Pakistan Tax Bar Association (PTBA) has suggested measures to tax authorities to resolve the issue of refund adjustment just ahead of the deadline to file income tax return tax year 2022.
It is important to note that the last date for filing income tax return is September 30, 2022.
The Federal Board of Revenue (FBR) has blocked the adjustment of previous years’ refunds in the income tax return form for the tax year 2022. PTBA and its affiliated tax bars raised the issues on various times but the issue is not resolved so far.
The PTBA on September 24, 2022 once again approached the FBR chairman to resolve the issue and the apex tax bar also suggested measures to facilitate taxpayers in this regard.
It said that adjustment of earlier refunds due, in the cases against admitted tax liability for Tax Year 2022 is a statutory right of a taxpayer, which has always been acknowledged, even by the system of IRIS from years to years.
Tax Year 2022 is the first Tax Year where for the key to claim adjustment of refund in the return form available on portal, has been blocked without assigning any plausible legal justification.
The sole stance of the officials of FBR in this respect is that various tax payers claim refunds in their returns which is not admissible.
“We wish to bring on record that PTBA would never support any such illegal action of any person and at the same time it is submitted that the responsibility to verify the authenticity of refund was on the field formations of the FBR who never took any pain to verify the claim of refunds at their own.”
On the other side facility to adjust refund against admitted tax liability for Tax Year 2022 has been taken away due to which the taxpayers have been forced to pay tax in cash, no matter how much refund is due to them.
It would not be out of place to mention here that there are plethora of cases decided by the Courts of the Country that the taxpayer cannot be deprived of his right to claim admissible refunds either in cash or through adjustment of same against his any tax liability payable under the law.
The Federal Tax Ombudsman (FTO) Vide order dated 27-05-2022 in an own motion case has recommended to grant adjustment of the refund against admitted tax liability in terms of section 170(3)(a) of the Ordinance
The PTBA suggested following steps to resolve the issue of adjustment of refunds:
1. In the column of refund adjustment in return available on portal there may be a link to specify the Tax Year where from the tax payer is making adjustment of Refund.
2. The returns from Tax Year 2014 onward have been submitted through IRIS and every return submitted by the tax payer is clearly depicting the amount of refund claimed by the tax payer.
3. For example, if the tax payer claims the refund adjustment from Tax Year-2016, the system should automatically check that either any refund for Tax Year 2016 is claimed and appearing on the return for Tax Year 2016 or not.
4. If refund is claimed and appearing on the return of Tax Year 2016, the system should allow the tax payer to claim refund adjustment against his tax demand for Tax Year 2022.
5. After submission of tax return for Tax Year 2022, the concerned officer holding jurisdiction over the case be made responsible to first verify the withholdings/payments made by the tax payer in the year from which refund adjustment has been claimed by the tax payer through ITMS.
6. If the data available on ITMS verifies the deductions, collections and payments made and claimed by the taxpayer, no further action would be required except making adjustment entries in the DCR regarding adjustment of refund for Tax Year 2016 against tax demand for Tax Year 2022, so that the taxpayer may not be able to claim the same refund again.
7. If data available on ITMS does not match with the claim of the taxpayer, then the concerned officer should call the tax payer to explain his position in line with post refund audit under the Sales Tax Act.
8. If the tax payer fails to verify his claim of refund, then a strict action may be taken against that tax payer in accordance with the relevant provisions of law.
9. A time line be fixed for verification of the claim of refund by the concerned officer, so that, the matter may not be kept pending for indefinite period.
The PTBA said that in the light of the submissions made above it is requested that the taxpayers may not be deprived from their statutory right to claim the refund adjustment of other year(s) against demand of this year.
Moreover, timely decision taking in this regard by this good office would not only be appreciated by the taxpayers/legal fraternity, who are working very hard day & night by playing their part towards the legal responsibility for contributing towards national exchequer but also in collection of taxes at the appropriate time.