty of one hundred thousand rupees.

09. Any person who fails to furnish the information required or to comply with any other term of the notice served under section 176 or 108.

— Such person shall pay a penalty of twenty-five thousand rupees for the first default and fifty thousand rupees for each subsequent default.

10. Any person who –

(a) makes a false or misleading statement to an Inland Revenue Authority either in writing or orally or electronically including a statement in an application, certificate, declaration, notification, return, objection or other document including books of accounts made, prepared, given, filed or furnished under this Ordinance;

(b)furnishes or files a false or mis-leading information or document or statement to an Income Tax Authorityeither in writing or orallyor electronically;

(c) omits from a statement made or information furnished to an Income Tax Authority any matter or thing without which the statementor the information is false or misleading in a material particular.

Sections 114, 115, 116, 174, 176, 177 and general

— Such person shall pay a penalty of twenty five thousand rupees or100 percent of the amount of tax shortfall whichever is higher:

Provided that in case of an assessment order deemed under section 120, no penalty shall be imposed to the extent of the tax shortfall occurring as a result of the taxpayer taking a reasonably arguable position on the application of this Ordinance to the taxpayers’ position.

11. Any person who denies or obstructs the access of the Commissioner or any officer authorized by the Commissioner to the premises, place, accounts, documents, computers or stocks. Sections 175 and 177

— Such person shall pay a penalty of twenty five thousand rupees or one hundred per cent of the amount of tax involved, whichever, is higher.

12. Where a person has concealed income or furnished inaccurate particulars of such income, including but not limited to the suppression of any income or amount chargeable to tax, the claiming of any deduction for any expenditure not actually incurred or any act referred to in sub-section (1) of section 111, in the course of any proceeding under this Ordinance before any Income Tax authority or the appellate tribunal. Sections 20, 111 and general

— Such person shall pay a penalty of twenty five thousand rupees or an amount equal to the tax which the person sought to evade whichever is higher. However, no penalty shall be payable on mere disallowance of a claim of exemption from tax of any income or amount declared by a person or mere disallowance of any expenditure declared by a person to be deductible, unless it is proved that the person made the claim knowing it to be wrong.

13. Any person who obstructs any Income Tax Authority in the performance of his official duties. Sections 209, 210 and general

— Such person shall pay a penalty of twenty five thousand rupees.

14. Any person who contravenes any of the provision of this Ordinance for which no penalty has, specifically, been provided in this section.

— Such person shall pay a penalty of five thousand rupees or three per cent of the amount of tax involved, which-ever is higher.

15. Any person who fails to collect or deduct tax as required under any provision of this Ordinance or fails to pay the tax collected or deducted as required under section 160. Sections 148, 149, 150, 151, 152, 153, 153A, 154, 155, 156, 156A, 156B, 158, 160, 231A, 231B, 233, 233A, 234, 234A, 235, 236, 236A.

— Such person shall pay a penalty of twenty five thousand rupees or the 10 percent of the amount of tax which-ever is higher.

16. Any person who fails to display his NTN at the place of business as required under this Ordinance or the rules made thereunder. Section 181C

— Such person shall pay a penalty of five thousand rupees.

17. Any reporting financial institution or reporting entity who fails to furnish information or country-by-country report to the Board as required under section 107, 108 or 165B within the due date.

— Such reporting financial institution or reporting entity shall pay a penalty of two thousand rupees for each day of default subject to a minimum penalty of twenty five thousand rupees.

18. Any person who fails to keep and maintain document and information required under section 108 or Income Tax Rules, 2002. Section 108

— 1 percent of the value of transactions, the record of which is required to be maintained under section 108 and Income Tax Rules, 2002.

19. Where any manufacturer of a motor vehicle accepts or processes any application for booking or purchase of a locally manufactured motor vehicle in violation of the provisions of clause (a) of section 227C

— Such person shall pay a penalty of 5 percent of the value of the motor vehicle

20. (i) Where any registering authority of Excise and Taxation Department accepts, processes or registers any application for registration of a locally manufactured motor vehicle or for the first registration of an imported vehicle in violation of the provisions of clause (a) of section 227C

(ii) Where any authority responsible for registering, recording or attesting the transfer of immovable property accepts or processes the registration or attestation of such property in violation of the provisions of clause (b) of section 227C

— Such person shall pay a penalty of 3 percent of the value of motor vehicle or immovable property.

(2) The penalties specified under sub-section (1) shall be applied in a consistent manner and no penalty shall be payable unless an order in writing is passed by the Commissioner, Commissioner (Appeals) or the Appellate Tribunal after providing an opportunity of being heard to the person concerned:

Provided that where the taxpayer admits his default he may voluntarily pay the amount of penalty due under this section.

(3) Where a Commissioner (Appeals) or the Appellate Tribunal makes an order under sub-section (2), the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, shall immediately serve a copy of the order on the Commissioner and thereupon all the provision of this Ordinance relating to the recovery of penalty shall apply as if the order was made by the Commissioner.

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