Automated scrutiny of tax returns to end universal self assessment scheme

Automated scrutiny of tax returns to end universal self assessment scheme

ISLAMABAD: The introduction of automated scrutiny of all income tax returns may end the Universal Self Assessment Scheme (USAS) in the country.

The Finance Bill, 2020 introduced a major policy change under which the FBR to conduct scrutiny of all income tax returns.

In contrast the existing USAS all the returns filed by taxpayers are accepted by the tax authority.

The USAS was introduced through promulgation of income tax ordinance in year 2001.

Tax experts said that currently where a taxpayer has furnished a return of income, the Commissioner of Inland Revenue shall be treated to have made an assessment of taxable income and tax due thereon equal to amounts specified in the return.

Further, such return shall be taken for all purposes to be an assessment order issued by the Commissioner.

“Under the USAS 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,” said a senior officer at Federal Board of Revenue (FBR).

Deloitte Yousuf Adil Chartered Accountants commented that under the proposed mechanism, the return filed shall 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.

In this regard, a notice shall be issued to the taxpayer before the adjustments are effected in the return, which is required to be responded within 30 days of the date of notice.

Further, 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 shall be forwarded to the taxpayer.

The existing provisions as to deemed assessment order will now apply to adjusted return rather than the original return filed by the taxpayer.

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