Defects' removal in e-return FTO issues notice to FBR for not submitting compliance report

The Federal Tax Ombudsman (FTO), Dr Muhammad Shoaib Suddle, has issued a notice to the Federal Board of Revenue (FBR) for non-submission of report on action taken on a complaint for removal of defects in the electronic return placed on the FBR Web Portal for working out correct tax payable for services sector.
In this connection, the FTO Office has issued a notice, dated May 16, 2011, to the FBR in the complaint No 719/LHR/ IT(594)1258/2010 pertaining to removal of defects in the income tax return for tax year 2010. The notice said: "Whereas the above-mentioned complaint was investigated by this office (FTO) and by FTO findings dated April 25, 2011, the Federal Tax Ombudsman had recommended in accordance with section 11(1) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000 that the FBR should ensure that apparent defects in the electronic return placed on the FBR web portal are removed so that tax payable is correctly worked out when all the fields are filled out.
"The FBR should issue appropriate instructions for retrieval of any revenue lost in services sector returns filed up to October, 2010 and submit compliance report within 15 days."
It further said that under section 11(2) of the Ordinance, the FBR was required to inform the Federal Tax Ombudsman by May 12, 2011 about the action taken with regard to implementation of the findings. The record shows that the FBR has not so far informed the office about the action taken for implementing the recommendations on or before May 12, 2011.
Therefore, the FBR is called upon to give show cause why proceedings under section 12(2) of the Ordinance may not be initiated against it. The FTO notice added that written reply of the FBR must reach the FTO office on or before May 24, 2011. Background of the case shows that the FTO had directed the FBR to remove defects in the income tax return for the Tax Year 2010 to ensure correct calculations of the income tax by taxpayers of services sector category falling u/s 153(1)(b) of the Income Tax Ordinance, 2001.
It was also recommended by the FTO that FBR should issue appropriate instructions for retrieval of any revenue lost in services sector returns filed up to October, 2010 and submit compliance report within 15 days. A show-cause notice was issued to the FBR, why defiance of recommendation proceedings under section 12(2) of the Federal Tax Ombudsman Ordinance may not be initiated against FBR for not implementing the recommendations issued by FTO.
These recommendations were issued by the FTO on April 25, 2011 while deciding a public interest complaint in which the complainant, an advocate of Lahore, has taken issue with defects in the electronic income tax return the FBR web portal requires to be e-filed by taxpayers receiving professional receipts for services rendered in Tax Year 2010, sources said.
As per complaint, there is lacuna in the income tax returns devised by the FBR/eFBR for Tax Year 2010. The system based working is not only erroneous, but also causing loss of revenue at national exchequer's end and ultimately unnecessary litigation at taxpayer's and, solely due to technical fault in the computation formulas applying in the income tax return form, sources added.