Comments on Section 118(3) of the Income Tax Ordinance 2001

COMMENTS ON SECTION 118(3) OF THE INCOME TAX ORDINANCE, 2001 COMMENTS ON SECTION 118(3) OF THE INCOME TAX ORDINANCE, 2001 By Tahir Mahmood Butt, Vice President, Pakistan Tax Bar Association, Lahore Vide Finance Act, 2010 an amendment was made in section 118 of the Income tax Ordinance, 2001 where by subsection (3) of section 118 was substituted to provide for change in date of submission of Return, Statements in various categories. Before substitution last date for submission of Returns, statement under section 115(4) and annual statement of tax deductionby employers was 30th of September for all taxpayers. After substitution for the following categories the last date has been changed from 30th of September to 31st of August:-- (1) Annual statement of deduction of income tax from salary by employers. (2) Return of income to be submitted by salaried individual through e-portal. (3) Statement under section 115(4) of the Income tax Ordinance, 2001 in the cases covered under fixed or final tax regime. In all other cases of Individuals and A.O.P's, the last date for submission of returns, statements etc. is 30th of September as in the past. In this regard following submissions are tendered for your kind and judicious consideration of the concerned quarter. At the very out set it is respectfully submitted that the change in date of submission of return, statements etc. appears to be made with the intent to facilitate the tax authorities and not to the taxpayers. Although FBR is trying hard to take the entire tax data on web-portal to facilitate the taxpayer and the departmental officials but in spite of all efforts the FBR has not yet been able to achieve its goal in this regard. It would be important to point out here that for tax year-2011 the last date for submissions of returns, statements etc. for taxpayers covered under above noted categories was 31st of August, 2011 and even up-to 18th of August, 2011 no return or statement was available on the web-portal and as such how the taxpayer would had been able to comply in accordance with Law in such small time left. Definitely as per last years the last date was extended by the FBR for the reason of inability and in efficiency of the concerned official of FBR. But the bases of extension was made like, request of the taxpayers, month of Ramzan etc. It is submitted that if a thing is not possible to accomplish in time then what is the fun to make such changes in law. The FBR has expended millions of rupees for the improvement of web-portal but it is hard fact that till to-date it has not been able to established an uninterrupted link of web-portal for the taxpayers. In rush days the assignment of five minutes takes hours and hours to transfer the data on the e-portal. The FBR has also totally ignored the fact that all the taxpayers of country particularly the one belonging to the rural areas do not have appropriate internet facility. The element of electricity load shading has also not been taken into consideration. In spite of all the above referred factors the FBR instead of providing easy modes for submission of returns and statements etc. to the taxpayer has forced them to sit in front of computers for hours and hours for transfer of data on web-portal of FBR. It would not be out of place to point out here that the amendment in subsection (3) of section 118 to the Income Tax Ordinance, 2001 has been drafted and got approved from the Parliament only with the intent to hide the inefficiency of the relevant FBR officials. The amendment is even otherwise not practically workable for the following reasons:-- (1) Annual income tax return of taxpayer requires to declare income earned by the taxpayer from all sources. Under the Income Tax Ordinance, 2001 some sources of income are covered under normal tax regime and some are covered under fixed and final tax regime. In cases where the taxpayer has more then one source of income covered under normal as well as fixed and final tax regime, it is difficult for him to determine that for a particular tax year his last date for submission of return would be 31st of August or 30th of September. (2) Article 25 of the Constitution of Islamic Republic of Pakistan clearly provide that all citizen are equal before law. Under the Income Tax Ordinance there has always been provided a period of three month to submit tax returns or statements by the taxpayers. Now for taxpayers covered under normal tax regime the period of three month is still available but for salaried individual or taxpayers having fixed or final tax sources of income, the period has been curtailed for two month. The action is not in accordance with Article 25. If the intent is taken as to facilitate the taxpayer then the last date in such cases should have been 31st of October and not 31st of August. (3) It is also an hard fact that the taxpayer covered under final or fixed tax regime dealing with government or semi government department have never been provided the relevant documents like certificates or challans of tax deductions made by such institutions at the earliest and as such without collection of the same how a taxpayer can be able to submit his return or statement. In the light of the above submissions it is proposed: (a) The last date of 31st of August in cases covered under above referred categories be fixed as 30th of September. (b) Return and statement forms for tax year-2012 be issued at the earliest. (c) The FBR should take serious steps to improve the working capability of web-portal at the earliest. (d) The last date for submission of returns or statements should be same for all taxpayers being individual and A.O.P. (e) If the FBR is facing problems to entertain all taxpayers on web-portal with same date then the time for submission of returns, statements by the taxpayer covered under above noted categories be fixed as 31st of October as against 31st of August. It is hoped that the FBR official would take a serious note of above submissions.