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Tag: Section 111

  • FBR to impose 100 percent penalty for not mentioning money in tax returns

    FBR to impose 100 percent penalty for not mentioning money in tax returns

    ISLAMABAD: Federal Board of Revenue (FBR) has started examination of income tax returns filed for tax year 2020 and directed tax offices to identify undisclosed income / amount for imposing 100 percent penalty.

    According to sources in the FBR the tax authorities had started examination of tax returns filed for the tax year 2020 and were cross matching with the information of database where details of transactions made by taxpayers had been stored.

    The sources said that those taxpayers, who had failed to provide details of those transactions already available to the FBR through third party information, would pay tax at normal rate along with payment of penalty equal to payable tax detected as undisclosed.

    The last date for filing the income tax return for tax year 2020 was December 08, 2020 and the FBR for the first time had not extended the date beyond the deadline. The number of return filers by due date was 1.768 million. However, enforcement measures through issuance of hundreds of thousands notices to non filers the number of return filers increased to 2.316 million January 04, 2021.

    The sources said that the tax offices were examining tax returns with all aspects of Income Tax Ordinance, 2001. However, undeclared income or assets in the returns will be treated as concealment of income/assets.

    Under Section 182 of the Income Tax Ordinance, 2001, where a person has concealed income or furnished inaccurate particulars of such income, including but not limited to the suppression of any income or amount chargeable to tax, the claiming of any deduction for any expenditure not actually incurred or any act referred to in sub-section (1) of section 111, in the course of any proceeding under this Ordinance before any Income Tax authority or the appellate tribunal.

    “Such person shall pay a penalty of one hundred thousand rupees or an amount equal to the tax which the person sought to evade whichever is higher. However, no penalty shall be payable on mere disallowance of a claim of exemption from tax of any income or amount declared by a person or mere disallowance of any expenditure declared by a person to be deductible, unless it is proved that the person made the claim knowing it to be wrong.”

  • Non-filers may face concealment of income charges

    Non-filers may face concealment of income charges

    ISLAMABAD: Federal Board of Revenue (FBR) may invoke provisions of Tenth Schedule of Income Tax Ordinance, 2001 under which non-filers of income tax returns for tax year 2020 may face charges of concealment of income.

    Rule 3 of the Tenth Schedule of Income Tax Ordinance, 2001, explained:

    (1) Where for a tax year person’s tax has been collected or deducted in accordance with rule 1 and the person fails to file return of income for that tax year within the due date provided in section 118 or as extended by the Board, the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114, within sixty days of the due date provided in section 118 or as extended by the Federal Board of Revenue (FBR) make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon.

    (2) In making the provisional assessment under sub-rule (1), the Commissioner shall impute taxable income on the amount of tax deducted or collected under rule 1 by treating the imputed income as concealed income for the purposes of clause (d) of sub-section (1) of section 111:

    Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.

    Explanation.- For the removal of doubt it is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub-section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, section of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.

    The last date for filing income tax return for tax year 2020 was expired on December 08, 2020 and a large number of taxpayers have failed to comply with the mandatory requirement of filing annual return.

    At present the applicable ATL is of tax year 2019 and will remain applicable till February 28, 2021. The ATL for tax year 2020 will be issued on March 01, 2021 and will applicable till February 28, 2022.

    The FBR has received record 3 million returns for tax year 2019 and making all efforts to further increase the number for the tax year 2020.

    According to rule 01 of the Tenth Schedule the tax rate of withholding is 100 percent higher for persons having taxable income but not on the ATL.

  • Income Tax Ordinance 2001 Defines Unexplained Income and Assets for Taxation in 2019

    Income Tax Ordinance 2001 Defines Unexplained Income and Assets for Taxation in 2019

    ISLAMABAD – The Income Tax Ordinance 2001 has laid out specific provisions for addressing unexplained or concealed income and assets, offering a framework for taxation during the tax year 2019.

    Section 111 of the Ordinance defines the parameters of unexplained income or assets, providing transparency and guidelines for both taxpayers and tax authorities.

    Section 111: Unexplained Income or Assets

    Sub-Section (1) of Section 111 addresses various scenarios where unexplained income or assets may come into play. These include:

    (a) Any amount credited in a person’s books of account.

    (b) A person’s investment or ownership of money or valuable articles.

    (c) Expenditures incurred by a person.

    (d) The concealment of income or provision of inaccurate income particulars, encompassing the suppression of production, sales, tax-chargeable amounts, or items of receipt liable to tax.

    If a person fails to offer a satisfactory explanation about the nature and source of any of the aforementioned, these unexplained amounts will be included in the person’s income chargeable to tax under the head “Income from Other Sources,” provided they are not adequately explained. Notably, if a taxpayer explains such amounts as agricultural income, the explanation will be accepted to the extent of agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law.

    Sub-Section (2) of Section 111 stipulates that the unexplained amounts will be included in a person’s income chargeable to tax in specific tax years:

    (i) If the amount is related to investments, money, valuable articles, or expenditures situated or incurred in Pakistan, or concealed income is Pakistan-source, it will be included in the tax year to which it relates.

    (ii) If the amounts are discovered by the Commissioner to be situated or incurred outside Pakistan and concealed income is foreign-source, they will be included in the tax year immediately preceding the year of discovery.

    Sub-Section (3) of Section 111 allows the Commissioner to include in a person’s income chargeable to tax the difference between the declared cost of an investment or valuable article and the reasonable cost, or the declared amount of expenditure and the reasonable amount, if the declared cost is less than reasonable.

    Sub-Section (4) provides certain exceptions to the application of Sub-Section (1), including:

    (a) Exemption for foreign exchange remitted from outside Pakistan, not exceeding ten million Rupees in a tax year and encashed into rupees through a scheduled bank with an appropriate certificate.

    (c) Exemption for amounts invested in acquiring immovable property, computed based on a specific formula, provided certain conditions are met.

    This clause ensures that the value computed under Section 68 is compared to the value recorded by the authority registering or attesting the transfer, with the applicable clause only coming into effect if the computed value is greater than the recorded value. Importantly, the taxpayer is entitled to incorporate the amount computed under this clause in tangible form if they have paid tax under Section 236W.

    The Income Tax Ordinance 2001’s Section 111 serves as a vital tool in ensuring tax compliance and preventing tax evasion by addressing unexplained or concealed income and assets. These provisions contribute to a fair and transparent tax system in Pakistan and provide taxpayers with a clear understanding of their obligations under the law. It also empowers tax authorities to take appropriate actions when dealing with unexplained financial transactions, ultimately contributing to the country’s revenue generation and economic stability.