SALES TAX AUDIT Penalties and Recovery

AUDIT Record keeping sec 22. Record keeping sec 22. Urdu or English Urdu or English Document : includes electronic data, comp. prog / tapes / disks Document : includes electronic data, comp. prog / tapes / disks Purchases, imports and supplies Purchases, imports and supplies ( incl 0 rated, exempt ) ( incl 0 rated, exempt ) invoices, bank stat, inventory, utility bills, lease agreement invoices, bank stat, inventory, utility bills, lease agreement Penalty: Rs 10,000 or 5% of the tax Penalty: Rs 10,000 or 5% of the tax Retention: five years ( section 24) Retention: five years ( section 24)

AUDIT By a Sales Tax Officer ( sec 25 ) By a Sales Tax Officer ( sec 25 ) By Auth. Officer ( AC and above ) sec 38. By Auth. Officer ( AC and above ) sec 38. Once a year Once a year Re-audit, audit in the FY same year Re-audit, audit in the FY same year

AUDIT ONCE A YEAR The Officer of Sales Tax……. may, once a year, conduct audit. The Officer of Sales Tax……. may, once a year, conduct audit. The Officer of Sales Tax….. may conduct audit only once for a year. The Officer of Sales Tax….. may conduct audit only once for a year. Which one is applicable ? Which one is applicable ?

AUDIT BY DRRA ( Auditor General ) The President of Pakistan has required the AG audit the receipt of Federal Govt. and not the record of the sales tax registered units. The President of Pakistan has required the AG audit the receipt of Federal Govt. and not the record of the sales tax registered units. Judgment of Peshawar High Court. Dec 08. Judgment of Peshawar High Court. Dec 08. Proviso in sec 25 ( 2 ) FA Proviso in sec 25 ( 2 ) FA 2008.

AUDIT 15 days notice 15 days notice Systematic, organized and professional. Systematic, organized and professional. 3-4 days. 3-4 days. Audit observation Audit observation Audit completion certificate. Audit completion certificate. Audit Report Audit Report Contravention report Contravention report

Penalties Failure to produce record Failure to produce record 5000/- 5000/- 10,000/- 10,000/- 50,000/- 50,000/- Before Audit Notice….. No penalty. Before Audit Notice….. No penalty. During Audit & before SCN… 25% penalty During Audit & before SCN… 25% penalty After SCN….. After SCN…..

AUDIT Suspended in Nov Suspended in Nov Now resumed Now resumed Objective selection. Objective selection. No visit to the premises. No visit to the premises. Poor response / Black listing Poor response / Black listing Composite Audit. Composite Audit.

ADJUDICATION SCN on the basis of Contravention report. SCN on the basis of Contravention report. Section 36 ( 1 )…deliberate /collusion 5 yrs Section 36 ( 1 )…deliberate /collusion 5 yrs Section 36 (2) inadvertence 3 yrs Section 36 (2) inadvertence 3 yrs SCN… timely, clear, violations, penal and recovery clauses. SCN… timely, clear, violations, penal and recovery clauses. Personal Hearing. Personal Hearing.

ADJUDICATION POWERS POWERS Additional Collector: No limit Additional Collector: No limit DC: >1m 1m <2.5 m AC: >10,000 10,000 < 1m Suptd: 10,000 Suptd: 10, days 120 days Extendable 120 days. Extendable 120 days.

Order in Original Speaking order. Speaking order. Both side views. Both side views. Logical Logical Provisions of Law Provisions of Law Appeal by the registered person. Appeal by the registered person. RE-open under sec 45-A. RE-open under sec 45-A.

PENALTIES SECTION 33 Late return filing Rs 5000 Late return filing Rs 5000 Failure to notify changes Rs 5000 Failure to notify changes Rs 5000 Short Payment or 5 % Short Payment or 5 % Tax fraud / abetment or 100%,five years or/and fine. Tax fraud / abetment or 100%,five years or/and fine. Sec or 3 % Sec or 3 % General : 5000 or 3 % General : 5000 or 3 %

RECOVERY Section 48 Section 48 Deduction by IT, Customs or / and FE Deduction by IT, Customs or / and FE Person to hold money on acount of defaulter Person to hold money on acount of defaulter Embargo Embargo Bank Acc attachment Bank Acc attachment Seal the premises Seal the premises Attachment and sale Attachment and sale

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