The biggest enforcement tool ie section 122c of the Income Tax Ordinance, has not been used for broadening the tax base effectively by the Federal Board of Revenue (FBR) during current fiscal year, as a very low number of provisional assessments were made against non-compliant taxpayers during July-September (2010-11).
An FBR report on broadening the tax base in 2010-11 showed that the tax officials have expressed serious concern over poor performance of the field formations in making provisional assessments against the non-filers and un-registered persons. Most of the Chief Commissioners of Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) have yet not effectively used the biggest tool to broaden the tax base by making provisional assessment of registered non-filers under section 122C of the Income Tax Ordinance 2001.
As a result of provisional assessments being made of the taxpayers, the Board has not levied any kind of penalties and recovered no amount through penalties from the non-compliant taxpayers under the Income Tax Ordinance 2001.
According to the FBR report, only 732 provisional assessment cases had been framed during the first quarter (July-September) of the current year, while 5005 provisional assessment had been framed up to the period ending June, 2010. The provisional assessments totalling 5,737 obviously have been framed in cases of non-filers up to tax year 2009. This is in the backdrop of 278,948 registered non-filers for tax year 2009 identified by the units themselves up to June, 2010, out of which 118,286 had been reportedly notified and only 25,051 had responded by filing returns of income by June, 2010.
A further 131,411 registered non-filers for tax year 2009 were identified up to September,2010, out of which 85,875 were notified and returns in response had been filed by 29,103 taxpayers during the first quarter of the current year. This means that out of total notified non-filers for tax year 2009 alone, at least 150,057 cases were ripe for provisional assessment.
The FBR report said that only 5,737 provisional assessments had been framed despite lapse of more than eight months since the last date for filing of returns for tax year 2009 ie January 25, 2010. It may be noted that framing of provisional assessments remains the most potent tool available with the tax machinery for eliciting compliance with tax laws from non-compliant non-filers, the FBR report added.
The FBR data added that 732 provisional assessments had been framed during the first quarter (July-September) of 2010-11; the number of cases where penal proceedings completed were 36; amount of tax charged was Rs 15.209 million; nil amount of penalties was charged; nil amount of tax was recovered and nil amount of penalties was recovered from the provisional assessments made against the non-compliant taxpayers under the Income Tax Ordinance 2001.