Defective tax return forms for year 2014: FTO Office may issue another landmark judgement

The Federal Tax Ombudsman (FTO) Office may issue another landmark judgement against the defective return forms for Tax Year 2014 placed on the FBR web portal. The FTO Office had issued a similar ruling in a case pertaining to defective tax return forms for Tax Year 2010.
It is reliably learnt that the FTO Office has taken up the issue of faults appearing in the tax return forms and there are strong chances that the FTO Office may issue the order regarding defective forms. The representations before the FTO revealed that the income tax return form for Tax Year 2014 placed on the FBR web-portal with built-in tax computation formulas apparently having 'grossly understated taxpayer's due tax liability.
Sources told Business Recorder that on the same issue of defective tax return forms earlier former FTO Dr Muhammad Shoaib Suddle had decided a complaint for service sector taxpayers for Tax Year 2010 vide C.No 719/LHR/IT(594)/1258/2010. The FTO decided the said complaint directing the FBR for removal of defects in the return form placed on web portal, besides retrieval of loss of revenue in service sector through appropriate measures. Thereafter on the basis of order passed by the FTO, on the same pattern of minimum tax regimes, tax returns for Tax Year 2011, 2012 and 2013 were modified.
Income tax return form does suffer from a computational problem where the embedded code for computation of income tax liability for taxpayers placed in the Services Sector category having income/receipt liable to minimum tax under section 153(1)(b) of the Income Tax Ordinance, 2001 is defective and consequently their tax calculation is understated. Resultantly, this may lead to a significant loss of tax revenue because of universal self-assessment scheme the return will be accepted when filed. There is the added risk that such returns may be picked up for audit in case short payment of tax is criteria for selection of returns for audit.
Responding to the complaint the FBR informed the FTO office that the return available for e-filing on "Iris" is accurate and strictly according to law. The return downloadable from FBR website is for manual filing and is supposed to be downloaded, printed and filled manually. The electronic return provided in Iris has been specifically designed to be user-friendly so that taxpayers with no technical background can easily fill it.
The FBR further said that the complainant had completely misunderstood the facts. The return available on web for e-filing through "Iris" is absolutely accurate and any issues faced by the taxpayer is apparently due to a lack of understanding on how to fill the return, The return provided for e-filing through "Iris' has been specifically designed to be user-friendly so that taxpayers with no technical background can easily fill it.
The return downloadable from FBR website is for manual filing and is supposed to be downloaded, printed and filled manually by the taxpayer at his own responsibility. While a taxpayer is forced to follow the FBR's tax calculation for e-filing, there is no such compulsion for manual filing.
Member (IT), FBR and Secretaries (IT), FBR respond to hundreds of queries resulting from lack of understanding on the part of taxpayers and tax practitioners everyday on phone, email as well as in person to taxpayers who visit FBR field offices. The complainant could have directed these queries to one of the above officers instead of approaching the FTO.
Income Tax Return for Tax Year 2014 clearly shows "Payments for Services u/s 153(1)(b)" under "Minimum Tax Chargeable" at serial nos. 4 & 5 in Annexure E of Manual Return. Also, the same is available on the electronic return in the tab "Minimum Tax". The FBR further said that entering the said figures in the return available on "Iris" gives absolutely accurate and correct results.
The return available for e-filing on "Iris" is accurate and strictly according to law. The return downloadable from FBR website is for manual filing and is supposed to be downloaded, printed and filled manually. The electronic return provided in Iris has been specifically designed to be user-friendly so that taxpayers with no technical background can easily fill it. As for the manual return, it is not expected that taxpayers would be able to fill it without any help from experts: FBR added.