Candidates contesting election: FBR identifies two major discrepancies in IT returns

The Federal Board of Revenue has identified two major discrepancies in the income tax returns filed by many candidates contesting elections, ie, late filing and manual filing against required electronic filing of returns. Sources told Business Recorder here on Friday that the FBR's Central Verification Cell has analysed the trend of filing income tax returns by the contesting candidates.
The analysis has been done on the basis of tax declarations made in the nomination papers and income tax returns filed by the candidates. The analysis revealed that many candidates have manually filed the income tax returns instead of filing them electronically. The second discrepancy is the late filing of returns. Latest data revealed that the FBR has received 23,200 nomination papers as on April 5. Out of 23,200 cases, the FBR has verified 20,777 nomination papers and communicated the information to the ECP for further action. There are only 2,423 cases pending with the Cell.
Meanwhile, the ECP has placed FBR's guidelines on 'tax defaults' for the returning officers on its website on April 5, 2013. The FBR had given these guidelines to the ECP on March 21, 2013, but the same have been placed on the ECP website on April 5, 2013. According to the FBR guidelines on 'tax defaults' non-filing of income tax returns by contesting candidates tantamount to tax default. The returning officers can make the following relevant queries to the contesting candidates: 1.Is there any income generating asset(s) (like property/business/investment/deposit etc) declared in the nomination forms.
2.What are the sources of day to day living and other expenses declared in the nomination forms.
3.If income is being claimed exempt (like agricultural), whether it has been declared with provincial authorities.
As per FBR's guidelines, under section 115 of IT Ordinance, 2001 the following persons shall not be required to furnish a return of income for a tax year solely by reason of [sub- clause (iii)] of clause (b) of sub-section (1) of section 114: A widow; an orphan below the age of twenty-five years; a disabled person; or in the case of ownership of immovable property, a non-resident person.
Any person who is not obliged to furnish a return as per subsection 4 of section 115, he shall furnish a statement of final discharge of liability as prescribed, FBR said. In case of NTN holders but non-filers of IT Returns, if the candidate is borne on tax roll but he is non-filer then all the aforesaid queries shall apply mutates mutandis, FBR said.
According to the FBR's guidelines, if the candidate claims to have filed the tax returns then following queries can be made: If under the FBR instructions tax return was to be submitted electronically, compliance has been made or filing is manual. From Tax Year 2009 wherever a refund has been claimed, return shall be filed electronically. From Tax Year 2010 for every Sales Tax registered person electronic filing of income tax return is mandatory. For salaried individuals whose salary income is Rs 500,000 or more (for tax year 2010 and 2011) and Rs one million or more (for Tax year 2012) electronic filing of return is mandatory along with wealth statement.
Another query is that filing of tax return is within prescribed time lines or it is late, the FBR said. As per the guidelines, the section 114 (2) of Income Tax Ordinance, 2001clearly states that IT return shall be accompanied with a wealth statement as required u/s 116 and under section 116 (2), every resident taxpayer [being an individual] filing a return of income for any tax year whose last declared or assessed income [or the declared income for the year], is Rs 500,000 or more (for tax years 2010 and 2011) and Rs one million or more (for tax year 2012), shall furnish a wealth statement and wealth reconciliation statement for that year along with such return.
So in cases where filing of Statement of Assets & Liabilities/Wealth Statement is obligatory, it may be checked whether the same has been filed along with the tax return; after filing of tax return or has yet not been filed. In case of outstanding/recoverable tax demand, the candidate may be asked whether he or Association of Persons/Registered partnerships to which he is member/partner, owes any outstanding/recoverable taxes to FBR. If yes, why the liability has yet not been discharged? The FBR said.
According to the FBR's guidelines on 'tax defaults' the filing of Income Tax Returns is obligatory if the candidate is enjoying taxable income of Rs 350,000 or above. Falling in the following categories of persons who are bound to file the IT return u/s 114 (1) of IT Ordinance, 2001: Every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under Income Tax Ordinance; any non-profit organisation; any welfare institution approved under clause (58) of Part I of the Second Schedule to Income Tax Ordinance, 2001; any person not covered by clause [(a), (ab), (ac) or (ad)] who, has been charged to tax in respect of any of the two preceding tax years; claims a loss carried forward under this Ordinance for a tax year; owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory; owns immovable property with a land area of five hundred square yards or more located in a rating area; owns a flat having covered area of two thousand square feet or more located in a rating area; owns a motor vehicle having engine capacity above 1000 CC has obtained National Tax Number; holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees one million; every individual whose income under the head 'Income from business' exceeds rupees three hundred thousand but does not exceed rupees three hundred and fifty thousand in a tax year is also required to furnish return of income from the tax year( Applicable to Tax Year 2012).
The commissioner may by notice in writing require a person to furnish a return of income where he otherwise thinks appropriate that such a Return needs to be furnished, the FBR said. Where a taxpayer is not borne on the National Tax Number Register and fails to file an application in the prescribed form and manner with the taxpayer's return of income or employer's certificate, such return or certificate shall not be treated as a return or certificate furnished under this section, the FBR added.