The Financial Express

Tax return scrutiny detects negligible faults

NBR sleuths examine all of 2016-17 tax returns to discover any doctoring of income-tax documents

| Updated: October 23, 2017 03:15:12

Evaly and Fianancial Express Evaly and Fianancial Express
Tax return scrutiny detects negligible faults

A much-vaunted review of all the income-tax returns submitted in last fiscal detected only less than one per cent mathematical errors, but scared many of the taxpayers.


Officials said taxmen rummaged through the tax returns of fiscal year 2016-17 under scrutiny-assessment provision of the income-tax ordinance. And they found 0.23 per cent or 2,983 tax returns until April 2017 with arithmetical and other types of errors out of total 12,71,595. 


Since FY 2011-12, the number of erroneous tax returns has been less than 1.0 per cent of the total tax returns submitted under self-assessment system.


However, the process of scrutiny of tax returns of 2016-17 may go on as the taxmen are allowed to conduct the review until June 30, 2018.


In FY 2015-16, the National Board of Revenue (NBR) introduced the provision of scrutiny assessment of all tax files to find out any doctoring of the tax files.


However, experts and former tax members found the provision creating panic among the taxpayers as they know their universal self-assessment of tax will be reviewed by the taxmen.


Aminur Rahman, former income-tax-policy member of the NBR, said many of the marginal taxpayers may not feel comfortable after knowing that their universal self-assessment tax returns would go through a recheck.


"There must be some relief or space for marginal taxpayers to encourage them to pay tax without fear," he added.


The arithmetical errors include errors in addition of sectoral disclosed income, taxpayers' position, category, gender, age, residence status, minimum tax, investment rebate, house-property income and its expenditure, calculation in tax rebate, tax-rebate claim in gift and investment, surcharge for individual taxpayers etc.


A senior tax official, however, said taxmen accept returns without question if taxpayers comply with some conditions and file tax returns under universal self-assessment.


"There are allegations of misuse of the universal self-assessment scheme to evade tax and claim extra refund taking advantage of the provision," he said.


Some tax officials said many other taxpayers make mathematical errors, either intentionally or mistakenly, in calculating the income tax.


The provision of scrutiny assessment would help in minimizing the arithmetical errors, he added.


In recently compiled statistics of the NBR, the number of erroneous tax returns was found coming down significantly in a year as people became more conscious over their tax returns and simplification of the return-filing process.


In FY 2015-16, the taxmen found 6,606 tax returns with arithmetical and other types of fault out of 9,64,778 tax returns.


Although the taxmen used to conduct 'return process' earlier, there was no provision in the income-tax law for 100 per cent review of the tax files.


In the guidelines for scrutiny assessment, the NBR instructed field-level taxmen across the country to check only arithmetical errors in the tax returns filed under universal self-assessment system and not to call taxpayers for personal hearing under the return process.


Earlier, the taxmen only used to audit universal self-assessment tax returns on sampling basis. Only 1.0 to 2.0 per cent of the tax returns would go through assessment process or auditing in the previous years.


Income-tax officials said return process is different from auditing. It is just for checking arithmetical mistakes.


There is no link of field audit activities with the return-process activity. The procedure of field audit should be followed if there is any element for field audit in a return.


The NBR gave a specific time to the DCT for completing scrutiny assessment of all tax files under their respective tax zones. If any DCT failed to process the tax returns in the stipulated time, he or she will be held responsible for any revenue loss on this account.


The last time for tax return (for tax year 2015-16) processing was June 30, 2017.


The DCTs will inform the taxpayers on arithmetical errors and ask them to reply within a specific timeframe, the guidelines said.


Taxpayers will be asked to pay due tax within 30 days of expiry of the given timeframe for reply, it said.


However, if a taxpayer's reply is acceptable, then the return-scrutiny process will be done away with.


According to the guidelines, the taxpayers must be allowed sufficient opportunities to furnish valid documents to defend their position regarding arithmetical errors detected by the DCTs.


The guidelines also gave some directions to the DCTs to recover the revenue that was lost due to arithmetical mistakes in tax returns.


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