Income tax laws: time limit of five years for audit remains applicable: SHC

The Sindh High Court has ruled that the time limit of five years for purposes of audit remains applicable under the income tax laws. In a detailed judgement, on behalf of a division bench, Justice Munib Akhtar has upheld the contention of banks that the FBR cannot reopen cases for audit beyond 2006 of tax deductions deposited by banks on behalf of their clients.
The department had calculated the 10 percent tax withheld and deposited; it bore no correlation to the interest paid by banks to their clients as per their published annual accounts/balance sheets.
The Sindh High Court set aside notices and quashed all proceedings based on the above contention and restrained tax officials from giving effect to statutory powers conferred by section 161 as banks had submitted their audited accounts along with their returns for the tax years in question many years prior to the notices. As such, impugned actions were time barred by limitations.