The Federal Board of Revenue (FBR) has decided to withdraw the proposed income tax return forms for the Association of Persons (AOPs) and individuals for the Tax Year 2010, as the taxpayers may be allowed to file the return in the old format.
However, the new income tax return form for the companies would shortly be notified. The new return form for companies would have no major change for the Tax Year 2010. It is learnt that the FBR Legal Wing as well as Direct Taxes Department had cleared the proposed return forms few weeks back without issuing the necessary notification required under the law. This makes the draft returns illegal and the same cannot be notified without the notification which allow the department to obtain comments of the stakeholders.
Sources told Business Recorder here on Sunday that the FBR has also decided to extend the date for filing of returns for those taxpayers, who have to file return by August 31, 2010. In this regard, the FBR would announce the decision during current week. The proposed return forms for AOPs and individuals have no legal backing and, therefore, the same would be withdrawn. As the necessary Statutory Regulatory Order (SRO) required for obtaining comments of the stakeholders on the new return form has not been issued, the FBR may allow the taxpayers to use the previously notified income tax return form with some minor changes. The notification for obtaining comments of the stakeholders on the draft form has not been issued, therefore, the FBR is expected to allow the taxpayers to use the previously notified return form.
Sources said that the draft of the new income tax return forms for AOPs and individuals was duly issued after clearance from the FBR Legal Wing. However, it is surprising to note that the FBR Legal Wing give due clearance of an illegal return form, as the FBR has no legal authority to seek details of expenditure through return of income. Through draft of the new return forms for AOPs and individuals, the FBR has proposed to collect information pertaining to personal expenditure and assets details of 'individuals', including salaried/business class. The FBR is not legally empowered to seek details of expenditure through the income tax return under the Income Tax Ordinance 2001. Despite the fact that the same information could be collected from wealth statement and wealth reconciliation statement, the FBR Legal Wing cleared the draft of the new forms for public comments without issuing the SRO.
Sources said that it is yet to be seen that how the FBR Direct Taxes Department as well as FBR Legal Wing committed such a serious blunder and issued illegal return forms without issuing the relevant SRO necessary for seeking comments. The FBR's concerned departments placed the draft of returns forms on the web without issuing the notification required under the law.
Sources said that the details of expenditure cannot be made part of the tax return because section 116 of the Ordinance 2001 already empower the commissioners to seek details of personal expenditure and person's total assets and liabilities.
The commissioner can select any case for audit, obtaining information relating to the personal expenditure of an individual/AOP, but it cannot be made part of the return. Secondly, individuals and AOPs having annual income of Rs 5,00,000 have to submit wealth statement and wealth reconciliation statement along with the return of income. In the presence of section 116 of the Ordinance, there is no relevance to introduce a new Annex in the income tax return for collecting information about the personal expenditure, officials added.
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