Adjustments of Previous Years Tax refunds against Tax Liability

Adjustments of Previous Years Tax refunds against Tax Liability under the Income Tax Ordinance, 2001

Adjustments of Previous Years Tax refunds against Tax Liability: The issue of adjustment of previous years tax refunds has been discussed in detail and the following directions are being issued for guidance:

Where notices under section 221 have already been issued

Before concluding the proceedings under section 221 of the Ordinance, unit officers will verify year-wise refunds as claimed by the taxpayers after proper verification through ITMS/IRIS and passing order under 170 for adjustment of refundable/verifiable amount, if legal requirements are complete. They will also ensure that adjusted refunds have not been paid/issued earlier.

Order under section 221 will only be passed in respect of un-verified amount of adjusted refund subject to provision of evidence.

Cases where notices under section 221 have not been issued

Before issuance of notices under section 221, a desk audit with regard to admissibility of refund and their adjustability thereof may be conducted.

In cases where the taxpayer has claimed refund adjustment of more than one year, year-wise verification and completion of legal requirements shall be made separately by using IRIS and ITMS for adjustment of verified amount.

iii. The officer concerned shall issue notice to the taxpayers identifying the un-verified amounts and provide reasonable opportunity to explain his position in this regard alongwith documentary evidences. However, refund orders under section 170 of verified amounts for adjustment of tax liability have to be passed, if legal requirements are complete to dispose off pending refunds in respective years.

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