Tax disputes between the taxpayers and the Federal Board of Revenue (FBR) to the tune of billions would now be resolved through the forums of assessment oversight committees for agreed assessment of taxes between the registered persons and the tax department.
On Friday, the FBR has issued SRO.1184(I)/2020 to empower the FBR to constitute assessment oversight committees for resolution of disputes between the taxpayers and the tax officials on the issue of amendment of assessments.
After issuance of the SRO.1184(I)/2020, the taxpayers who do not agree with the assessment notices of the Commissioners of Inland Revenue, can take up their cases with the assessment oversight committees for settlement of tax disputes within a period of 30 days under the procedure of agreed assessment.
Prior to the Finance Act, 2020 there was no mechanism under the Income Tax Ordinance for negotiated settlement of tax disputes before finalization of an assessment/amended assessment. In order to facilitate taxpayers, reduce burden on formal appeal system and effecting speedy recoveries, a new section 122D enabling agreed assessment has been inserted through the Finance Act, 2020.
If a taxpayer intends to settle his case on or after receipt of a notice for amendment of assessment under section 122(9) of the Ordinance, he shall have the option of filing an offer of settlement in the prescribed form before the Assessment Oversight Committee for resolution of his dispute.
In addition, the taxpayer shall also be obliged to file reply in response to notice for amendment of assessment under section 122(9) of the Ordinance before the concerned Commissioner, FBR said.
The Assessment Oversight Committee shall comprise of the Chief Commissioner Inland Revenue, the Commissioner Inland Revenue and the Additional Commissioner Inland Revenue having jurisdiction over the taxpayer.
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The Committee shall examine the offer of settlement and may also call for the record of the case. Moreover, the Committee shall have the mandate to accept or modify the offer of settlement of the taxpayer through consensus after affording the taxpayer an opportunity of being heard.
In case, the Committee’s decision is acceptable to the taxpayer, the taxpayer shall be obliged to deposit the amount of tax payable, including penalty and default surcharge, in accordance with the decision of the committee pursuant to which the Commissioner shall amend the assessment in accordance with the decision of the committee.
Moreover, in such instances, the taxpayer shall forego his right to file appeal against such amended assessment.
In case, the Committee is unable to arrive at a consensus in respect of the offer of settlement or the taxpayer is not satisfied with the decision of the Committee, the concerned commissioner shall decide the case on the basis of reply filed by the taxpayer in response to notice of amendment issued under section 122(9) of the Ordinance.
Cases involving concealment of income or interpretation of question(s) of law having effect on other cases have been ousted from the purview of the agreed assessments under section 1220 of the Ordinance.
According to the FBR, in terms of section 120 of the Ordinance, a return filed by a taxpayer is deemed to be an assessment order on the day such return is filed, and the Commissioner is taken to have made the assessment of taxable income and tax chargeable equal to the amounts declared by the taxpayer.
Through the Finance Act, 2020 a new sub-section (2A) has been inserted in section 120 wherein the return filed by a taxpayer shall be processed through the automated system to arrive at correct amounts of taxable income and tax payable by making certain adjustments whose details have been given in Section 120(2A) of the Ordinance.
These adjustments will be made after providing opportunity of being heard through a system generated notice and after taking into account the reply received from the taxpayer. However, in case no reply is furnished, adjustments can be made within thirty days of the issuance of the notice.
According to the notification, a settlement application shall be made electronically by the applicant in person or by his authorized representative, under section 1220 for agreed assessment to the Committee on IRS Web Portal.
A settlement application shall be preferred to the Committee after the date of service of the notice issued under Sub-section (9) of section 122 of the Income Tax Ordinance and before finalization of assessment.
The Commissioner shall not conclude assessment proceedings under section 122 if an application, made against the notice issued under subsection (9) of section 122, lies pending before the Committee.
The Committee, after examination of the contents of an application submitted by an applicant and facts stated therein and on scrutiny of requisitioned record, if any, shall afford opportunity of being heard to the applicant in writing.
The Committee shall finalize the applications filed under section 1220 of the Ordinance within 30 days of receipt of application or within an extended period of 60 days, for reasons to be recorded in writing by the Committee, notification issued by the FBR added.
