New amendment to IT law aimed at enhanced efficacy

Staff Report

ISLAMABAD: The government is likely to introduce an amendment in the Income Tax Ordinance 2001 through finance bill 2005, to make mandatory for all income taxpayers to respond to the audit notices issued under income tax Universal Self Assessment Scheme (USAS), a senior official said.

The Central Board of Revenue (CBR) is facing a serious problem due to a flaw in the income tax law, which is flexible on the income taxpayers whose returns were selected for audit but they do not respond to audit notices.

Under the provisions of the said law the department cannot take unilateral decision against the taxpayers without sufficient proof unless it does not prove the concealment of income or any evasion of tax. Only remedy available with the tax authorities is to impose penalty on non-responding taxpayers despite the fact that evasion, often, exceeds the amount of the evaded tax.

The taxpayers usually do not respond to an income tax audit notice and opt to pay penalty, which is nominal, taking liberty of lacunae in the existing law. This practice is causing hardships for the tax authorities. When the taxpayers whose return is selected for audit do not respond to an audit notice the tax authorities cannot revise his assessment without sufficient proof. “The tax authorities can impose only marginal amount of penalty on such taxpayers under the existing law,” the official said.

The official said that under the current law the CBR can audit the income taxpayers returns, however, it lacks the authority to take stern action against the concealment of assets of the taxpayer. The flaw in the income tax ordinance is required to be done as soon as possible, the official said.

It is expected that the government will introduce an amendment in the Income Tax Ordinance 2001 through finance bill 2005 that would be tabled in the national assembly in the budget session.

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