An old lady, who is a compliant taxpayer before Tax Ombudsman, was burdened with multiple audit notices for the tax year 2016. The complainant applied for an extension which was rejected and an ex-parte order was passed asking for Rs.2.7 million.
An ex-parte order was passed by the Federal Tax Office (FTO) without examining all the relevant details of a taxpayer’s purchases and expenses. The Chief Commissioner of Inland Revenue (IR) contended that the case of the complainant was selected under Section 214C of the Income Tax Ordinance, 2001.
A complaint was filed against the unfair treatment meted out to the complainant by passing harsh ex-parte order. The case was selected for audit in 2018 and the order was passed on 28th June 2022, i.e. about the same time when the case was getting time barred.
It was a very unfortunate practice to sleep over the audit cases till the last minute and summarily dispose them of when they are getting time-barred. This result not only in prolonged agony for taxpayers but also did not result in any meaningful audit, writes Finance Minister Arun Jaitley.
Court Order in the Said Matter
The Lahore High Court has already directed in another case to finalize the audit cases before 30th June of the year of selection which was later relaxed to 31st December. Subsequently, the Supreme Court of Pakistan said that a general timeframe is necessary to ensure that the tool of audit is not abused or misused.
The Audit Officer may seek an extension of time from the FBR for completion of the audit after recording reasons in writing for his inability to complete the audit within the stipulated time. The order further stated, “If delays are inevitable, beyond the control of the department and do not occur on account of any act or omission on the part of the taxation officers”.
The passing of harsh, arbitrary ex-parte order without considering the details provided by the aged compliant taxpayer is tantamount to maladministration, it added. The Tax ombudsman recommended the FBR to direct the Commissioner-IR Audit-II to revisit the order under Section 122A of the Income Tax Ordinance 2001.