From today we are pleased to start the 2nd Phase of Blog Writing. Following is the First Blog of this phase. Author of this blog is Mr. Sharif Uddin Khilji, FCA, Chief Executive, Khilji & Co, Chartered Accountants.
Please read this blog and understand a complicated task explained in a easy and simple manner.
How to tackle a show cause notice from FBR?
The purpose of this article is to provide guidance to those who are in the initial stages of making a career in tax advisory in Pakistan.
Usually during the assessment proceedings, a tax officer would initially issue notice to collect information and thereafter call you for understanding the data. Finally the officer will issue a show cause notice confronting the issues which may lead to an adverse assessment order.
Unfortunately sometimes all these steps are done by issuing back dated notices and one fine morning the taxpayer may receive an assessment order containing a huge demand or the taxpayer may suddenly receive a call from his banker that tax authorities have attached his bank accounts however the purpose of this article is not to address such unfortunate situations, these will be covered in some other article. Today we’ll focus on responding to notices issued after due process.
Any person looking forward to prepare a response should ensure the following at a minimum:
1. Note down the date of issue mentioned on show cause notice and actual date of receipt of show cause notice.
2. The evidence relating to actual date of receipt of show cause notice should be kept as it may be required to be produced in future appellate proceedings.
3. Check the due date of response and see if sufficient time is available to respond otherwise file an adjournment request. Never respond to any notice in haste without proper study of the facts of the case. If the officer does not allow sufficient time to response you can always take the plea of “inappropriate hearing opportunity” before appellate authorities.
4. Do ensure jurisdiction of the officer issuing the notice.
5. Cross check all the figures in the notice with the financial statements or tax return of the taxpayer to ensure that notice is based on correct figures. I came across number of notices which confront figures different from those reported in the financial statements or tax return. It provides you a good defense if the officer has not confronted correct figures and you have duly pointed those in your response.
6. If the taxpayer has history of tax cases in the past, one must ensure to check stance taken by taxpayer in the past on similar issues and decisions of authorities thereupon. Even otherwise, always check case laws to find out Court decisions on similar issues. These days a number of online case law search facilities are available which can be helpful in finding relevant case laws quickly.
7. Read every sentence of the notice carefully and try to analyze the requirement of tax officer. If the issue raised by the officer is studied carefully and responded smartly by providing the most relevant response & information only, a lot of time & effort can be saved and the taxpayer is highly likely to have the issue settled in its favor at the appellate stage.
8. When a large number of issues are confronted, do ensure that each issue is responded while client should be categorically requested to verify the facts mentioned in the response.
9. The documents enclosed with the response should be appropriately mentioned and cross referred in the response. A number of times, the assessment order may claim non-provision of records. If the records are duly mentioned and cross referred in the response, the taxpayer will have a good defense before appellate authorities.
10. After submission of response, follow up on regular basis and hold meetings with tax officer to ensure that the submissions are appropriately understood by him.
Responding to notices appropriately is an art learned with experience but ensuring the above steps will help you learn the art quicker and doing the basics right most of the time.
Sharif Uddin Khilji, FCA