KARACHI: The concept of an ‘agreed assessment’ is proposed to be introduced in the Income Tax Ordinance, 2001.
Though not defined in the Ordinance, an agreed assessment represents a status agreed upon by the taxpayer and the department. The effect of such an assessment is that either party has no right to contest the matter in any manner and no penal action lies against the taxpayer.
The concept of agreed assessment is generally applied in situations where both parties do not have definite basis or calculation of an amount proposed to be added to the declared income, for example, in transfer pricing cases.
The amendment also prescribes that an agreed assessment can only be made after the receipt of notice under section 122(9) of the Ordinance. This effectively means that taxpayer may agree upon certain disallowances or additions proposed in such notice without a right of appeal.
In the past, there were instances of agreed assessment where the conditions as laid down above were exchanged by the taxpayer and department through respective undertakings. Now this procedure is proposed to be incorporated in law.
A taxpayer intending to settle a case may file offer of settlement in the prescribed form before the ‘assessment oversight committee’, in addition to filing a reply to the notice. This option is, however, not available in cases involving concealment of income or where the interpretation of question of law involved having effect on other cases.
The said Committee will comprise of the Chief Commissioner, Commissioner and the Additional Commissioner having jurisdiction over the case.
After examination of the aforesaid, the Committee may call for the record of the case and after affording reasonable opportunity of being heard to the taxpayer may accept, modify or decline the offer of the taxpayer through consensus and communicate the decision to the taxpayer. In case the taxpayer agrees with such decision, he shall deposit the amount determined by the Committee and on such basis, the assessment will be amended with no right of appeal and no further proceedings will be taken on such issues.
If the Committee is not able to arrive at a consensus or the taxpayer does not agree with the decision of the Committee the case shall be referred back to the Commissioner for decision on the basis of taxpayer’s response to notice under section 122(9).
“The FBR is empowered to make rules regulating the procedure in relation to the agreed assessment. The proposed amendment needs to be examined with reference to the implication of an agreed status in a particular year for any prior or subsequent assessment,” A.F Ferguson’s Tax Memorandum noted.