KTBA suggests automatic stay against recovery on 10% tax payment

KTBA suggests automatic stay against recovery on 10% tax payment

KARACHI: Karachi Tax Bar Association (KTBA) has suggested an automatic stay should be granted where a taxpayer paid 10 percent of the defaulted amount.

The stay should be granted till the decision by the Commissioner Inland Revenue (Appeals), the KTBA said in a letter sent to Member Inland Revenue (Policy) on Thursday.

The tax bar through the letter submitted its observations on the draft rules recently notified by the FBR related to third party recovery.

Through the draft rules, it is proposed that recovery may not be made where the taxpayer has voluntarily paid 10 percent of the tax demand until the decision of the appeal filed with the commission inland revenue (appeals).

“The condition to consider only voluntary payments, while issuing recovery notice, is contrary to the proviso to section 140(1) of Income Tax Ordinance, 2001 where the term ‘tax paid’ has been used which invariably includes any recoveries made by the department as well.”

It is therefore, suggested that where partial recovery up to 10 percent of the tax demand has already been made, the taxpayer should be entitled to automatic stay against any further recovery till the decision by the Commissioner Inland Revenue (Appeals), the KTBA said.

The KTBA observed that notice of recovery issued under Section 140 has to be complied with immediately. Meanwhile, Rule 210D proposes for dispute resolution relating to execution, discharge or satisfaction of a recovery notice.

A combined reading of the provisions suggests that the recovery could be affected before institution of any dispute with the Commissioner Inland Revenue.

“A minimum three working days time may be allowed for payment of the outstanding demand (after due date of service of recovery notice) to enable the defaulter to raise any genuine concerns arising from execution, discharge or satisfaction of such a notice.”

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