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FBR seeks to introduce concept of "Best judgment Assessment"

 The Federal Board of Revenue (FBR) has proposed to introduce the concept of “Best judgment Assessment” in the sales tax law for accurate assessment and recovery of sales tax from the registered persons.

The FBR has proposed to replace the existing section 11 (Assessment of Tax & Recovery of Tax not levied or short levied or erroneously refunded) of the Sales Tax Act 1990 with the new section. The provisions of assessment has been proposed to be harmonized with the income tax law. The section 11 has been divided into sub-sections under the proposed sales tax law. Under the proposed section 11 of the Sales Tax Act, where a person, (a) fails to furnish a sales tax return in response to notice; or (b) fails to produce before the Deputy Commissioner under section 25 or 38A, accounts, documents and records required, or any other relevant document or evidence that may be required by him, the Deputy Commissioner may, after a notice to show cause to such person, based on any available information or material and to the best of his judgment, make an assessment of tax payable or refund due and also charge penalty and default surcharge.


For the purposes of clause (b) of sub section (1) the Deputy Commissioner may also disallow or reduce a taxpayer’s input tax on goods or services if the taxpayer is unable, to provide invoice or other record or evidence of the transaction or circumstances giving rise to such claim.

Where a best judgment assessment has been made due to default of clause (a) of subsection (1) and the person files the return thereafter and pays the amount of tax payable along with default surcharge and penalty, the notice to show cause and the order of assessment shall abate.

Notwithstanding anything in sub-section (1), where a person required to file a return fails to file such return, the Deputy Commissioner, shall subject to such conditions as specified by the Federal Board of Revenue, determine the minimum tax liability of the registered person.

Now the new section 11A(Assessment of Tax & Recovery of Tax not levied or short levied or erroneously refunded) says: Where due to any reason any tax or charge has not been levied or short levied or where the Deputy Commissioner suspects on the basis of audit or otherwise that due to any reason a person has not paid or short paid due sales tax; claimed input tax credit or refund which is not admissible; or has obtained an amount of refund not due, the Deputy Commissioner after issuing a show cause notice to the person shall pass an order to charge sales tax unpaid or short paid, disallow input tax or refund not admissible or to recover the amount of refund not due and shall also impose penalty and default surcharge in accordance with sections 33 and 34.

For the purposes of sub section (1) the Deputy Commissioner may also disallow input tax on goods or services if the taxpayer is unable, without reasonable cause, to provide a receipt, or invoice or other record or evidence of the transaction or circumstances giving rise to such claim. Where a tax or charge has not been levied under clause (a) of sub-section (1) the amount of tax shall be recovered as tax fraction of the value of supply.

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