FBR’s major facilitative measure: Taxpayers, tax advisors begin taking benefit

ISLAMABAD: The taxpayers and tax advisors have started taking benefit of the Federal Board of Revenue (FBR)’s major facilitative measure directing chief commissioners to play quasi-official role of Inland Revenue Ombudspersons to address the grievances of the taxpayers for resolution of their issues within the tax department.

Tax experts have given credit to the FBR Member Inland Revenue Operations, Dr Muhammad Ashfaq Ahmed, for taking a key reform initiative to end litigaton between the taxpayers, and the tax department.

The FBR’s past instructions categorically directed the chief commissioners, “it is critically important that not only that chief commissioners assume their new role of Inland Revenue Ombudsperson wholeheartedly, but also that they widely publicise it in their respective jurisdictions, so as to attract and internalise maximum complaints lodged by their taxpayers. This significant administrative shift needs to be optimally leveraged to salvage image of the service, restore citizen’s trust in the system, and maximise revenue collection in a wholesome manner,” it stated.

The chief commissioners would ensure that they are the first point of contact for all existing and potential taxpayers for the resolution of their problems and plaints, and ensure that even if a taxpayer has ever to go seeking redressal elsewhere, it is only after he has failed in getting due relief from the Inland Revenue Ombudsperson at his doorstep, the FBR maintained.

The FBR added that, “in future, the chief commissioner’s role as Inland Revenue Ombudsperson would be a key indicator of his performance, and it would reflect adversely on his efficacy as a tax administrator, if the number of complaints emanating from his jurisdiction and lodged elsewhere does not drastically come down over the next few months.”

Tax experts stated that there is unprecedented thinking on the part of the FBR, whereby, the chief commissioners Inland Revenue have been termed as internal ombudsman to address the grievance of the taxpayer, so they are not compelled to seek remedy elsewhere of the Federal Tax Ombudsman or of High Courts in respect of matters which can be resolved within the department.

The said thinking is reflected in the letter of Member Operations Inland Revenue addressed to the chief commissioner, which has gone unnoticed by the taxpayers and the tax advisors, and earlier there were hardly any instances of filing applications with the chief commissioners in pursuance of instructions of the board.

When contacted, Shahid Jami, a tax consultant for comments, he observed that recently taxpayers have started availing this option and response of the chief commissioner is encouraging.

Now we have examples wherein, administrative grievance was brought in the knowledge of the chief commissioner by referring to the aforesaid instructions of the FBR to redress the grievance of the taxpayer as internal ombudsman.

According to the facts of first example, the taxpayer in August 2019 applied for change of particulars to add status of manufacturer when the imported machinery stood installed in the industrial undertaking.

The local registration office called for physical verification report from the concerned assessing officer.

The concerned officer deputed the auditor to visit the premises to verify the claim. Thereafter, the assessing officer on 31 December 2019 sent the physical verification report recommending the change to the commissioner through proper channel for onward transmission to the local registration office.

However, for 11 months, the report was not forwarded to the local registration office and when lately, the report was forwarded to the local registration office and the change in particulars was made the department came up with the version that for the period prior to change, the tax collection on import of raw material would not be counted towards adjustable advance tax for the purpose of issuance of exemption certificate under Section 153(4).

On this, representation was filed to the chief commissioner and report was called for from the commissioner and the taxpayer was given an opportunity to explain its contention before the chief commissioner as well as commissioner. The outcome was that the department agreed that since the delay in change of particulars was due to delay in forwarding the verification report to the local registration office, therefore, the tax collected on import of raw material by the industrial undertaking for its own use in the meanwhile was adjustable as envisaged under Section 148(7) and is to be accounted for towards advance tax liability under Section 147.

Shahid Jami explained that taxpayer relied upon judgement of the Supreme Court in the case of Commissioner Inland Revenue vs Secretary Revenue Division reported as 122 TAX 351 (SC) where it has been held that the question of refund payable to taxpayer arose entirely, and only, because of the failure of the commissioner of the commissioner to grant exemption certificate applied in the timely manner.

As such the issue was amicably resolved within days without going to any other forum.

The second example is that assessing officer at Large Taxpayer Office at Multan made an arbitrary assessment in haste whereby income was assessed at Rs1.08 billion which was even more than the sales declared at Rs1.05 billion by the taxpayer being pharmaceutical distributer.

In doing so, the purchases were curtailed by 43 percent over and above the limit of 20 percent envisaged in Section 21(c). This addition was made disregarding the contention that the pharmaceutical companies were holding exemption certificate which fact has been accepted by another officer for the same year during the proceedings under Section 161 for the same year.

Though the concerned chief commissioner has not officially informed the taxpayer of calling for report from the concerned assessing officer/Commissioner and giving the taxpayer an opportunity to explain his version further, yet informally, the hierarchy has realised that the additions were arbitrary and even violation of 20 percent limit provided in Section 21(c). The beneficial tangible outcome for the taxpayer was that on filing this representation, the department has shown self restraint and has not issued any recovery notice.

The third example is that a representation has been filed with the Chief Commissioner Regional Tax Office, Lahore that on 24.12.2020, the taxpayer received a hearing notice from Inland Revenue Officer, RTO, Faisalabad, fixing hearing on 30.12.2020, however, an assessing officer at Zone-II, Lahore has passed an order on 29.12.2020 without having jurisdiction and without issuing any notice for hearing under Section 122(9) in respect of show cause notice already issued in June, 2020.

The chief commissioner has called for report from the assessing officer and the Commissioner, and it is hoped that there would be an outcome to the satisfaction of the aggrieved taxpayer.

Shahid Jami observed that knowing these examples, it would be imperative to advise that whenever some issue of following nature is pending the same can be brought in the knowledge of the chief commissioner by referring to the FBR instructions, whereby they have been required to act as internal ombudsman: Delay in issuance of refund; delay in issuance of exemption certificate; any other delay adversely affecting the taxpayer; assessment made out of jurisdiction and arbitrary assessment wherein huge demand has been created by not bringing on record the stance of the taxpayer supported by documentary evidence.

Copyright Business Recorder, 2021