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Tag: Income Tax Ordinance 2001

  • Income Tax Ordinance 2001: No commercial, industrial gas or electricity connection without NTN

    Income Tax Ordinance 2001: No commercial, industrial gas or electricity connection without NTN

    KARACHI: The National Tax Number (NTN) is mandatory for a person applying by commercial or industrial connection for electricity or natural gas.
     
    The Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 which explained about taxpayer’s registration.
    Section 181: Taxpayer’s registration.—

    Sub-Section (1): Every taxpayer shall apply in the prescribed form and in the prescribed manner for registration.

    Sub-Section (2): The Commissioner having jurisdiction over a case, where necessitated by the facts of the case, may also register a taxpayer in the prescribed manner.

    Sub-Section (3): Taxpayers’ registration scheme shall be regulated through the rules to be notified by the board.

    Sub-Section (4): From tax year 2015 and onwards, in case of individuals having Computerized National Identity Card (CNIC) issued by the National Database and Registration Authority, CNIC shall be used as National Tax Number.

    Section 181A: Active taxpayers’ list

    Sub-Section (1): The Board shall have the power to institute active taxpayers’ list.

    Sub-Section (2): Active taxpayers’ list shall be regulated as may be prescribed.

    Section 181AA: Compulsory registration in certain cases

    Sub-Section (1): Notwithstanding anything contained in any law, for the time being in force, any application for commercial or industrial connection of electricity or natural gas, shall not be processed and such connection shall not be provided unless the person applying for electricity or gas connection is registered under section 181.

    Section 181B: Taxpayer card

    Subject to this Ordinance, the Board may make a scheme for introduction of a tax-payer honour card for individual taxpayers, who fulfill a minimum criteria to be eligible for the benefits as contained in the scheme.

    Section 181C: Displaying of National Tax Number

    Every person deriving income from business chargeable to tax, who has been issued a National Tax Number, shall display his National Tax Number at a conspicuous place at every place of his business.

  • Income Tax Ordinance 2001: Commissioner can take assistance of police, civil armed forces to conduct audit

    Income Tax Ordinance 2001: Commissioner can take assistance of police, civil armed forces to conduct audit

    KARACHI: A commissioner of Inland Revenue (IR) can take assistance of government authorities, police and civil armed forces to conduct audit of taxpayers.

    According to updated Income Tax Ordinance, 2001 recently issued by the Federal Board of Revenue (FBR), Section 178 explained the powers of Commissioner IR.

    Section 178: Assistance to Commissioner

    “Every Officer of Customs, Provincial Excise and Taxation, District Coordination Officer, District Officers including District Officer – Revenue, the Police and the Civil Armed Forces is empowered and required to assist the Commissioner in the discharge of the Commissioner’s functions under this Ordinance.”

    The Section 177 of the Ordinance explains the powers of Commissioner to call for any record of taxpayer for conducting audit.

    177: Audit.—

    Sub-Section (1): The Commissioner may call for any record or documents including books of accounts maintained under this Ordinance or any there law for the time being in force for conducting audit of the income tax affairs of the person and where such record or documents have been kept on electronic data, the person shall allow access to the Commissioner or the officer authorized by the Commissioner for use of machine and software on which such data is kept and the Commissioner or the officer may have access to the required information and data and duly attested hard copies of such information or data for the purpose of investigation and proceedings under this Ordinance in respect of such person or any other person:

    Provided that—

    (a) the Commissioner may, after recording reasons in writing call for record or documents including books of accounts of the taxpayer; and

    (b) the reasons shall be communicated to the taxpayer while calling record or documents including books of accounts of the taxpayer:

    Provided further that the Commissioner shall not call for record or documents of the taxpayer after expiry of six years from the end of the tax year to which they relate.

    Sub-Section (2): After obtaining the record of a person under sub-section (1) or where necessary record is not maintained, the Commissioner shall conduct an audit of the income tax affairs (including examination of accounts and records, enquiry into expenditure, assets and liabilities) of that person or any other person and may call for such other information and documents as he may deem appropriate.

    Sub-Sections (3) (4) and (5) omitted

    Sub-Section (6): After completion of the audit, the Commissioner may, if considered necessary, after obtaining taxpayer’s explanation on all the issues raised in the audit, amend the assessment under sub-section (1) or sub-section (4) of section 122, as the case may be.

    Sub-Section (7): The fact that a person has been audited in a year shall not preclude the person from being audited again in the next and following years where there are reasonable grounds for such audits.

    Sub-Section (8): The Board may appoint a firm of Chartered Accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961) or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966), or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966) to conduct an audit of the income tax affairs of any person or classes of persons and the scope of such audit shall be as determined by the Board or the Commissioner on a case to case basis.

    Sub-Section (9): Any person employed by a firm referred to in sub-section (8) may be authorized by the Commissioner, in writing, to exercise the powers in sections 175 and 176 for the purposes of conducting an audit under that sub-section.

    Sub-Section (10): Notwithstanding anything contained in sub-sections (2) and (6) where a person fails to produce before the Commissioner or a firm of Chartered Accountants or a firm of Cost and Management Accountants appointed by the Board or the Commissioner under sub-section (8) to conduct an audit, any accounts, documents and records, required to be maintained under section 174 or any other relevant document, electronically kept record, electronic machine or any other evidence that may be required by the Commissioner or the firm of Chartered Accountants or the firm of Cost and Management Accountants for the purpose of audit or determination of income and tax due thereon, the Commissioner may proceed to make best judgment assessment under section 121 of this Ordinance and the assessment treated to have been made on the basis of return or revised return filed by the taxpayer shall be of no legal effect.

    Explanation.— For the removal of doubt, it is declared that the powers of the Commissioner under this section are independent of the powers of the Board under section 214C and nothing contained in section 214C restricts the powers of the Commissioner to call for the record or documents including books of accounts of a taxpayer for audit and to conduct audit under this section.

    Sub-Section (11): The Board may appoint as many special audit panels as may be necessary, comprising two or more members from the following:—

    (a) an officer or officers of Inland Revenue;

    (b) a firm of chartered accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961);

    (c) a firm of cost and management accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966); or

    (d) any other person including a foreign expert or specialist as directed by the Board, to conduct an audit, including a forensic audit, of the income tax affairs of any person or classes of persons and the scope of such audit shall be as determined by the Board or the Commissioner on case-to-case basis.

    (e) a tax audit expert deployed under an audit assistance programme of an international tax organization or a tax authority outside Pakistan:

    Provided that in case the member is not an officer of Inland Revenue, the person shall only be included as a member in the special audit panel if an agreement of confidentiality has been entered into between the Board and the person, international tax organization or a tax authority, as the case may be.

    Sub-Section (12): Special audit panel under sub-section (1) shall be headed by a Chairman who shall be an officer of Inland Revenue.

    Sub-Section (13): Powers under sections 175 and 176 for the purposes of conducting an audit under sub-section (11), shall only be exercised by an officer or officers of Inland Revenue, who are member or members of the special audit panel, and authorized by the Commissioner.

    Sub-Section (14): Notwithstanding anything contained in sub-sections (2) and(6), where a person fails to produce before the Commissioner or a special audit panel under sub-section (11) to conduct an audit, any accounts, documents and records, required to be maintained under section 174 or any other relevant document, electronically kept record, electronic machine or any other evidence that may be required by the Commissioner or the panel, the Commissioner may proceed to make best judgment assessment under section 121 and the assessment treated to have been made on the basis of return or revised return filed by the taxpayer shall be of no legal effect.

    Sub-Section (15): If any one member of the special audit panel, other than the Chairman, is absent from conducting an audit, the proceedings of the audit may continue, and the audit conducted by the special audit panel shall not be invalid or be called in question merely on the ground of such absence.

    Sub-Section (16): Functions performed by an officer or officers of Inland Revenue as members of the special audit panel, for conducting audit, shall be treated to have been performed by special audit panel.

    Sub-Section (17): The Board may prescribe the mode and manner of constitution, procedure and working of the special audit panel.

  • Income Tax Ordinance 2001: Commissioner IR has court powers for production of taxpayers’ record

    Income Tax Ordinance 2001: Commissioner IR has court powers for production of taxpayers’ record

    KARACHI: The tax laws have empowered Commissioner of Inland to act as a court under the Code of Civil Procedure for compelling production of records of any person.

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  • Income Tax Ordinance 2001: Tax officials’ power to enter premises without notice

    Income Tax Ordinance 2001: Tax officials’ power to enter premises without notice

    KARACHI: Tax officials have immense powers to enter any premises for the purpose of audit of a taxpayer or survey of a potential taxpayer.

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  • Income Tax Ordinance 2001: Taxpayers require to keep 6-year tax record for audit

    Income Tax Ordinance 2001: Taxpayers require to keep 6-year tax record for audit

    The Federal Board of Revenue (FBR) has recently introduced amendments to the Income Tax Ordinance, 2001, emphasizing the importance of maintaining accurate records by taxpayers.

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  • Income Tax Ordinance 2001: procedure for claiming refund, additional payment for delay

    Income Tax Ordinance 2001: procedure for claiming refund, additional payment for delay

    KARACHI: A commissioner of Inland Revenue is responsible for making payment at KIBOR plus 0.5 percent per annum for late payment of income tax refund.

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  • Income Tax Ordinance 2001: FTR taxpayers not required to file returns

    Income Tax Ordinance 2001: FTR taxpayers not required to file returns

    The Federal Board of Revenue (FBR) in Pakistan has introduced a noteworthy amendment, providing substantial relief to taxpayers falling under the Final Tax Regime (FTR).

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  • Income Tax Ordinance 2001: Commissioner’s power to make provisional assessment

    Income Tax Ordinance 2001: Commissioner’s power to make provisional assessment

    The Income Tax Ordinance, 2001 (ITO 2001) in Pakistan has granted power to the Commissioner to initiate provisional assessments when a person’s concealed asset is impounded by any government agency.

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  • Income Tax Ordinance 2001: Commissioner IR empowered to make assessment for non-compliant taxpayers

    Income Tax Ordinance 2001: Commissioner IR empowered to make assessment for non-compliant taxpayers

    KARACHI: In a significant move to enhance tax compliance, the Federal Board of Revenue (FBR) has updated the Income Tax Ordinance, 2001, granting Commissioners of Inland Revenue the authority to conduct ‘best judgement assessment’ for taxpayers who fail to file their annual returns and meet their tax obligations.

    Under Section 121 of the amended ordinance, the commissioner is empowered to initiate a best judgement assessment in several scenarios. These include a taxpayer’s failure to furnish a statement as required by a notice under sub-section (5) of section 115, failure to submit a return of income in response to a notice under sub-section (3) or sub-section (4) of section 114, and failure to furnish a return as required under section 143 or section 144, among others.

    The section stipulates that if a taxpayer neglects to produce necessary accounts, documents, and records required for assessment, the Commissioner may, based on available information and to the best of their judgement, assess the taxable income and determine the corresponding tax liability. Any such assessment is considered to have been made independently of the taxpayer’s filed return or revised return, rendering the latter of no legal effect.

    Upon completing the assessment, the Commissioner is obligated to issue an assessment order to the taxpayer promptly. The order must include details such as the taxable income, the amount of tax due, any tax payments made, and information regarding the process of appealing the assessment order, including the time, place, and manner.

    The revised ordinance also imposes a time constraint on the issuance of assessment orders under this section. Sub-section (3) dictates that such orders can only be issued within five years after the end of the tax year or the income year to which they relate. However, an exception is provided in cases where a notice for filing a return of income under sub-section (4) of section 114 is issued; in such instances, the assessment order must be issued within two years from the end of the tax year in which the notice is served.

    The FBR’s move is aimed at bolstering the country’s tax collection efforts by ensuring that taxpayers fulfill their obligations and discouraging non-compliance. The provision of ‘best judgement assessment’ grants tax authorities the tools necessary to make informed decisions in the absence of complete and accurate information from non-compliant taxpayers.

  • Income Tax Ordinance 2001: Notice can not be issued after 180 days for incomplete return

    Income Tax Ordinance 2001: Notice can not be issued after 180 days for incomplete return

    KARACHI: A commissioner of Inland Revenue is required to send notice to taxpayers for incomplete annual income returns within 180 days from end of financial year in which return was filed.

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