ISLAMABAD: An automated scrutiny of income tax returns has been introduced to Income Tax Ordinance, 2001 through Finance Bill, 2020.
For this purpose a new sub-section 2A has been inserted to Section 120 of Income Tax Ordinance, 2001 through the Finance Bill, 2020.
The new sub-section 2A is as:
“(2A) A return of income furnished under sub-section (2) of section 114 shall be processed through automated system to arrive at correct amounts of total income, taxable income and tax payable by making adjustments for—
(i) any arithmetical error in the return;
(ii) any incorrect claim, if such incorrect claim is apparent from any information in the return;
(iii) disallowance of any loss, deductible allowance or tax credit under Parts VIII, IX and X respectively of Chapter III; and
(iv) disallowance of carry forward of any loss under clause (b) of sub-section (1) of section 182A:
Provided that no such adjustments shall be made unless a system generated notice is given to the taxpayer specifying the adjustments intended to be made:
Provided further that the response received from the taxpayer, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such notice, adjustments shall be made.
Provided also that where no such adjustments have been made within six month of filing of return, the amounts specified in the return as declared by the taxpayer shall be deemed to have been taken as adjusted amounts on the day the return was filed and the taxpayer shall be intimated automatically through IRIS.”;
A new sub-section 7 has also been introduced in the section, which states:
(7) For the purposes of this section,—
(a) “arithmetical error” includes any wrong or incorrect calculation of tax payable including any minimum or final tax payable.
(b) “an incorrect claim apparent from any information in the return” shall mean a claim, on the basis of an entry, in the return,—
(i) of an item, which is inconsistent with another entry of the same or some other item in such return;
(ii) regarding any tax payment which is not verified from the collection system; or
(iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction.”