Mechanism for auditing late filers proves hard nut to crack for FBR

Mechanism for automatic selection of late filers of tax returns for audit is proving a hard nut to crack for the field staff of Federal Board of Revenue (FBR) as the taxpayers are facing complications even after the introduction of section 214E in the Income Tax Ordinance, 2001, by the government, said sources.
The scheme has failed to deliver and the objectives are unmet due to departmental inefficiencies arising out of heavy pendency in the wake of poor policy making. Sources said the policy is quite faulty as the field staff is unable to deal with piling discrepancy.
It may be noted that the FBR had asked over one million late filers of tax returns to pay penalty or higher tax for automatic closure of audit proceedings in the month of October 2018. The late filers of returns for tax years 2015, 2016 and 2017 were selected for audit under Section 214D of the Income Tax Ordinance.
The facility for availing automatic closure of audit under Section 214E was available till Dec 31 and approximately 1,022,000 taxpayers were supposed to benefit from it. Moreover, Section 214D under which late filers were automatically selected for audit had been deleted from the Income Tax Ordinance 2001 in the Finance Act 2018 due to undue hardship faced by new taxpayers and to facilitate the process of broadening of tax base.
FBR Member Taxpayers' Audit Nausheen Javaid Amjad had announced in the month of November that those taxpayers who were automatically selected for audit under Section 214D due to late filing of returns should now avail the facility by paying penalty or higher tax than previously filed return - whichever is applicable under the law. The salaried persons or whose income fell under the category of FTR/PTR had to pay penalty only to close their audits. However, the taxpayers whose income falls under any other head of income have to apply for revision of returns under Section 214E in IRIS system.
The departmental sources said a taxpayer filing a nil return is bound to deposit Rs 20,000 while another having paid a tax of Rs 500 is bound to pay 25 percent of the same can also avoid automatic audit of his return. It means that the nil filer is bound to pay heavy penalty against the one paying a meager tax to the exchequer.
The present government had introduced section 214E in the income tax law that stated that if taxpayer himself pays penalty for late filing under section 214D or deposit 25 percent extra tax the audit would automatically be closed. The objective was to provide a safe exit to the department and easy exit to the taxpayer.