LAHORE: Income tax officers are accused of calculating stock-in-trade of sales tax returns in the income tax returns to make a comparison and treat the difference as expenditure on excess purchases which is not in line with the relevant tax laws, said sources.

They said the tax officers amend the assessments filed as income tax return while comparing them with those filed under the sales tax and declare them as undeclared income or assets to create a demand of additional tax.

According to the sources, the data given in the sales tax return is basically a summary of input tax which could not be made basis for calculating stocks held on a particular date to make its comparison with that of stock-in-trade as declared in the income tax return.

Such a summary is only meant for summary of input tax and excess carry forward amount of sales tax credit, they said and added that none of the provisions of sales tax law or the income tax ordinance is purported to deem these figures of carry forward summary to be the closing stocks and equate them with the stock statement of a taxpayer.

The sources from among the tax experts have pointed out that the departmental authorities were carrying out such practices on their personal whims and wishes for creating concurrent tax liabilities under two separate statutes having different standards of reporting stocks and inventory.

None of the provisions of Sales Tax Act, 1990, and Income Tax Ordinance, 2001, supports such an action on the part of tax authorities, they said, adding that a number of appeals are being filed by the taxpayers every now and then to challenge it before the appellate tribunals.

When asked about the scope of stock-in-trade, they said it means anything produced, manufactured, purchased or otherwise acquired for manufacture, sale or exchange, and any material or supplies to be consumed in the production or manufacturing process, but does not include stocks and shares.

According to the sources, if any difference of declared stock is found or is effectively unearthed through audit or otherwise, it cannot be added as expenditure under the income tax law. Such stocks can be added to investment, money, assets or valuable articles owned by a person whose sources are not adequately explained but it cannot be added towards his expenditure, they stressed.

They have further pointed out that stocks are physically tangible in trade or business whereas expenditures are irretrievably gone into costs of goods.

Copyright Business Recorder, 2023