Budget proposals 2014-2015: apex body advocates separate tax judicial system

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has proposed the government that tax judicial system should be separated from collection machinery and should work under the respective High Court.
The FPCCI said that in line with constitutional requirement, adjudicating officers should be removed from subordination of Federal Board of Revenue (FBR). Appellate Forums should work under the respective High Courts.
In current situation, tax appellate authorities operate under the executive side of FBR.
The apex body has suggested that all decisions of the tribunal should be challenge-able in the country’s court of law.
At present the decisions of Appellate Tribunal are not challenge-able before High Courts or Supreme Court of Pakistan.
In current scenario, it is not in line with constitution of Pakistan for providing justice.
The federation has proposed that the provisions existed before the Finance Act, 2013 for appointment of the appellate tribunal should be restored.
In the Finance Act 2013, the criteria for appointment of a judicial member about their qualification and experience is lowered and now he can also be an officer of Inland Revenue Service (IRS) of grade 20.
Prior to it the criteria was included: the person has exercised the powers of a district judge and is qualified to be a Judge of a High Court; and he has been an advocate of a High Court and is qualified to be a Judge of the High Court.
But in existing situation, a Judge of a High Court cannot be equated with an IRS Officer.
The apex body has urged that the provisions existed before the Finance Act, 2013 for appointment of accountant members should be restored.
Prior to Finance Act, 2007 qualification was of the rank of Regional Commissioner BPS-21. However, further expanded the criteria to qualify commissioner of appeals with five years experience to become an accountant member, subsequently, Finance Act 2010 further curtailed the qualifying service period to three years.
The federation said that above changes affected the performance of the Appellate Tribunal, which is the reason for seldom landmark judgments by the Appellate Tribunals.
The FPCCI has proposed that scope and parameters of audits should be fixed properly by revenue department to avoid frivolous demands against the taxpayers.
Currently there are three audits for checking the Income Tax Assessment which are included: two from within the tax department; and one from revenue department, Islamabad.
However no scope or parameters are fixed for these audits. Revenue department initiates audit after two to four years of completion of assessments and re-assessment of the completed assessment.
The federation said that assessment of any good should only be amend once and not allowed to reopen every item on the same issue.
It is also proposed that the time period to amend the assessment order should be reduced to three years.
The FPCCI said that once the assessment is amended any further amendment should only be done when the department acquires definite information that the income has been concealed or inaccurate particulars of income have been furnished or incorrect.
It is suggested that re-opening of the case should be made only by the Chief Commissioner, IRS after giving proper opportunity to the taxpayer of being heard by issuing specific show-cause notice. It is against the tenets of justice that the same Commissioner of Income Tax, who has completed the assessment, re-opens the case for additional assessment.
In current scenario, commissioner may amend the assessment order as many times as he may deem necessary.
The FPCCI highlighted that the taxpayer will be at the mercy of revenue officer and his assessed case is not considered as closed transaction till at-least six years from the date of original assessment.
The apex body has suggested that audit should only be carried out through computer ballot under section 214C and in case if it is required to be done under section 177 then it should only be done after approval of FBR.
The FPCCI has proposed that audit is required to be done through computer ballot under section 214C; this fulfils the law of justice and selection of audit is not biased. However commissioner is authorized to conduct audit under section 177 and an explanation was added to the ordinance after section 177 (10) whereby powers to select a case for audit was also given to the commissioner.
This nullify the effect of the decision of the Lahore High Court that powers to select taxpayers cases for audit only vested with FBR.
The federation has proposed that date for filing should be changed from 15th to 25th day of the month to which withholding pertains.
It said that it is required to furnish the statement by 15th day of the month following the month to which withholding tax pertains.
It is believed that it coincides with the date for filing of monthly sales tax return and monthly statement of income tax.
The federation has suggested that FBR should ensure that tax deducted is credited in the account of the person whose tax has been deducted.
In this regard, the original status should be restored, however supporting documents, if required, such as copies of challans / receipts of payment with the return of income should be specified.
Prior to Finance Act, 2013 a certificate issued by a withholding agent for tax collected or deducted was treated sufficient evidence for claiming credit under section 168. This facility was withdrawn in the Finance Act, 2013.
The apex body has suggested that law should specify for tax payment that if 15 percent of the amount is paid then balance may be paid in 12 installments to ensure justice, equity and fair play.
Further if an appeal is filed then all monthly payments should only start after the decision of the appeal.
The FPCCI said that notice issued by commissioner for payment of tax liability is required to be paid within 15 days from the date of service of notice. However commissioner may grant extension of time or installments for payment.
The above provision provides arbitrary powers, resulting misuse in many cases.
The apex body has demanded that tax authorities’ powers should be restricted for the access of banking transactions and suitably tailored to enforced judicially and fairly.
At present FBR is allowed online access to banks central database containing details of its account holders and all transactions made in their accounts.
It said that the tax authorities have been given wide powers to probe into banking transactions and can be misused in this regard the provision must be revisited in the budget of 2014-2015.

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