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Withholding Tax Statements Filed by Agents u/s 165 of ITO to be Desk Audited

ISLAMABAD  (November 02, 2010) – The withholding tax (WHT) statements filed by the withholding agents under section 165 of the Income Tax Ordinance 2001 (ITO) for first quarter (July-September) of 2010-11 would be subjected to desk audit to check discrepancies in payment of taxes for improving collection during current fiscal.

Sources told reporters here on Monday that the deadline for filing of quarterly statements by the withholding agents has expired.

Now the field formations would submit report on statements already filed under section 165 of the Ordinance 2001. At the same time, the field offices would start desk audit of the statements filed by the withholding agents. The income tax department is empowered to conduct desk audit of the statements as per prescribed pro forma in the Income Tax Rules. The desk audit are being done with reference to the correct application of rates as well as reconciliation of statements with the previously year's filed returns/statements. The desk audit of withholding tax statements would also help in increasing revenue collection by improving compliance of the withholding agents.

According to sources, there are two types of actions being taken against the non-filers of withholding agents. First, the non-filers of withholding agents are being identified for imposition of penalty. In response to notice, withholding agents usually file the statements. The penalty is liable to be paid by the non-filer withholding agents under section 182 (offences and penalties) of the Income Tax Ordinance 2001. This would ensure filing of return by the agents.

Second, the desk audit would check whether tax has been accurately applied as well as deducted by the withholding agents. Through desk audit, the penalty would be imposed in cases tax has not been properly deducted. Under section 161 of the Income Tax Ordinance 2001, where at the time of recovery of tax, it is established that the tax that was to be deducted from the payment made to a person or collected from a person has meanwhile been paid by that person, no recovery shall be made from the person who had failed to collect or deduct the tax but the said person shall be liable to pay default surcharge at the rate of eighteen percent per annum from the date he failed to collect or deduct the tax to the date the tax was paid. A person personally liable for an amount of tax as a result of failing to collect or deduct the tax shall be entitled to recover the tax from the person from whom the tax should have been collected or deducted, it added. The provision of section 205 of the Income Tax Ordinance 2001 would also be applicable in such cases where withholding agents failed to accurately deduct the admissible amount. Under section 205, a person who fails to pay any tax, excluding the advance tax and default surcharge any penalty or any amount on or before the due date for payment shall be liable for default surcharge.

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