MONDAY JULY 11: FBR tax record: thousands of dormant companies to be excluded by month-end

ISLAMABAD: Thousands of dormant and inactive companies which are untraceable due to non-existence or closure of business would be excluded from the Federal Board of Revenue (FBR) tax record by end the end of July, 2011.
Sources told Business Recorder here on Sunday that out of 45,000 companies available on the 'NTN Master Index', around 23,000 filed their income tax returns. The remaining companies, who are presently untraceable or have closed down their business, would be excluded from the 'NTN Master Index'. A committee headed by Chief Commissioner Inland Revenue (IR) Large Taxpayer Unit (LTU) Lahore Khalid Aziz Banth is actively working for the cleansing of the 'NTN Master Index' to get rid of all irrelevant NTNs, which are not presently required to file returns. It is expected that the exercise would be completed by end of July 2011.
According to the Standing Operating Procedure (SOP) of the FBR, the committee has given priority to companies' data for cleansing of 'NTN Master Index'.
The initial period of last 1-2 years has been picked by the committee to check the status of NTN holders for filing of returns. The committee has also reviewed the NTNs issued in the past years to check the status of the taxpayers, who have obtained the NTNs 3-5 years ago. Cases have also been identified where NTNs were obtained in the past for one-time purpose, like purchase of vehicle, abroad travel. The committee has also picked dormant cases and businesses which have been closed but their NTNs are still reflected in the 'NTN Master Index'. Presently, out of 3.1 million NTN holders, around 2.2 million have filed the returns.
The SOP says that considering the importance of having the correct number of taxpayers in LTU/RTO jurisdiction, it is imperative that dormant cases are reported from the active taxpayers in the light of SOP to determine the same. The timeline for completion of the whole exercise is end July 2011.
The SOP said that for the purpose of ensuring compliance of statutory returns and statements from the NTN holders and credible reporting of data of compliant taxpayers, the following NTN holders may be treated as Live Category A and B Cases":
Live Category 'A' Cases: All NTNs issued from July 1, 2010 onwards, all NTNs against which any of the following activity is recorded in the FBR computer system from July 2005 onwards, filing of income tax return, filing of sales tax return, filing of withholding tax statement as prescribed u/s 165 of the Income Tax Ordinance 2001, importing/exporting of goods as per customs records and payment/deduction of tax.
Live Category 'B' Cases: In addition to the above, a case/NTN shall be categorised as 'Live Category 'B' Case' if arrears demand of income tax, sales tax, federal excise or wealth tax for any tax year is outstanding, internal or external audit observation/para is pending, litigation is pending at appellate/ higher courts and enquiries are pending with NAB, FIA etc, which have duly been intimated to the department.
All the remaining NTN holders may be categorised as 'Dormant' in the 'Master Index'. A Dormant Case/NTN shall be converted to Live Case/NTN automatically whenever any of the activities referred above is reported in the computer system. The respective RTO/LTU would be intimated by the system for taking further necessary action for ensuring compliance. All dormant cases shall be subjected to physical verification by the respective RTO/LTU. If after, physical verification it is established that the Dormant Case is engaged in any taxable activity, the same shall be categorised as Live Case after proposing necessary change in the Master Index. Otherwise, the same shall be proposed for removal from Master Index.
The Pakistan Revenue Automation Limited (PRAL), the IT arm of the FBR, shall forward separate lists of all Live and Dormant cases to the respective RTOs/LTUs. Weeding out of records in dormant cases, however, has to be carried out in accordance with the prescribed procedure, FBR's SOP added.