KARACHI: Karachi Tax Bar Association (KTBA) has expressed concerns over tax recovery notices.

In a letter sent to the chairman FBR, President KTBA Syed Rehan Jafri said that number of notices being issued lately, especially in the wake of the due date of advance tax payment of the second (2nd) instalment, i.e., for the quarter ending December 2022, whereby the taxpayers have been confronted in respect of their advance tax liability worked out by department itself as per tax to turnover ratio and have asked the taxpayers to give an explanation as to why the computed amount or any shortfall of payment arising out of it should not be collected under section 147(7) of the Ordinance.

He said that this exercise poses a clear challenge to advance tax liability computed by taxpayers by re-estimating the liability of its own by the department and is fundamental without any legal jurisdiction in the first place. The power of estimating advance tax liability is bestowed by the legislature on the taxpayer alone and not on the taxation officer; a legal fact that must not be misunderstood by tax officers.

Furthermore, he said that section 147(7) of the Ordinance also seems to have been completely misunderstood because it only empowers the tax officer for the recovery of advance tax estimated by the taxpayer but not the recovery based on tax estimate made by the taxation officer.

Jafri said that after the insertion of proviso to section 147(6) of the Ordinance through the Finance Act, 2018, a Commissioner was made empowered to question the estimate filed by a taxpayer and to require the taxpayer to pay advance tax on the basis of tax to turnover ratio if evidence and/ or proper explanation for payment of lesser advance tax is not provided by the taxpayer.

However, the aforesaid proviso was omitted through the Finance Act, 2021, which therefore means that the power to challenge the estimate of the taxpayer is no more available to a tax officer as the law has reverted to the old position, he added.

KTBA President urged the chairman FBR to issue directions to the field formation to cease this exercise, which will yield nothing but unnecessary and avoidable litigation.

Copyright Business Recorder, 2022