Incorrect adjustment of brought forward losses by the Federal Board of Revenue (FBR) cost the national exchequer Rs. 23.18 billion in the financial year 2020-21 (FY21).
According to the audit report by the Accountant General of Pakistan (AGP) for FY21, eleven taxpayers assessed in three field offices of the FBR filed their income tax returns by claiming adjustment of carried forward losses against the income under the heading “Other Income” instead of “Income from Business.”
Section 57 of the Income Tax Ordinance 2001 provides that if a taxpayer sustained a loss under “Income from Business” for a tax year, the loss would be carried forward to six following tax years and would be adjusted only against income earned under “Income from Business” of such a business. However, in the case in question, the brought forward loss adjustment was claimed under “Other Business.”
The report states these lapses were reported to the department from March to November 2021, but the department did not take any action to amend the assessment to recover the due tax, which resulted in an exorbitant loss of revenue amounting to Rs. 23,189.90 million.
The FBR has initiated legal proceedings but has not yet finalized them, the report stated, adding that the AGP sought a report from the FBR by January 15, 2022, but till the completion of the audit report, the FBR failed to submit it.