Karachi Tax Bar Association (KTBA) has termed the proposed draft of the SRO 1320/2019 that holds jewellers and Real Estate Agents (REAs) responsible for record keeping of sale and purchase transactions and reporting of suspicious transactions as 'preposterous', urging the Federal Board of Revenue (FBR) for a redraft. In a letter to the chairman FBR, the KTBA said that they had a discussion over the subject and made certain observations, which need to be taken into account before the drafted rules are finalized.

It said that although this initiative was aimed for needed documentation of economy, the proposed steps in this notification for jewellers and real estate agents were far from commercial realities and the legal boundary of the business.

Besides making them responsible for disclosing the name and particulars of their customers is against the fundamental objective behind the record keeping and the mandate imposed upon them to keep track of their customers and keeping a constant intelligence and surveillance over the transaction to ensure that their payments have been made through kosher money is completely unheard and unparalleled in the tax history of the country, it said.

Furthermore, KTBA said that it had never been witnessed that a shop keeper was asked to make arrangement for conducting verification through reliable independent sources to ensure the transaction was risk free and was made out of taxable sources of the buyer which he duly declared in his return and wealth statement and termed it as preposterous.

Right from the definition of Beneficial Owner along with 'Explanation", which has been carved out completely out of context, is alien to the whole back ground or the foreground of the subject, which needs to be deleted altogether and reintroduced with reference to the context.

In addition, another definition given is, for defining the person of "Real Estate Agent" who now consists of not only the real agents but the registrars (for societies, authorities) and the board of revenues as well.

This implies that the same set of transaction will now not only be subject of record keeping at three different places but will be subject to verification by these three different and distinct authorities as well.

It is also, inter alia, included that Jewellers and Real Estate Agents, who are the Designated Persons (DP) have to undertake the following;

i. The DP is made responsible to identify transaction where he believes that the transaction is being executed as Benami transaction i.e. the beneficial owner of the transaction is different than the actual person making the transaction;

ii. The DP is required to conduct an independent verification of the customer making the transaction.

Moreover, as per the proposed Rule 33F, below mentioned transactions are to be considered as 'suspicious transactions' by the DP:

Transaction which involves fund derived otherwise than from business activity;

ii. Transactions which involve financing made through terrorism activity;

iii. Transaction where bank accounts are changed frequently;

iv. Transaction where the customer uses a bank account other than the bank account maintained in the name of the beneficial owner.

Furthermore, KTBA said that the responsibilities being assigned were investigative in nature, which a businessman ought not to have been delegated in the first place as it would tantamount to stepping into officer shoes and termed the reporting responsibility of a suspicious transaction to the Board and linking it with verification of the background of the individual conducting the transaction as well as to authenticate his mode of financing are the set of responsibilities as sensitive in nature and far from the ground realities of these businesses.

Therefore, the KTBA has urged the FBR to redraft the whole of the notification in the light of the said observation in order to achieve the core objective of documentation of the transactions.