Withholding agents: Tax officers imposing penalties without verifying payments

LAHORE: Tax authorities are allegedly imposing additional tax against withholding agents without verifying whether the tax has been paid or not, said sources.

Sources said the tax authorities take the stance that the assessing officers are not obliged to identify the names of the parties to whom supplies were made because of the record being maintained by the suppliers/withholding agents.

But tax experts have pointed out that it is duty of tax authorities to ensure that biannual or annual statements of tax collected or deducted are filed by the withholding agent within the stipulated time. Also, they added, tax officers are equipped with power of imposing penalty if statutory obligation is not fulfilled by any taxpayer.

Have the tax authorities their duty of ensuring compliance for filing statements at the earliest, the occasion of issuing notices would never arise, as the amount to be collected or deducted would have been deposited in exchequer much earlier.

They said the very purpose of advance tax is collection of tax in advance and it’s adjustment at later stage but not charging or levy of tax. For collection of advance tax, they added, certain persons are obliged by law to collect and deposit the same in treasury. Such person is known as an agent of the state and such tax can only be recovered from him if he fails to comply with his statutory obligation.

However, said sources, tax authorities do not bother to verify collection and deduction of tax while ensuring submission of biannual statement by taxpayers and prefer to impose penalty by simply assessing their return, which at the end of the day is refunded by the department after due verification post imposition of penalty, therefore, the whole exercise for recovery proves futile, as tax collected does not become part of national exchequer rather it burdens the exchequer with an expense which could have been expended for recovery of tax due.

The pursuit of creating such demands by tax administrations to meet budgetary targets, they said, not only wastes resource and revenue but also burdens the judicial hierarchy at the end of the day.

According to sources, tax authorities shift the burden of tax collection and deduction wholly and solely on taxpayers by the expedient of simply identifying one or more payments, or a class or a category of payments. At least, there must be some reason or information available with the Commissioner Income Tax to conclude that there was no, or could have been, a failure to deduct, they stressed.

They have further added that the threshold of reason or information is not so stringent as to require definite information but it is also not so low as to be bound merely to the subjective satisfaction of the officers concerned.

Copyright Business Recorder, 2023