The Income Tax (Second Amendment) Ordinance, 2021 promulgated in March 2021 was proposed to be made part of the Bill for approval by the Parliament as required by the Constitution. The Finance Act 2021 adopts the following amendments promulgated through the Income Tax (Second Amendment) Ordinance, 2021 in the Table under section 182(1):
|1||Late filing of the income tax return under section 114.||New provisos have been introduced through which; If taxable income is up to eight hundred thousand, then a minimum penalty of Rs. 5,000 shall apply. Penalty shall be reduced by 75%, 50% or 25% if the return is filed within one month, two months or three months respectively after the expiry of due date or such extended date as allowed by FBR.|
|1A||Failure to file statements under sections 165, 165A or 165B.||New proviso has been inserted through which a minimum penalty of Rs. 10,000 has been prescribed where no tax was required to be collected or deducted.|
|6||Erroneous calculation of tax in the return for more than one year resulting in short payment than actual tax due.||A new exception has been introduced where the prescribed penalty shall not apply in case the taxpayer has a reasonably arguable position related to applicability of the Ordinance to its case.|
|10||Filing of false or misleading statement or information or omission of information thereto.||Earlier the penalty was higher of Rs. 25,000 or 100% of the amount of tax shortfall. The same has now been reduced to 50% of the tax shortfall or Rs. 25,000/- whichever is lower. The applicability of the penalty has also been restricted to sections 114A and 118 apart from sections 114, 116, 174, 176, 177 already mentioned therein.|
|11||Person who denies access to the Commissioner or authorized officer to premises, place, accounts, documents, stocks or computers.||The penalty has now been reduced to either Rs. 50,000 or 50% of the tax involved whichever is higher.|
|15||Any person who fails to collect or deduct tax as required under any provisions of this Ordinance or fails to pay the tax collected or deducted as required under section 160.||The existing sections references has been substituted with the expression “Division II or Division III of part V of Chapter X or Chapter XII”|
|16||Person who fails to display NTN at place of business.||The penalty of Rupees Five thousand has now been extended to failure of displaying “business license” as well.|
|19||Manufacturer of motor vehicles accepts or processes any application for booking or purchase of a locally manufactured vehicle in violation of section 227C.||The penalty of 5% of the value of motor vehicle has now been omitted.|
|20||Registering authority of Excise and Taxation or any authority responsible for accepting, registering or processing any application or transfer of immoveable property violates the provisions of section 227C.||The penalty of 5% of the value of motor vehicle or immovable property has now been omitted.|
Now the Finance Act 2021 provides following amendments in table under section 182(1):
|4A||Any person who is required to furnish or update a taxpayer’s profile but fails to furnish or update within the due date.||A penalty of Rs. 2,500 for each day of default from the due date subject to a minimum penalty of Rs.10,000 allowed by FBR has now been omitted.|
|4B||Any person who contravenes the provisions of section 181AA.||A penalty of Rs. 10,000 for each connection provided to an unregistered person has now been enhanced to Rs.100,000.|
|29||Where any person fails to declare business bank account(s), in his registration application or fails to amend his registration profile to declare existing business bank account(s).||Such person shall pay a penalty of Rs. 10,000 for each day of default since the date of submission of application for registration or date of opening of undeclared business bank account whichever is later subject to minimum penalty of Rs.100,000 per undeclared bank account. This provision is effective from 1st October 2021.|
Levying penalty even without willful default
The appellate authorities in number of cases have held that no penalty can be imposed without establishing mens rea (willful default) by taxpayer. The Act intends to dilute the effect of these appellate decisions by insertion of an explanation that penalty can be levied without establishing mens rea.
Consequences of non-filing the return within due date:
The Finance Acts 2018 and 2019 inserted section 182A whereby it was provided that the non-filing of return of income within the due or extended date were subject to following consequences in addition to penal provisions:
1)- The name of the person was not to be included in the Active Taxpayers List (ATL) for that year; and
2)- Such person was not to be allowed to carry forward any loss for the tax year;
3)- issued refund during the period the person is not included in the active taxpayers’ list; and
4)- entitled to additional payment for delayed refund and the period the person is not included in the ATL, shall not be counted for computation of additional payment for delayed refund.
However, it was provided that such person shall be included in the ATL upon filing of tax return beyond the due or extended date subject to payment of surcharge.
The Finance Act, 2020 inserted a proviso to exclude taxpayer from ATL who fails to furnish or updates his profile within the time prescribed in this regard.
The Finance Act, 2020 also enacted that such person shall be included in ATL upon filing the profile subject to payment of surcharge.
Now the Act omits the payment of surcharge in respect of the taxpayer who fails to furnish or updates his profile.
Offences and prosecutions for non-declaration of business bank account(s):
Any person, who fails to declare business bank account(s) in the registration form or updated registration form or return of income or wealth statement. shall commit an offence punishable on conviction with a fine or imprisonment not exceeding one year or both.
Offences | Penalties | Section 182 | Income Tax Returns | Profile of Taxpayers | Late filing of Income Tax Returns | Finance Act 2021 | Change in Offences and Penalties | FBR | Federal Board of Revenue |