Unexplained Income or Assets under the Income Tax Ordinance, 2001
This blog is written by Mr. Sachal Aftab, Senior Associate Taxation and Corporate Services. Please read this well written blog and provide your valued comments.
Unexplained Income or Assets under the Income Tax Ordinance, 2001.
If you are filing your income tax return with the innocent intention to become a filer in order to make a dream come true by owning a family car or buying a house for your lady, then your very purpose of filing the Tax Return is false. And in doing so, trying to understate your assets, income or jacking up your liabilities to make you look poor in the eyes of tax man, is quite an absurd idea. Sine qua non, to declare them prudently at appropriate values is to declare your assets and liabilities at fair values. File your tax returns with the mindset to tie a guardian knot to your financial affairs at the end of the tax year, so that you are kept away from the heat of the tax department.
The law, Income Tax Ordinance, 2001 (ITO, 2001), is very straight forward in this respect and must be complied with in every way possible. Section 111 of the Ordinance deals with the subject issue faced by more than half the population breathing on our motherland. The aforementioned section clearly states that any amount credited in a person’s books of accounts, any investments made or any expenditure incurred by the person during the year, which cannot be satisfactorily explained or justified, shall be included in the person’s income of the tax year. It shall added in its income chargeable to tax under the head Income from other sources and shall absolutely attract the most dearly tax rate of the tax department.
The law also states that Quote “Where the declared cost of any investment or valuable article or the declared amount of expenditure of a person is less than reasonable cost of the investment or the valuable article, or the reasonable amount of the expenditure, the Commissioner may, having regard to all the circumstances, include the difference in the person’s income chargeable to tax under the head “Income from Other Sources” in the tax year 3[to which the investment, valuable article or the expenditure relates.” Unquote (Sub Section 3 of Section 111 of the ITO, 2001)
The understatement of assets or overstatement of liabilities shall also attract section 68 of the Income Tax Ordinance, 2001, whereby the S 68 provides for the Fair Market Valuation of any article, Income, Benefit, Asset or Liabilities to be determined for taxing them, at an appropriate value. And shall be included in the Taxable Income of the person for taxing the same.
The concealment of assets may also attract section 123 of the ITO, 2001, which shall have the same adverse effect on the declarant as sections 121 & 122 of the ITO, 2001. The implication will be the amendment of assessments, increasing the Taxable Income thereby taxed at higher rates, of the tax years subjective to these sections.
So in order to be in safe hands it is in the best interest of every taxpayer to have a qualified tax consultants on his side, who are familiar with the sensitivity of the procedures involved and shall always guide the tax payer to secure your business dealings appropriately, while also advising to comply the Tax Laws in the most adequate manner. Just as the saying goes salus populi suprema lex esto, meaning “The good of the people shall be the supreme law.”