Taxpayers excluded from ATL ‘despite interim relief against deemed income’

LAHORE: Federal Board of Revenue (FBR) has excluded names of taxpayers from the Active Taxpayer List (ATL) despite interim relief from the court against section 7E of the Income Tax Ordinance, 2001 related to ‘deemed income’.

All such taxpayers had approached to the Lahore High Court against the insertion of the provision in the law, which granted relief by directing the applicants to apply their concerned commissioners for extension of time for submission of income tax return for the tax year 2022 till disposal of writ petitions.

Meanwhile, field formations of the Board have also started issuing notices where taxpayers have submitted their returns on the basis of non-filing of relevant part of return related to working of tax liability under the provisions related to ‘deemed income’.

So much so, those taxpayers are receiving notices in those cases as well where the controversial provision of law is not applicable and no tax is chargeable under the exemptions provided under the relevant provision of the law.

The effect of the above action is that if the notice under section 120(3) of the Income Tax Ordinance, 2001 is not responded by the tax payer or after receipt of explanation specifically with regard to application of section 7E, the assessing officer does not close the proceeding, the system would automatically treat the return as invalid.

In a letter to Chairman FBR, the leadership of Pakistan Tax Bar Association has urged him to direct the field officers stop initiating proceeding u/s 120(3) of the Income Tax Ordinance, 2001 for the tax year 2022 on the basis of application of the provision of section 7E without having any plausible justification. Moreover, they said, a timely decision in this regard by the Board would not only be appreciated by taxpayers/legal fraternity but also be helpful in collection of taxes at the appropriate time.

The Association has also drawn attention of the Chairman towards the fact that the newly inserted section 7E in the Income Tax Ordinance, 2001 is not applicable in all such cases where a taxpayer has declared immoveable properties in his wealth statement for the tax year 2022. Instead, the provisions of section 7E comes into operation only where the net fair market value of the immoveable properties of a taxpayer exceeds the prescribed limit of twenty five million after exclusions of the properties given exemption vide sub-section (2) of section 7E of the Income Tax Ordinance, 2001.

Copyright Business Recorder, 2023