Thursday, December 22, 2011

Income Tax Authorities


1.         Central Board of Revenue
“Central Board of Revenue” means the Central Board of Revenue (CBR) established under the Central Board of Revenue Act 1924.
Who appoints the CBR?
CBR is a statutory body appointed by the Federal Government by the authority of the Central Board of Revenue Act, 1924.
Basic Function of the CBR:
Tax collection is the basic function of the CBR.
Status of the CBR:
CBR is the highest executive tax authority in Pakistan.
Head of the CBR:
Chairman of the CBR is the main authority in the CBR who is appointed by the Federal Government.
Members of the CBR:
CBR consist of four members who are as office joint _______ in the Government of Pakistan.
Powers & Functions of the Central Board of Revenue (CBR):
The CBR has following powers & performs the following functions in the presence of its powers:
1)         Certification of research institutions:                   [26(2)]
The CBR is authorized to certify an institution as conducting scientific research in Pakistan.
2)         Approval of employee training scheme:  [27(c)]
The CBR is empowered to approve a Pakistani employee training scheme against which a business is allowed a deduction.
3)         Approval of Leasing Companies & Modaraba:  [28(3)]
The CBR has authority to approve such leasing companies & Modaraba where lease rental payment made to such companies is allowed as deduction to person against income from business.
4)         Method of accounting:  [32(3)]
The CBR may prescribe that any class of persons shall account for income chargeable to tax under the head “Income from Business” on a cash or accrual basis.
5)         Approval of security:                 [46(d)]
The CBR is authorized to approve any security that the profit received by a non-resident person on such approved security shall be exempt from tax.
6)         Approval of charitable institutions:         [61]
The CBR is empowered to approve the charitable institutions for the purposes of the Income Tax Ordinance, 2001 specially, for donation purposes.
7)         Apportionment of Deductions:   [67(2)]
The CBR may make rules u/s 237 for the purposes of apportioning deductions where the expenditure relates to the derivation of more than one head of income.
8)         Decision of application u/s 74:
The CBR is authorized to decide an application submitted by a person against the decision of the CIT for granting or withdrawing the permission regarding use of a special or normal tax year.
9)         Power to collect information regarding exempted income:          [180]
The CBR may authorize any department or agency of the Government to collect and compile any data in respect of incomes from industrial and commercial undertakings exempt from tax under the Income Tax Ordinance, 2001.
10)       Authority of circulars:                [206]
The CBR may issue circulars to achieve consistency in the administration of Ordinance and to provide guidance to taxpayers and officers of the CBR.
11)       Empowerment of advance ruling:           [260A]
The CBR may issue to the non-resident taxpayer an advance ruling setting out the Commissioner’s position regarding the application of the Income Tax Ordinance, 20001 to a transaction proposed or entered into by the taxpayer.
12)       Empowerment of General Administration:
The CBR shall exercise the general administration of the Income Tax Ordinance, 2001.
13)       Appointment of income tax authorities:  [208]
The CBR may appoint as many Regional Commissioners of Income Tax, Commissioners of Income Tax, Commissioners of Income tax (Appeals), Taxation officers and such other executive or ministerial officers and staff as may be necessary.
14)       Criteria for audit selection:         [177(1)]
The CBR may lay down criteria for selection of any person for an audit of person’s income tax affairs, by the Commissioner.
15)       Appointment of the auditor:       [177(8)]
The CBR may appoint a firm of Chartered Accountants, to conduct an audit of the income tax affairs of any person.
16)       Determination of the scope of audit:       [179(8)]
The scope of any audit conducted by firm of Chartered Accountants shall be determined by the CBR on a case to case basis.
17)       determination of jurisdiction:                  [209(6)]
Where a question arises as to whether a Commissioner has jurisdiction over a person, the question shall be decided by the RCIT or RCITs concerned and, if they are not in agreement, it is determined by the CBR.
18)       Authority of Approval:  [212]
The CBR may, by a general or special order, authorize the RCIT or the CIT to grant approval on behalf of the CBR.
19)       Determination:  [217]
Forms, notices, returns, statements, tables and other documents required under this Ordinance may be in such form as determined by the CBR.
20)       Registration of Income tax practitioners:            [223(10)]
The CBR may make rules u/s 237 for the registration of income tax practitioners.
21)       Power to make rules:    [237(1)]
The CBR may, by notification in the official Gazette, make rules for carrying out the purposes of the Income Tax Ordinance, 2001.
22)       Delegation of powers:               [209(2)]
The CBR may assign to any Taxation Officer or any authority all or any of the powers its powers & functions for the purposes of administrative convenience.
23)       Unexplained income or assets:
The CBR may make rules u/s 237 for the procedure of taxation of any unexplained income or asset discovered by any income tax authority.
24)       Supervision of subordinate authorities:
The CBR supervises the functions, duties and jurisdiction of its authorities.

2.         Regional Commissioner of Income Tax (RCIT)
Definition:
“Regional Commissioner” means a person appointed to be a Regional Commissioner of Income Tax (RCIT) u/s 208 of the Income Tax Ordinance, 2001. It also includes a Director-General of Income Tax & Sales Tax.
Who appoints the RCIT?
RCIT is appointed by the CBR.
Basic function of the RCIT:
The RCIT has to supervise the functioning of his subordinate tax authorities. He shall make such arrangement to ensure that the provisions of the Income Tax Ordinance, 2001 and directions given by the CBR are being complied with.
Jurisdiction of the RCIT:
The jurisdiction of the RCIT is decided by the CBR.
Authorities subordinates to RCIT:
The following authorities are sub-ordinate to the CBR.
i) Commissioner of Income Tax (CIT)
ii) Additional Commissioner of Income Tax
iii) Deputy Commissioner of Income Tax
iv) Income Tax Officer
v) Special Officer
vi) Any other officer appointed by the CBR.
Powers & Functions of the RCIT:
The RCIT may exercise the following powers & functions:
1)         Transfer of jurisdiction:
The RCIT may transfer the jurisdiction in respect of cases or persons from one Commissioner subordinate to another.
2)         Decision of jurisdiction:
If any dispute arises regarding the jurisdiction of two Commissioners within same region, it is decided by the RCIT of that region.
3)         Revision of orders:
The RCIT may revise any order passed by any sub-ordinate authority of the RCIT.
4)         Appointment of sub-ordinate authorities:
The RCIT may appoint any of his subordinate authority with the approval of the CBR.
5)         Inspection of sub-ordinate offices:
The RCIT may inspect the subordinate offices.
6)         Delegation of power:
The RCIT with the approval of the CBR may delegate all or any of its powers and functions to any sub-ordinate income tax authority in respect of any person, classes of persons or areas.
7)         Supervision of Technical work:
This RCIT is responsible to supervise the technical work performed in the region.
8)         Power to write-off irrecoverable demands:
This RCIT has powers to write off irrecoverable demands in respect of the instructions issued by the CBR.
9)         Supervision of tax collection procedure:
The RCIT being an administrative authority is responsible to supervise the tax collection procedure under his region.
10)       Internal audit of tax department:
The RCIT may conduct internal audit of his subordinate offices.
11)       Regulation of inspection work:
The RCIT may supervise & regulate the inspection work of the Additional Commissioner.
12)       Examination of inspection notes:
The RCIT may examine the inspection notes received from the Additional Commissioners of Income Tax and take necessary follow up actions.
13)       Action against tax evasion:
The RCIT may take action in respect of the complaints of tax evasion under the region.
14)       Posting of subordinate authorities:
The RCIT may pos different subordinate authorities in different offices in the region.
15)       Any function assigned by the CBR:
The RCIT shall perform any function assigned to him by the CBR.

3.         Commissioner of Income Tax
“Commissioner” means a person appointed as a Commissioner of Income Tax (CIT) u/s 208, and includes a Taxation Officer vested with all or any of the powers, and functions of the Commissioner.
Who appoints the Commissioner?
Commissioner is appointed by the CBR u/s 208 of the Income Tax Ordinance 2001.
Basic function of the Commissioner:
Commissioner performs all such functions as are required by any provision of the Income Tax Ordinance and as directed by the CBR.
Powers of the Commissioner:
Briefly speaking the Income Tax Ordinance, 2001, revolves around the Commissioner because lot of powers has been granted under such Ordinance to the Commissioner.
Authority which supervises the CIT:
CBR and RCIT under whose jurisdiction, the Commissioner works, supervises the Commissioner of Income Tax.
Note:    Income Tax Ordinance, 2001 also permits the delegation of work. If some work of Commissioner is delegated to a Taxation Officer, such Taxation Officer may enjoy all powers of the Commissioner.
Powers & Functions of the Commissioner of Income Tax:
1)         Change in method of accounting [32(4)]
The Commissioner may allow a change in method of accounting, if the CIT is satisfied that the change is necessary to clearly effect the person’s income chargeable to tax under the head “Income from Business”.
2)         Change in stock valuation method [35(6)]
A stock valuation method, once chosen, may be changed only within the written permission of the Commissioner.
3)         Allowability of Special Tax Year [74(3)]
The Commissioner may allow a person to use special tax year, only if the person has shown a compelling need to use special tax year.
4)         Allowability of Normal Tax Year [74(4)]
The Commissioner may allow a person to use normal tax year instead of special tax year, only if the person has shown a compelling need to use normal tax year.
5)         Imposition of conditions regarding tax year [74(5)]
The Commissioner may imposer certain conditions while permitting a person to use a special tax year or normal tax year.
6)         Withdrawal of permission to use a specific tax year:
The Commissioner may withdraw the permission granted to a person in respect of using the specific tax year (special tax year or normal tax year), after providing the opportunity of being head.
7)         Transactions between associations [108(1)]
The Commissioner may, in respect of any transaction between associates, distribute apportionate or allocate income, deduction or tax credits.
8)         Unexplaiend income or assets [111]
The Commissioner may charge to tax the value of any unexplained income or asset and determine the value if it has been declared less than the fair market value (FMV).
9)         Issuance of notice for filing of return [114(3) & (4)]
The Commissioner may issue a notice to a person or a person’s representative for filing a return for a period of less than 12 months or to a person who is required to file a return but has failed to do so.
10)       Issuance of notice to furnish Wealth Statement [116(1)]
The Commissioner may be notice, require any person to furnish a wealth statement in the prescribed form and verified in the prescribed manner.
11)       Return of discontinued business [117(3)]
The Commissioner may serve a notice on the person who has discontinued the business or is likely to discontinue the business to furnish the return of income within the specified time & specified period in the notice.
12)       Extension of time [119]
The Commissioner may grant the applicant an extension of time for furnishing the return certificate, or statement etc.
13)       Best judgment assessment [121]
If the tax payer has not furnished required return or any other document, the Commissioner may, based on any available information or material and to the best of his judgment, make an assessment of the taxable income of the person and the tax due thereon.
14)       Amended assessment order [122]
The Commissioner may amend an original assessment order by making necessary alterations or additions.
15)       Recovery of tax from defaulting tax payer [138]
The Commissioner may take all necessary and appropriate actions for recovery of tax from a defaulting taxpayer.
16)       Recovery of tax from other person on behalf of taxpayer [140]
The Commissioner may recover the tax from a person who holds money on behalf of the defaulting taxpayer.
17)       Issuance of an exemption certificate [159]
The Commissioner may issue an exemption or lower rate certificate to the person whose income is not likely to be chargeable to tax under this Ordinance or at lower rate.
18)       Adjustment & refund of tax [170]
Where a person applies for refund, the Commissioner after necessary adjustments shall refund the balance to the taxpayer within 34 days of receipt of a refund application.
19)       Power to enter & search premises [175]
The Commissioner may enter in any business premises of the taxpayer within his jurisdiction to perform any task which is deemed fit for the Income Tax Ordinance, 2001.
20)       Power to impound documents [175]
The Commissioner or any authorized officer may impound any accounts or documents relating to taxpayer and retain them for so long as may be necessary for examination or for the purpose of prosecution.
21)       Power to make inventory [175]
The Commissioner may make an inventory of articles found in any premises or place of taxpayer during special inspection of taxpayer records & inventory etc.
22)       Power to select a person for audit [177]
The Commissioner may select a person for audit of his income tax affairs.
23)       Imposition of penalties [Part-X of Chapter-X]
The Commissioner may impose penalties for different defaults discussed under Part-X of Chapter-X of the Income Tax Ordinance, 2001.
24)       Imposition of additional tax [205]
The Commissioner may impose additional tax if the tax payer fails to pay the tax by due date.
25)       Appointment of subordinates [208(2)]
Any income tax authority may appoint any income tax authority subordinate to it by the approval of the CBR. So, the Commissioner may appoint any subordinate authority by the approval of the CBR.
26)       Delegation of powers:
The Commissioner may delegate to any Taxation Officer all or any of its powers or functions, other than the powers of delegation.
27)       Rectification of mistakes [221]
The Commissioner may amend his own order to rectify any mistake apparent from the record on his own activity or any mistake brought to its notice by a taxpayer or any income tax authority.
28)       Appointment of expert [222]
The Commissioner may appoint any expert for the purposes of audit or valuation etc.
29)       Recognition of funds:
The Commissioner may recognize the provident fund, superannuation fund and gratuity fund etc. under the Income Tax Ordinance, 2001.
30)       Supervision of subordinate authorities:
The CIT supervises the functions, duties and jurisdiction of its subordinate authorities.

4.         Directorate General of Inspection & Audit:
Head of the Directorate:
Director General of Inspection (DG1) is the head of Directorate.
Who appoints the Directorate General of Inspection & Audit?
It is appointed by the Federal Government.
How many officers are appointed?
The Federal Government may appoint as many officers as are required to discharge the functions of the Directorate-General of Inspection & Audit.
Qualification of officers of the Directorate:
The officers from income tax group are appointed as officers of the Directorate.
Authorities working under the Directorate General of Inspection & Audit:
The following officers shall perform their functions under the supervision of the DG1:
i) Directors of inspection
ii) Additional Directors of Inspection
iii) Deputy Directors of Inspection
iv) Assistant Directors of Inspection
v) Extra Assistant Directors of Inspection
vi) Inspectors of Inspection
Powers & Functions of the Directorate-General of Inspection & Audit:
Generally, the following functions & powers are exercised by the Directorate-General.
1)         Inspection of cases & offices:
Directorate General caries out inspection of income tax cases & offices.
2)         Investigation of cases regarding tax evasion:
It investigates the cases involving leakage of revenue or evasion of taxes.
3)         Investigation of staff of income tax department:
It investigates the officers and staff of the income tax officers allegedly involved in corruption & malpractice and recommends the case to competent authority for necessary action.
4)         Audit of cases or offices:
It may carry out audit of cases or officers involving income tax revenues.
5)         Recommendations to the CBR:
It may recommend the CBR in matters of tax policy, tax administration and tax operations.
6)         Preparation of annual report:
An annual report about the working of Income Tax Officers is furnished by the directorate to the CBR. So, preparation of the report is the responsibility of the directorate.
7)         Acquirement of evidence on oath:
The Directorate may acquire evidence on oath regarding cases under consideration.
8)         Performance of work assigned by the Federal Government:
The Directorate may perform any other function as may be assigned to it by the Federal Government.

5.         Director-General of Investigation & Intelligence:
Definition:
Director-General of Investigation & Intelligence (DGII) means a person appointed to be a Director-General of Investigation & Intelligence under the Income Tax Ordinance, 2001.
Who appoints the DGII?
The DGII is appointed by the CBR.
Basic function of the DGII:
The Director-General of Investigation & Intelligence performs the function of intelligence in finding out the concealed income & assets etc. Further, he shall perform such functions as may be specified by the CBR.
Jurisdiction of the DGII:
The CBR shall specify the jurisdiction of the DGII.
Authorities subordinate to DGII:
The following authorities work under the DGII.
i) Director of Investigation & Intelligence
ii) Additional Director of Investigation & Intelligence.
iii) Deputy Director of Investigation & Intelligence.
iv) Assistant Director of Investigation & Intelligence.
v) Extra Assistant Director of Investigation & Intelligence.

6.         Director-General of Training & Research:
Definition:
“Director-General of Training & Research” (DGTR) means a person appointed to be a Director-General of Training & Research under the Income Tax Ordinance, 2001.
Who appoints the DGTR?
The DGTR is appointed by the CBR.
Basic function of the DGTR:
The DGTR provides training & research facility to the Income Tax Department. Further, he shall perform such functions as may be specified by the CBR.
Jurisdiction of the DGTR:
The jurisdiction of the DGTR is specified by the CBR.
Authorities subordinate to DGTR:
The following authorities are subordinate to the DGTR:
i) Director of Training & Research
ii) Additional Director of Training & Research
iii) Deputy Director of Training & Research
iv) Assistant Director of Training & Research
v) Any other officer appointed to perform the functions of the DGTR.
Appointment of a Firm of Chartered Accountants:
The CBR may appoint a firm of Chartered Accountants to conduct an audit of the income tax affairs of any person and the scope of such audit shall be determined by the CBR on case to case basis.
Any person employed by a firm for audit may exercise the powers to enter and search premises & may issue a notice to obtain information or evidence.
Appointment of Surveyor:
The CBR is authorized to appoint any private agency, firm or company to carry out survey. Such survey may relate to certain persons or areas as deemed fit by the CBR. The CBR shall authorize surveyor to conduct survey in writing. The scope of survey is determined by the CBR on case to case basis.
Valuer:
Valuer is not an income tax authority under the Income Tax Ordinance, 2001. However, he assists the Commissioner in the valuation assets, so it is necessary to know about him.
1)         Who appoints the valuer?
The Commissioner may appoint the valuer as a result of an application made by a person willing to be a valuer.
2)         Basic function of the valuer:
The main function of the valuer is to assist the CIT in valuation of the capital assets belonging to a taxpayer.
3)         Status of valuation made by valuer:
Valuation made by the valuer is not binding on the Commissioner. The Commissioner may disagree with the value determined by a valuer.
4)         Qualification of valuer:
A person should be competent according to nature of assets normally valued by him. Generally, a person who holds a recognized degree or equivalent qualification in civil, mechanical & electrical engineering & architectural field etc.
5)         Disqualification of a valuer:
The following persons are qualified for appointment as a valuer:
i) A person who has been dismissed or removed from government service.
ii) An un-discharged insolvent.
iii) A person who has been found quality of misconduct in his professional capacity.
iv) Representative of taxpayer.
6)         Termination of valuer:
The Commissioner may terminate the valuer at any time without assigning any reason and without paying any compensation.
7)         Remuneration of value:
A valuer is remunerated on the basis of the value of the assets valued by him. Remuneration list has been provided in the Rule-227 of the Income Tax Ordinance, 2001.

7.         Income Tax Appellate Tribunal [ITAT]
1)         Status of the ITAT:
Income Tax Appellate Tribunal is the highest appellate authority under the Income Tax Ordinance, 2001.
2)         Who appoints the ITAT?
The Income Tax Appellate Tribunal (ITAT) is appointed by the Federal Government.
3)         Who may appeal to the ITAT?
If a taxpayer or Commissioner of Income Tax (CIT) is not satisfied with the decision of the Commissioner’s (Appeals). The un-satisfied party may appeal the appellate tribunal.
4)         Basic function of the tribunal:
The basic function of the tribunal is to hear the appeals against the decisions of Commissioner (Appeals).
5)         head of the appellate tribunal:
Head of the appellate tribunal is called Chairman. Chairman is appointed by the Federal Government, generally, out of the judicial members of the tribunal.
6)         Members of the ITAT:
There are two types of Income Tax Appellate Tribunal (ITAT) members.
i) Judicial members
ii) Accountant members
7)         Who appoints the members?
The Federal Government appoints the members of the ITAT considering their qualifications.
8)         Qualification of members:
i)          Judicial members:
A person may be appointed as a judicial member of the appellate tribunal if the person:
a) Has exercised the powers of a district judge and is qualified to be a judge of a high court; or
b) Is or has been an advocate of a high court and is qualified to be a judge of a high court.
ii)         Accountant member:
A person may be appointed as an accountant member if the person is an officer of the Income Tax Group equivalent in rank to the Regional Commissioner of Income Tax.
9)         Number of the ITAT members:
The Federal Government may appoint as many members of the appellate tribunal as are considered necessary.
Powers & Functions of the Appellate Tribunal:
The Income Tax Appellate Tribunal is the head of the Appellate system under the Income Tax Ordinance, 2001. It is independent from the CBR. In other words, the CBR may not interfere in the appellate functions of the ITAT.
1)         Performance of the functions of ITAT:
The powers and functions of ITAT are exercised and discharged by the Benches.
2)         Establishment of Benches:
The Benches of the ITAT are constituted by the Chairman out of the judicial and accountant members of the ITAT.
3)         Placement of Benches:
The ITAT shall decide that where the Benches of the ITAT shall hold their sittings.
4)         Power to regulate its own procedure:
According to section 130(12), the Appellate Tribunal has the power to regulate its own procedure.
5)         Decision of the appeals:
The appellate tribunal performs its functions in deciding the appeals against decisions of the Commissioner (Appeals) through establishment of Benches.
6)         Decision about number of the members of the Benches:
Where the members are equally divided in their opinion, the matter is referred to the chairman of ITAT. Chairman shall appoint one or more other members of the tribunal for hearing of disputed point.
7)         Power of final decision:
The decision of the appellate tribunal on a point of fact is final. If the decision involves point of law, it may be referred to high cart.
Number of the Members of a Bench:
A bench, generally, consist of at least two members. Normally, a bench consists of equal number of judicial as well as accountant members (one judicial + one accountant) but in certain cases, the number of one type of members may exceed the other.
(For example, one judicial + two accountants or two judicial + one accountant)
Note:    The Federal Government may authorize only one member of the tribunal to alone hear and decided the case.
Who Regulate the Procedure of ITAT:
According to section 130(12), the Appellate Tribunal has the power to regulate its own procedure, and the procedure of its Benches in all matters arising out of.
1)         The discharge of its functions
2)         The places at which the Benches shall hold their sittings.
Procedure of the Decision of a Bench:
Decision is made by the bench. If the members of a bench differ in opinion on any point, the majority decision is accepted. Where the members are equally divided in their opinion, the matter is referred to the Chairman. Chairman shall appoint one or more other members of the tribunal for hearing of disputed point. The point shall be decided according to the opinion of the majority of the members of the tribunal who have heard the case including those who first hear it.
Note:    If there are an equal numbers of the Appellate Tribunal, the Federal Government may appoint an additional member for the purpose of deciding the case on which there is a difference of opinion.
Why Appellate Tribunal is called Final Fact Finding Authority?
It is called final fact finding authority because the decision of the appellate tribunal on a point of fact is final. If the decision involves point of law, it may be referred to high cart.
Administration:
Registrar is the responsible authority in the office of appellate tribunal who works under the guidance of Chairperson and entertains the appeals provisionally, fixes the date for hearing and looks after the Appellate Tribunal office matters.

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2 Responses to “Income Tax Authorities”

Anonymous said...
November 29, 2012 at 2:28 AM

good work


smith said...
April 6, 2014 at 12:59 AM

great


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