FBR seeks legal backing for withholding tax audit: amendment to IT Ordinance likely

The Federal Board of Revenue is expected to propose an amendment to the Income Tax Ordinance 2001 to obtain legal backing for conducting 'withholding tax audit' of withholding agents for any past year, without observing any time limitations.
Sources told Business Recorder here on Thursday that the FBR wanted to propose an amendment to the Income Tax Ordinance 2001 taking into account a judgement of Supreme Court of Pakistan No ITR 44-45 dated 29-05-2009 passed in respect of a telecom company that "the legislature has not provided any period of limitation for passing an order declaring a person to be assessee in default."
In line with this judgement, an amendment can be proposed to the Income Tax Ordinance 2001 for withholding audit purposes. In order to conduct withholding audit in respect of any withholding agent, the monitoring officer can go to any year or can conduct withholding audit of any past year. This should be specifically made part of the law that the monitoring officers can conduct withholding audit of any past year, without observing any time limitations, sources maintained.
Sources said that the recovery of withholding tax from Pakistan Post was made for past years like 2004-05. Similarly, withholding audit of banks pertaining to past years was also carried out. Therefore, this specific issue of time limitation be made part of the relevant law to smoothly carry out withholding audit of withholding agents.
According to the past instructions of the Directorate General of Withholding Taxes FBR to the Chief Commissioners of LTUs and RTOs, the FBR had circulated the Supreme Judgement No ITR 44-45 dated 29-05-2009 passed in respect of a telecom company. In this judgement it has been categorically decided that "the legislature has not provided any period of limitation for passing an order declaring a person to be assessee in default." The exact wording of the judgement is as follow:
"The legislature has not provided any period of limitation for passing an order declaring a person to be assessee in default. Section 156(1) comes into play only if there is an order already in existence, which requires rectification of the authority which passed the said order. There is no time limit for action under section 52". This is a significant judgement and while monitoring and managing the withholding tax regime it will definitely increase the scope and performance of the withholding audit. The field formations should utilise this judgement while conducting withholding audit, the FBR instructions added.