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Federal Board of Revenue (FBR) has said the government has facilitated the taxpayers by providing them a one-time option for closing the audit proceedings due to late filing of returns through the Finance Supplementary (Amendment) Act 2018.
In a statement, FBR has strongly denied news reports in a section of the print media accusing the taxation authorities of harassment of late filers, especially salaried individuals. The assertion by the media that FBR is pressurizing taxpayers for additional revenue through recovery of penalties reveals a lack of understanding about tax laws and their true intent.
FBR has clarified that an amendment in income tax law made through Finance Act 2015 by the previous government provided for automatic selection for audit if a person had not filed return of income by the due date stipulated under the law. Through Finance Act 2018 this amendment was withdrawn, however the cases that were automatically selected under the said provision prior to its withdrawal were still to be audited. This created a lot of problems for the taxpayers and also resulted in a large pendency of audit cases. Therefore, in order to facilitate the taxpayers, the present government, provided a one-time option to the taxpayers for closing the audit proceedings due to late filing of returns through the Finance Supplementary (Amendment) Act 2018.
Under the Finance Supplementary (Amendment) Act 2018, taxpayers were provided an option to get their audits closed on the payment of either 25% higher taxes than the tax paid with the return or in case no tax was payable 2% of the turnover and to file revised return by 31-12-2018. The salaried individuals whose cases were selected for audit due to late returns were facilitated by exempting them from the requirements of paying 25% higher tax and filing revised returns for closure of their audit cases. They however, had to pay only the penalty on account of delay in filing of return in order to get their audit cases closed. It is worth mentioning that the previous government had fixed the minimum penalty for late filing of return at Rs 20,000 through the Finance Act 2013 and no change has been made by the present government.
It is imperative to understand that the penalty proceedings are independent from audit which will be applicable regardless of whether the taxpayer avails the benefit under the above mentioned provision of the Finance Supplementary (Amendment) Act 2018 or not.
That is to say that even if the taxpayer chooses not to conclude its audit proceedings he or she would have to pay the tax charged as a result of audit proceedings as well as the penalty for late filing which, as mentioned before is an independent provision applicable on persons who were obliged to file their returns but filed the returns late. The present government tried to facilitate the salaried taxpayers by providing a one-time option to avoid additional tax liability under the audit proceedings.