FBR Barred From Initiating Proceedings Against Amnesty Scheme Declarants

The Federal Board of Revenue (FBR) has been barred from initiating proceedings against legally valid declaration under the Foreign Exchange Regulation Act, 1947, Protection of Economic Reforms Act, 1992, and the Anti-Money Laundering Act, 2010 (section XII-A of the Schedule) with respect to assets, income or expenditure declared under the amnesty scheme of Voluntary Declaration of Domestic Assets, 2018 and Foreign Assets (Declaration and Repatriation) Act, 2018.

The FBR has revised the Assets Declaration (Procedure and Conditions) Rules, 2019, issued through an S.R.O. 369(I)/2021 here on Wednesday.

The amended rules revealed that subject to section 11 of the Assets Declaration Act, 2019, no proceedings in respect of a legally valid declaration shall be undertaken under any other law for the time being in force, including Foreign Exchange Regulation Act,1947, Protection of Economic Reforms Act,1992 and the Anti-Money Laundering Act, 2010 (to the extent of section XII-A of the Schedule) or any rules, notifications or orders made thereunder with respect to assets, income or expenditure declared under the Act.

When contacted, a tax expert informed Propakistani that action would not be taken against the declarants of the amnesty scheme for committing certain violations of the Income Tax Ordinance 2001. Section XIIA of the Anti-Money Laundering Act, 2010 covers certain prosecutions under the Income Tax Ordinance, 2001.

It included prosecution for false statement in verification- where tax sought to be evaded is Rs. 10 million or more; prosecution for concealment of Income-where tax sought to be evaded is Rs. 10 million or more; prosecution for improper use of National Tax Number [Certificate}- where tax sought to be evaded is ten million rupees or more and prosecution for abetment – where tax sought to be evaded is ten million rupees or more.

This means that the said violations committed by the declarants of legally valid declaration under the Voluntary Declaration of Domestic Assets, 2018 and Foreign Assets (Declaration and Repatriation) Act, 2018 would be ignored to the extent of section XII-A of the Schedule of the Anti-Money Laundering Act, 2010.

The FBR has explained the proceedings under the Ordinance in respect of the information received other than under CRS [“common reporting standard (CRS)” means information obtained and exchanged under Multilateral Convention on Mutual Administrative Assistance in Tax Matters].

No proceedings under any provisions of the Ordinance shall be initiated on the basis of any information relating to any asset, income or expenditure as at the 30th day of June 2018 or any prior period, if the information relates to a declarant under the Act, and the declarant files an irrevocable written statement along with documentary evidence to the effect that the source of the asset, income or expenditure in the received information has been the assets, income or expenditure declared under the Act. The declarant shall file such a statement on a notice u/s 176 of the Ordinance along with the related documentary evidence.

The nature and source of asset, income, or expenditure shall not be treated as explained, and the Commissioner Inland Revenue or his delegate shall be entitled to proceed under section 111 of the Ordinance, based on definite information acquired from any source other than a valid declaration itself, in following cases:

  • Where the value of an asset, income, or expenditure, as of the 30th day of June 2018, or before as per the definite information is in excess of value as per declaration.
  • Where the source of asset, income, or expenditure relates to a person other than the declarant.
  • Where an action under section 111 of the Ordinance as undertaken in accordance with sub-rule (2) results in invalidation of the declaration, then such an action cannot be initiated without prior approval, for reasons to be recorded in writing, of the Chief Commissioner Inland Revenue as defined in clause (11B) of section 2 of the Ordinance.

Where a foreign asset or income is reported to the Board under CRS, then before any action under any provision of the Ordinance, the Board shall ensure compliance with the conditions under the Protocol for CRS, including exchange of information by the person whose information has been received. On completion of that process, following the procedure, shall be followed:

  • The Commissioner Inland Revenue of the concerned person or delegate of the Commissioner shall issue a notice under section 176 of the Ordinance.
  • The notice referred in clause (a) of this sub-rule shall enquire as to whether or not such asset, income, or expenditure has been declared under the Voluntary Declaration of Domestic Assets Act, 2018 and the Foreign Assets (Declaration and Repatriation) Act, 2018 or Assets Declaration Act, 2019.
  • If the taxpayer informs the Commissioner Inland Revenue or his delegate that the asset, income, or expenditure, as reported under the CRS has been declared in a declaration, the Commissioner Inland Revenue or his delegate shall require the taxpayer to provide a copy of the declaration.
  • The taxpayer on receipt of such notice under section 176 of the Ordinance shall:
  1. Provide a copy of his declaration where such asset, income, or expenditure, as the case may be, has been declared; and
  2. Provide a copy of the declaration of another person, being the beneficial owner, where the asset, income, or expenditure referred to in the CRS has been declared.

Subject to the provision of section 11 of the Assets Declaration Act, 2019, in case the information received under CRS and the declaration as referred above are in agreement then confirmation in writing shall be issued by the Commissioner Inland Revenue, or his delegate that the asset, income, or expenditure to the extent referred to in the letter has been declared under the respective declaration law, FBR said.

In case of a matter relating to legal or beneficial ownership of an asset, income, or expenditure, the claim of beneficial ownership shall not be questioned unless there is definite information that the asset was created out of sources of a person other than the person claiming the beneficial ownership. Where in the case of a foreign trust, the source of contribution to the trust is claimed by any person other than the settlor, beneficiary, or the trustees, the person so claiming shall be entitled to declare his contribution under the Act.

Such declaration shall not be called in question merely on account that such person is not the settlor, beneficiary, or trustee of the trust.

Provided that where the asset, income, or expenditure is reported under CRS in the name of settlor, the beneficiary of the trust, or any other person, proceedings shall be initiated against such person in the absence of a declaration by such settlor, beneficiary, or other persons.

Provided further that in such a case any claim, by a third person as a contributor to the asset, income or expenditure, shall only be considered if supported with documentary evidence.

About the holder of public office, the FBR stated that the status of a person as to the holder of public office or otherwise and the period during which a person remained holder of public office shall not be questioned or challenged by the Commissioner Inland Revenue or his delegate if the same is confirmed by the relevant office.

No declaration by a person entitled to file a declaration under the Act shall be questioned only for the reason that the declarant is a relative other than spouses and dependent children of the declarant of a person being a holder of public office unless it is confirmed through definite information that the asset, income or expenditure have been created out of the undisclosed sources of a holder of public office.

The FBR added that the proceedings under section 122 of the Ordinance shall be preceded by a notice under these rules to the effect of facts available with the FBR and those given in a declaration. The declarant shall be provided with an opportunity of being heard.

The information contained in a legally valid declaration shall not be used in any manner to initiate the proceedings for misrepresentation and suppression of assets, income, or expenditure.

No declaration shall be declared void under section 13 of the Act unless definite information regarding misrepresentation or suppression of facts is available with the Commissioner Inland Revenue or his delegate.

FBR Member Information Technology and Member IR (Operations) are authorized by the Board to access the declarations under section 14 of the Act, on their own or when a request by the concerned Chief Commissioner IR, supported with reasons, is forwarded to any of the aforementioned Members for provision of a copy of the declaration, FBR added.

Courtesy: Pro Pakistani

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