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ISLAMABAD: The Sindh High Court (SHC) has barred the Federal Board of Revenue (FBR) from imposing huge penalty (two percent of the value of foreign assets) on a salaried individual, who filed his income tax return/wealth statement for the tax year 2019, disclosing details of all foreign income and assets as prescribed, but did not file a separate statement of foreign income and asset u/s 116A of the Income Tax Ordinance.

According to the order the SHC issued on Friday, the FBR and the relevant (Automatic Exchange of Information) Zone has been stopped from passing an adverse order against the salaried individual/petitioner till the next date of hearing.

The petitioner is a salaried individual, who filed his return under Section 114 along with wealth statement under Section 116 of the Income Tax Ordinance, 2001, for the tax year 2019, while disclosing his total income from all sources Including details of foreign income and assets through IRIS as prescribed by the FBR, which was duly accepted and no objection was raised thereon.

However, according to learned counsel, respondents (Automatic Exchange of Information) Zone and as per directions of the FBR through impugned notice dated 25.09.2020 issued under Section 182(2) read with Section 116A of the Income Tax Ordinance, 2001, intend to enforce penalty for not submitting return regarding foreign income and assets under Section 116A, which could not be filed by the petitioner due to inadvertence, whereas, the same was duly declared u/s 114.

It has been further contended by the learned counsel for petitioner that particulars of the foreign income/assets have already been disclosed by the petitioner, while submitting return under Section 114 and wealth statement under Section 116 of the Income Tax Ordinance, 2001; therefore, petitioner has made no concealment or committed default, moreover, there is no element of mens rea or tax implications attracted for non-filing such statement under Section 116A; therefore, proposed imposition of penalty under the circumstances is without lawful authority.

In support of his contentions, learned counsel has placed reliance on the cases of DG Khan. The SHC has issued pre-admission notice to the respondents as well as DAG to be served through first three modes for 04.11.2020.

In the meanwhile, petitioner may submit response to impugned notice by raising all such factual and legal objections; however, till next date of hearing, no final adverse order may be passed by the FBR against the petitioner pursuant to impugned Notice, the SHC order added.

When contacted, the counsel for the petitioner it was informed that FBR wants to use this means as a revenue generation as the information of foreign income and assets has been declared by most of the taxpayers u/s 114 of the Ordinance, and the information has also been obtained by the FBR from the declarations made suo motu by taxpayers, and they are now being penalised for minor inadvertence.

Copyright Business Recorder, 2020

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