Sources told Business Recorder here on Saturday that the report of the Directorate General of Internal Audit for 2008-09 issued in January 2010, analysing the record of certain companies, detected gaps in their tax record pertaining to the past years.
The report referred to a few top cases of inspection where sizeable amount of lost revenue has been retrieved on the basis of detection pinpointed in the inspection reports. In the jurisdiction of Southern Region, Karachi, the inspection authorities, after examining the record of a bank for 2004 tax year, retrieved RS 1,435.978 million.
This involves provision of non-performing loan worth Rs 1.277 million; provision of diminution in value of investment of Rs 634.003 million; provision of balance-sheet obligation of Rs 238.712 million; bad debt of Rs 38.140 million written off directly; other provisions of Rs 8.699 million; donation of Rs 63.661 million; provision of Rs 87.998 million against other assets; trading liabilities of Rs 1,479.852 million; inadmissible penalties; credit of Rs 11.964 million; advertisement/sales promotion expenses; short deduction of Rs 4.352 million; proration of expenses between PTR, non-PTR and exempt income and issues also involved lease rental of Rs 39.963 million.
In reply, the Additional Commissioner, TO-C, LTU, Karachi, admitted the findings of Additional Director and revised the assessment order under Section 122 (5A) of the Income Tax Ordinance, 2001. During examination of record of a KSE member for 2005 Tax Year, the directorate has unearthed discrepancies to the tune of Rs 173.882 million.
The directorates found illegal issuance of refund on the basis of tax deduction under Section 233 A (c) of the Income Tax Ordinance, 2001; non-taxation of interest income under Section 18 (2) of the Income Tax Ordinance and failure in prorating expenses under Section 67 of the income Tax Ordinance.
Taking into account the findings of the directorate, the Taxation Officer, Unit-I, Audit Division-I, Regional Tax Office (RTO), Karachi, accepted the findings of the Additional Director and revised the assessment order u/s 122 (1) (5) of the Income Tax Ordinance. The loss of revenue includes Rs 1,966,000 on account of illegal refund.
In case of a courier company, the directorate detected wrong adjustment of tax deduction u/s 148 of the Ordinance, 2001 against normal tax liability and violation of the provision of section 24 of the Income Tax Ordinance. The total detected amount involved Rs 18.414 million.
Responding to the observations of the directorate, the Additional Commissioner, Large Taxpayer Unit (LTU), Karachi, admitted only first issue concerning wrong adjustment of tax deduction u/s 148 and amended assessment orders for all the years u/s 122 (5A) of the Income Tax Ordinance, 2001, whereas the second issue, being controversial, was not attended to by the field formation. As a result, it stands unresolved.
The record (2004-05 tax year) of a commercial importer and trader of agri products showed wrong adjustment of tax deduction u/s 148 of the Income Tax Ordinance, 2001 against normal tax liability. In reply, the Additional Commissioner, LTU, Karachi, accepted the findings of the Additional Director and modified the assessment orders u/s 122 (5A) of the Income Tax Ordinance, 2001.
In case of a manufacturer of glass bottles, the directorate unearthed incorrect payment of tax u/s 113; acceptance of Presumptive Tax Regime (PTR) expenses against normal income; incorrect depreciation of Rs 38,667,210; profit on sale of machinery; shifting of plastic plant; provision for staff retirement and transactions with the associates.
In reply, the Additional Commissioner of Income Tax, RTO, Quetta, has partially admitted the findings of the Additional Director, and revised the assessment orders u/s 122(5A) of the Income Tax Ordinance, 2001. Within the jurisdiction of Central Region, Lahore, the directorate retrieved revenue loss of Rs 741.139 million due to short levy of tax by a bank pertaining to 2004 tax year.
A company involved in the marketing and after sales support of road transport vehicles etc, was involved in wrong carry forward of loss; wrong claim of expenses on pro-rata basis; tax not deducted on commission income and commission income not offered for tax u/s 233 of Ordinance 2001. The tax record examined for 2004, 2005 and 2006 tax years detected revenue loss of Rs 266,466 million.
In case of a company engaged in feed products, analysis of tax record for Tax Year 2004, 2005 and 2006 detected revenue loss of Rs 140.882 million. The unit was involved in wrong claim of depreciation; non-deduction of WHT and commission income not offered for tax u/s 233 of the Ordinance 2001.
A company engaged in food products was involved non-payment of tax u/s 137, non deduction of WHT, wrong claim of depreciation, commission income not offered for taxation u/s 233 and over-casting of liabilities. The total amount of revenue loss stood at 78.355 million.
An exchange company within the jurisdiction of Central Regional, Multan, was involved in non-deduction of WHT, wrong claim of depreciation, commission income not offered for taxation u/s 233 and non-amortisation of expenses u/s 24 of the Ordinance 2001. The revenue loss detected stood at Rs 89.329 million.
Within the jurisdiction of Northern Region, Islamabad, an electric power supply company was involved in non-payment of minimum tax under Section 113 of the Income Tax Ordinance 2001. The directorate has retrieved revenue loss of Rs 72.224 million during examination of tax record for the 2007 Tax Year.
The examination of tax record of National Highway Authority for 1999-2000 to 2001-02 found non-deduction of withholding tax. The loss of revenue retrieved stood at Rs 434.305 million. A company involved in oil exploration activities was involved in non-payment of advance tax within the jurisdiction of Northern Region, Islamabad. The directorate has retrieved revenue loss of Rs 12.123 million for the tax period of 2003.