The Federal Board of Revenue on Thursday updated income tax law in line with Finance Act 2017, empowering commissioner Inland Revenue to finalise assessment of taxable income if a taxpayer fails to file returns.

Government, in budget 2017/18, deleted a section 122(c) from Income Tax Ordinance, 2001 related to provisional assessment as it was said to give discretionary powers to the tax officials. Under the removed section the commissioner was empowered to make a provisional assessment of the taxable income of an individual, which would be treated as final assessment order.

The new sub-section 1(ab) to Section 121, which replaced the expunged provision, also empowers commissioner to prepare best judgment assessment when a taxpayer or a representative of the taxpayer fails to submit the tax return.

Tax experts said the new clause introduced into the ordinance was not different from the deleted section as the new section would have the similar implications. They alleged that tax officials had been abusing the deleted section to harass the taxpayers during past few years

The tax law, stipulating filing of returns and wealth declaration, allows a commissioner to direct a person or a company to file income tax return of a particular year. The commissioner is also empowered to ask a representative of a taxpayer who has died, become bankrupt or left Pakistan permanently to furnish tax records and file returns.

In such cases if a taxpayer or representative of taxpayer fails to comply with a notice, the commissioner is empowered to issue self-calculated or best judgment assessment, asking the taxpayer to fulfill the liability.

The new section is applicable for tax year 2018 and if an individual fails to respond to the notice of the commissioner and file return then it would be treated as an offence punishable with fine or imprisonment for a term not exceeding one year. The fine and term of imprisonment may be doubled in case the taxpayer fails to provide plausible reason for his/her non-compliance. (August 4, 2017)