FBR may extend returns filing date due to portal issues

The Federal Board of Revenue (FBR) is likely to extend the last date to file the income tax returns, as taxpayers have failed to fulfil the national duty due to a large number of technical errors on the digital form.

The last date to file income tax returns for the tax year 2022 is September 30. Although, the FBR had already announced that it would not extend the date beyond the deadline. However, a recent communication sent to the FBR chairman by the Pakistan Tax Bar Association (PTBA) pointed towards the errors, which hampered the returns filing.

The apex tax bar appreciated the revenue body initiative to enable the return form on July 1, 2022 to file the income tax returns online by individuals, Association of Persons (AOPs) and the companies enjoying special year.

The PTBA said that before discussing the matter regarding filing of income tax returns for the tax year 2022, the PTBA endorsed the stand/opinion/observations about the system errors/glitches highlighted by the regional affiliated bars, including the Karachi Tax Bar Association.

It is regretted to say that to-date the present IT team has failed to provide an efficient, user-friendly, hassle- and error-free and smooth IT system in professional manners, it added.

Under the scheme of the Income Tax Ordinance, 2001, there are certain obligations on the part of the taxpayers to file the tax returns but, at the same time, there are also some obligations to be fulfilled by the tax machinery to facilitate the taxpayers by providing flawless returns form and hassle-free filing.

The PTBA highlighted the issues in the online return form on the IRIS, the return filing portal of the FBR.

As per the law, a taxpayer is entitled to claim adjustment of his previous refunds against the tax liability for the current tax year but the relevant column for adjustment of refund has illegally been blocked, which is against the fundamental rights and present scheme of law under the Income Tax Ordinance, 2001.

Similarly, the draft of the manual returns of income for the individuals and AOPs for the tax year 2022 was issued as late as on August 26, 2022, whereas the final SRO 1733(I)/2022 has been issued on September 13, 2022; thereby, only 17 days’ time has been allowed to file the manual returns, which is insufficient as provided under the law supra.

The income tax return form introduced for the Small and Medium Enterprises (SMEs) sector has been issued on the IRIS system without sharing a draft of the same as required under sub-section (2) of Section 100E read with Section 237 of the ordinance. However, it has also been noted that the simplified return for the SMEs has been uploaded without issuing the draft return, which may lead to illegality.

It is; therefore, suggested that the draft; followed by a final return should be issued to meet the requirement of law; enabling the taxpayers to avail the benefits for the SME sector provided under Section 2(59A) of the ordinance.

The PTBA said the IRIS portal is calculating incorrect normal, as well as initial depreciation allowance on the purchase of plant and machinery against the provisions of Section 23 read with the Part-II, of the Third Schedule of the Income Tax Ordinance, 2001.

Further, the IRIS portal is calculating incorrect and excess tax liability on gains on the sale of immovable properties in violation of the Section 37(1A) of the Income Tax Ordinance, 2001.

The rate of tax collection under Section 153(1)(c) for individuals and AOP contractors is 7 per cent, which is a minimum tax. In the relevant part of the return for working of attributable income, there is neither any row having rate at 7 per cent of tax nor the system is allowing credit to the deduction.

At present, the IRIS portal is calculating and charging the excess and incorrect tax liability on the income covered under Section 153 of the ordinance, on the basis of fixed and predefined wrong formulas due to which the taxpayers are bound to pay high tax instead of their actual tax liability, which is against the spirit of self-declaration and the existing scheme of law. De-freezing of attribution tabs and enabling the taxpayers to enter correct figures and data to file their return in time may resolve the issue.

Besides, the IRIS portal is also calculating incorrect tax at profit and yield on Bahbood Certificates, Pensioner’s Benefit Account and Shuhada Family Welfare Account, whereas Clause (c) of sub-section (1) of Section 39 provides that the tax would not exceed 10 per cent of such profit or yield read with Clause (6) of Part-III, Second Schedule of the Income Tax Ordinance, 2001.

The portal is treating normal income for the tax year 2022 instead of the final income at interest and profit on debts on the government securities as per Clause (20) of Part-III of the Second Schedule of the Income Tax Ordinance, 2001, wherever, the said clause was omitted vide the Finance Act, 2022 and is applicable for the tax year 2023, which can’t be applied retrospectively.

The taxpayers, in general, and the legal fraternity, in particular, are facing acute hurdles in the preparation of the tax payment challans because the response of the system is slow. Most of the time, it requires many attempts for the preparation of the tax challan due to the website issue and the preparation of the tax challan in single attempt is difficult and it is a common issue faced by almost every taxpayer, while preparing the tax challan; hence, the website or the system issue should be resolved immediately and sufficient time is also required for timely filing of returns.

That, in cases where revised wealth statement under Section 116(3) of the Income Tax Ordinance, 2001 for the tax year 2021, resulting into change in the closing balance of net wealth for the tax year 2021 has been filed, the system does not carry forward the opening balance of the net wealth for the tax year 2022, showing the opening balance of original wealth statement of the last year’s closing balance. The PTBA urged the FBR to allow the taxpayers’ statutory time limit of 90 days from the day when the return form is available error-free.