‘Scrutiny assessment’ of tax returns to begin soon

The National Board of Revenue (NBR) has issued a guideline asking its income tax offices across the country to start ‘scrutiny assessment’ of the tax returns submitted for the tax year 2015-16.

As per the guideline, the taxmen have to complete the scrutiny assessment known as ‘return process’ by December 2016.

The tax authority instructed the taxmen to check only arithmetical errors in the tax returns filed under universal self-assessment system and not to call taxpayers for personal hearing under the return process procedure.

In the current fiscal year, the Finance Bill 2015 incorporated a new provision in the income tax ordinance under which the taxmen will have to check all of the income tax returns for finding out arithmetical errors.

Earlier, the taxmen only audited universal self- assessment tax returns on sampling basis. Only 1.0 to 2.0 per cent of the tax returns went through assessment process or auditing in the previous years.

Income tax officials said return process is different from auditing. It is just for checking arithmetical mistakes, they said.

There is no link of field audit activities with the return process activity. The procedure of field audit should be followed if there is any element for field audit in the return.

As per the guideline, all the income taxpayers who submitted tax returns under universal self- assessment procedure will have to go through the return process by the Deputy Commissioner of Taxes (DCTs).

“The last time for tax return (for tax year 2015-16) processing is June 30, 2017. If any DCTs failed to process the tax return by the stipulated time, he or she will be held responsible for any revenue loss for this reason,” the guideline said.

The DCTs will inform the taxpayers on arithmetical errors and ask them to reply within a specific time-frame, it added.

Taxpayers will be asked to pay due tax within 30 days of expiry of the given time-frame for reply, it said.

However, if taxpayers’ reply is acceptable, then the return process will be cancelled.

The taxpayers must be allowed sufficient opportunities to furnish valid documents to defend their position regarding arithmetical errors detected by the DCTs.

The guideline also gave some directions to the DCTs to recover the revenue that was lost due to arithmetical mistakes in tax returns.

The arithmetical errors include errors in addition of sectoral disclosed income, taxpayers’ position, category, gender, age, residence status, minimum tax, investment rebate, house property income and its expenditure, calculation in tax rebate, tax rebate claim in gift and investment, surcharge for individual taxpayers etc.

Under the universal self assessment provision, taxmen accept tax returns without any question if taxpayers comply with some conditions.

It has been alleged that many taxpayers misused the universal self-assessment scheme to evade tax and claim extra refund taking advantage of the provision.

Some tax officials said many other taxpayers make arithmetic errors, either intentionally or mistakenly, in calculating the income tax under the system.

Currently, more than 96 per cent of taxpayers submit income tax returns under the universal self- assessment system and the remaining taxpayers submit returns following general methods.