Section 161 of Income Tax Ordinance, 2001 describes the withholding agent to be liable for failure in deducting tax.
The Federal Board of Revenue (FBR) issued the Income Tax Ordinance, 2001 updated up to June 30, 2021. The Ordinance incorporated amendments brought through Finance Act, 2021.
Following is the text of Section 161 of Income Tax Ordinance, 2001:
161. Failure to pay tax collected or deducted.— (1) Where a person–
(a) fails to collect tax as required under Division II of this Part 1or Chapter XII or deduct tax from a payment as required under Division III of this Part 2 or Chapter XII or as required under section 50 of the repealed Ordinance; or
(b) having collected tax under Division II of this Part or Chapter XII or deducted tax under Division III of this Part or Chapter XII fails to pay the tax to the Commissioner as required under section 160, or having collected tax under section 50 of the repealed Ordinance pay to the credit of the Federal Government as required under sub-section (8) of section 50 of the repealed Ordinance,
the person shall be personally liable to pay the amount of tax to the Commissioner who may pass an order to that effect and proceed to recover the same.
(1A) No recovery under sub-section (1) shall be made unless the person referred to in sub-section (1) has been provided with an opportunity of being heard.
(1B) Where at the time of recovery of tax under sub-section (1) it is established that the tax that was to be deducted from the payment made to a person or collected from a person has meanwhile been paid by that person, no recovery shall be made from the person who had failed to collect or deduct the tax but the said person shall be liable to pay default surcharge at the rate of “twelve” per cent per annum from the date he failed to collect or deduct the tax to the date the tax was paid.
(2) A person personally liable for an amount of tax under sub-section (1) as a result of failing to collect or deduct the tax shall be entitled to recover the tax from the person from whom the tax should have been collected or deducted.
(3) The Commissioner may, after making, or causing to be made, such enquiries as he deems necessary, amend or further amend an order of recovery under sub-section (1), if he considers that the order is erroneous in so far it is prejudicial to the interest of revenue:
Provided that the order recovery shall not be amended, unless the person referred to in sub-section (1) has been provided an opportunity of being heard.
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