How to reply FBR notice under section 177

How to reply FBR notice under section 177 of Income tax Ordinance, 2001

Tax departments have so far issued more than 278,000 audit notices to the taxpayers who failed to file their returns for the past three years, sources said on Friday.

The sources said the offices of Large Taxpayers Units (LTUs) and Regional Tax Offices (RTOs) in Karachi served the notices on November 16 -17.

The break-up of the notices showed that LTU and LTU-II Karachi having jurisdictions over big corporate entities and high net-worth individuals sent 2,008 and 650 notices, respectively. Similarly, Corporate RTO Karachi having jurisdiction over small companies issued 62,686 notices.

If anyone received the notice under section 177 of the Income Tax Ordinance, 2001 the following reply should be given to Federal Board of Revenue: –

With reference to above captioned subject matter, it is submitted that your taxpayer has only one source of income which is salary which is below taxable limit.

Your goodself will appreciate that the section 214D was omitted vide Finance Act, 2018 and new section 214E of Income Tax Ordinance, 2001 was introduced through Finance Supplementary (Amendment) Act, 2018, which reads as under.

“214E. Closure of audit.─ Notwithstanding the omission of section 214D, audit of income tax affairs of a taxpayer under sub-section (2) of section 214D shall be deemed to have been concluded, if─

(i) taxpayer has been selected for audit under sub-section (1) of the omitted section 214D;

(ii) notice under section 122 has not been issued;

(iii) the taxpayer has revised return voluntarily, by thirty first day of December, 2018, along with payment of 25% higher tax than the tax paid with return on the basis of taxable income and where no tax is payable 2% of the turnover and where no turnover is declared penalty under entry at Serial No. 1 of sub-section (1) of section 182 has been paid voluntarily:

Provided that the condition of revision, 25% higher tax or 2% of the turnover shall not apply, if the taxable income of the taxpayer includes only salary income or income subject to final taxation under sub-section (1) of section 169 or subject to taxation under section 5, 5AA, 6, 7, 7A or 7B.

Explanation.— For the removal of doubt it is clarified that only audit initiated as a result of automatic selection under the omitted section 214D shall stand abated under this section and audit initiated or to be initiated on the basis of definite information or otherwise as per provisions of section 177 or 214C shall be conducted independently.”

From the bare reading of the above section 214E, it is crystal clear that the case of your taxpayer u/s 177 of Income Tax Ordinance, 2001 stands closed through insertion of section 214E, therefore, your notice is not maintainable on this score.

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