Self-assessment tax files to come under NBR scrutiny

All income tax files under universal self-assessment will come under scrutiny from the current fiscal year (FY) after the tax authority incorporated a new provision in the Income Tax Ordinance of the budget.   
The provision titled 'Scrutiny assessment' will empower taxmen to examine arithmetical errors in the tax returns of individual and corporate taxpayers from FY 2015-16.
The provision will give a legal basis to the taxmen to examine the tax files for only arithmetical mistakes. It is not auditing of universal self-assessment tax files that taxmen do by suspecting tax evasion, tax officials said.
Field offices need permission to audit universal tax files from the National Board of Revenue (NBR) high-ups but no permission will be required for scrutiny assessment as it will be a sort of 'desk audit', they said.  
The objective of the universal self-assessment system, introduced in 2007-08, is to accept tax returns without raising questions to encourage voluntary submission of tax returns.
Until 2014-15 fiscal, the taxmen used to audit only less than 2.0 per cent of the tax files under the system.
Tax officials said many of the tax files have arithmetical mistakes on calculation of tax amount on the declared income of the taxpayers.  
"There was no legal basis for the Deputy Commissioners of Taxes (DCTs) to go through all the tax returns under the self-assessment system. The system has the provision to accept tax returns as complete and correct under certain conditions," said a senior tax official.
Many tax gaps were found in the tax files only because of errors in tax calculations that need to be rectified under a legal framework, he said.
"Usually, many of the taxpayers submit tax returns at the last minute when the DCTs cannot see the tax calculation in a short time. But, taxpayers obtain an acknowledgment receipt from the taxmen," the tax official said.
The new provision has been incorporated to plug holes of revenue leakage that taxpayers in many cases do 'unintentionally', he said.
In several field-visits in the just-concluded FY, high-ups of the income tax wing have also found massive abuse of the universal self-assessment by some large taxpayers.
"Taking the advantage of the relaxed tax file scrutiny system, some taxpayers have claimed large refund higher than that of the payable income tax for the year," he added.    
Humayun Kabir FCA, income tax subcommittee convener of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) hailed the new provision but stressed the need for clarifying the measure with a circular.
"It is a good provision for both income taxpayers and taxmen. After scrutiny assessment of tax files, taxpayers would have a ground to talk to taxmen on the issue in case of auditing of tax-files, he added.
Details of the provision need to be explained to check possible scope of misusing the power, he added.
Some 98 per cent of the tax returns are currently submitted under universal self-assessment system. There is an audit guideline for the taxmen to select those tax files for audit.   
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