The Panama Leaks and the Paradise Papers have identified many cases where offshore companies/assets have not been declared/disclosed in Pakistan tax records by persons who were required to do so under the law. Such revelations are only a tip of the iceberg. Whole list of assets under consideration, is very large. In this situation, the question of possibility of taxing undisclosed assets and income by Pakistanis is an important subject that is not being addressed appropriately. We cannot continue to keep a blind eye on the matter. As per author’s understanding, Federal Board of Revenue (FBR) has adopted an appropriate position before the Supreme Court of Pakistan during the hearing of Panama case by stating a correct understanding of the concept of ‘time limitation’. As per author’s understanding it was stated by FBR that cases barred by limitation cannot be reopened under the Income Tax laws. However, in our zest and enthusiasm to clean up Pakistan, we at times forget about the fiscal laws in Pakistan, about the taxing right of the state after the lapse of a particular period of time. Every fiscal law has a concept of ‘time of limitation’. We may argue about the moral validity of such law, however as at the present date, it is a valid law of the land. In the following paragraphs, the concept of taxation of undisclosed assets or income in Pakistan or outside Pakistan in relation to time limitation has been discussed in brief to dispel the impression that Pakistan’s fiscal laws provide unlimited time span for taxing undisclosed income and assets created from undisclosed income sources in or outside Pakistan. In brief, under the income tax laws no question can be asked from a Pakistani tax resident today about the sources of his/her offshore assets if that person can substantiate that such income or asset relates to a period prior to June 30, 2011.
All the fiscal regulations in Pakistan, the Income Tax Act, 1922, the Income Tax Ordinance, 1979 and the Income Tax Ordinance, 2001, are composed of two segments. First part deals with the procedures and processes for taxing the ‘income declared’. The second part deals with the manner of taxation of undisclosed income and assets. This is a universal principle. All the fiscal statutes of the world are structured in a similar manner. In India, in one of the cases, constitutional validity of the second part was challenged and the same was held to be within the ambit of constitutional validity of taxing rights of the state [209 ITR 679]. At the outset, it is clarified that aforesaid discussion is limited to Income Tax Ordinance, 2001 and if there are consequences under any other law then the same are not the subject matter of this discussion.
If second part is removed from any fiscal law then the same will effectively become meaningless. No tax law can be conceived without such provisions. In the current income tax law, this aspect is dealt with in Section 111 of the Income Tax Ordinance, 2001(Ordinance). In other words, if Section 111 of the Ordinance is excluded or omitted then there will be no provision under the taxation laws to tax undisclosed and untaxed income and assets created out of such income. This is the most important aspect of tax policy and administration in our country as Pakistan’s primary problem is taxing undisclosed income and assets. As will be described in the following paragraphs, we have not dealt with these provisions in appropriate manner in the past. This is one of the causes of high incidence of undisclosed and untaxed assets. We are highly confused on the subject. Now the Panama Leaks and the Paradise Papers have identified substantial undeclared and undisclosed assets held by tax residents of Pakistan. Unless we understand that law on the subject including time limitation, there can be no constructive result/debate/solution and a vacuum on the subject may lead to harassment of citizens and inappropriate undesirable actions. The aforementioned general principle is applicable for persons who have filed return of income. There is a different situation for persons, who have not filed any return of income, being non-filers, however, in all practical sense, an in depth review of the Ordinance reveals that assets created before 5 years cannot be brought into the tax net under the present regulation in both the cases. As explained in the following paragraphs, the recent attempt by the legislature to extend such term from 5 to 10 years in case of non-filers is also applicable prospectively. This effectively means that an implied amnesty is already available, if the assets had remained out of ambit of tax system for past five years. Whether or not this is a desirable situation/position is a social question. The present article is restricted to legal position as it exists today.
Kinds of undisclosed and untaxed assets
In order to understand the concepts explained in the aforesaid paragraphs, it will be essential to identify the kinds of untaxed assets. This classification will assist in understanding the issue under consideration in correct perspective. For this purpose, assets which have been created out of untaxed income may be identified as:
Assets created out of ‘credit’ in the books of accounts, which may be considered as taxable on account of being unexplainable. This is hereinafter termed as ‘Cash Credits’; and Assets created out of income/sources not recorded in the books. This can be termed as ‘Undisclosed Assets’.
All the income tax laws cater for provisions for taxing both the aforesaid situations. Detailed discussions are made in every law with respect to manner of taxing each kind of asset. The discussion, in this article is the ‘time limitation’ as contained in tax laws, for taxing such undisclosed and untaxed income and assets. In the present situation we are concerned with (2) above.
The f0llowing extracts from all relevant Pakistani and Indian fiscal laws reveal that, underlying concepts in relation to taxation of undisclosed income, have remained the same since inception.
The Income Tax Act, 1922 dealt with the matter in Section 4(2A to 2F)of the Act as under:
“(2A) Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
(2B) Where, in the previous year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, nor shown in any statement furnished by him under sub-section (4A) of section 22 and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such previous year.
(2C) Where the assessee is found in respect of any previous year to be the owner of any money or any valuable article and such money or valuable article is not recorded in the books of account, if any, maintained by him nor shown by him in any statement furnished under sub-section (4A) of section 22, and the assessee offers no explanation about the nature and source of acquisition of the money or valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the article may, with the prior approval of the Inspecting Assistant Commissioner, be deemed to be the income of the assessee for such previous year.”
The Indian law on the subject is stated as under:
Indian Income Tax Act, 1961 in Section 68 and 69 dealt with the matter as under:
“68. “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:”
69. “Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.”
In India, there has been a major development on this matter. India’s Income Tax Act, 1961 introduced a Chapter XIV-B being ‘Special Procedures for Assessment of Search Cases’. Under this chapter the matter of time limitation in general has been overridden and assets recovered in ‘search’ can be taxed in the current year irrespective of the year when such amount has been earned. Almost similar position was adopted in India whilst dealing with offshore assets. India also introduced the concept of ‘block assessment’ to deal with such cases. In short, introduction of a separate regime as referred above substantiates the concept of time limitation under the general law. In Pakistan there is no such law similar to the one in India. This matter has been discussed in detail in Indian case law ‘307 ITR 1 (Gujarat)(2008)’.
Pakistan’s Income Tax Ordinance, 1979 (Repealed Ordinance) under Section 13 covered the matter as under:
(a) any sum is found to be credited in the books of an assessee maintained for any income year; or
(aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable article, in any year; or
(b) the assessee is found to have made any investment in any income year which is not recorded in the books of account maintained for that income year or is not shown in the wealth statement or return of wealth furnished under section 58 in respect of that year; or
(c) the assessee is found in respect of any income year to be the owner of any money or valuable article which is not recorded in the books of account, if any, maintained by him or is not shown by him in any wealth statement or return of wealth furnished under section 58 in respect of that year; or
(d) the assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Deputy Commissioner finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement or return of wealth furnished under section 58 in respect of that year; or
(e) an assessee has, during any income year, incurred any expenditure,
and the assessee offers no explanation about the nature and source of such sum, investment, acquisition of the money or valuable article, excess amount or the money from which the expenditure was met, as the case may be, or the explanation offered by him is not, in the opinion of the Deputy Commissioner, satisfactory, the sum so credited, the value of the investment, the money or the value of the article, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance:
Provided that, where any act referred to in clauses (a) to (e) is discovered after the assessment of income of the income year to which the said act relates has been made, the income chargeable to tax under this section shall be included in the total income of the income year relevant to the assessment year in which the said discovery is made:.”
In Section 13 of the Repealed Ordinance all forms of undisclosed and untaxed income were placed in sub-section (1). The first proviso to
Section 13(1) of the Repealed Ordinance, as referred above was included in 1987.When this proviso was inserted, its rationale was explained by the CBR in Circular 6 of 1987 as under:
“An amendment has been made in Sub-Section (1) of Section 13 by introduction of a new proviso therein. Now, when any asset, investment, expenditure etc. is discovered by the Income Tax Officer after the assessment of the relevant income year has been made, the deemed income (if any) under Section 13 shall be included in the total income of the income year relevant to the assessment year in which such discovery was made. For example, if an investment was made in the income year relevant to the assessment year 1985-86 and the fact of such investment is discovered by the Income Tax Officer during the assessment year 1987-88, after the assessment for assessment year 1985-86 had been completed, the deemed income under Section 13 in respect of the said investment shall be included in the total income of the income year relevant to the assessment year 1987-88 and not of the income year relevant to the assessment year 1985-86. If, on the other hand, the assessment for the year 1985-86 is still pending at the time of the discovery, the deemed income, if any, will be included in the income of the income year relevant to the assessment year 1985-86.”
The insertion of this proviso remained suspended for its operation up to Finance Act, 2000 by way of Clause (7) of Part IV of the Second Schedule to the repealed Ordinance. In other words, there has never been a year when this proviso has been applicable.
The Income Tax Ordinance, 2001 in Section 111,prior to amendment made by Finance Act, 2010stated as under:
“(1) Where –
(a) any amount is credited in a person’s books of account;
(b) a person has made any investment or is the owner of any money or valuable article;
(c) a person has incurred any expenditure; or
(d) any person has concealed income or furnished inaccurate particulars of income including –
(i) the suppression of any production, sales or any amount chargeable to tax; or
(ii) the suppression of any item of receipt liable to tax in whole or in part,
and the person offers no explanation about the nature and source of the amount credited or the investment, money, valuable article, or funds from which the expenditure was made suppression of any production, sales, any amount chargeable to tax and of any item of receipt liable to tax or the explanation offered by the person is not, in the Commissioner’s opinion, satisfactory, the amount credited, value of the investment, money, value of the article, or amount of expenditure suppressed amount of production, sales or any amount chargeable to tax or of any item of receipt liable to tax shall be included in the person’s income chargeable to tax under head “Income from Other Sources” to the extent it is not adequately explained:
Provided that where a taxpayer explains the nature and source of the amount credited or the investment made, money or valuable article owned or funds from which the expenditure was made, by way of agricultural income, such explanation shall be accepted to the extent of agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law.
(2) The amount referred to in sub-section (1) shall be included in the person’s income chargeable to tax in the tax year immediately preceding the financial year in which it was discovered by the Commissioner.
(3) Where the declared cost of any investment or valuable article or the declared amount of expenditure of a person is less than reasonable cost of the investment or the valuable article, or the reasonable amount of the expenditure, the Commissioner may, having regard to all the circumstances, include the difference in the person’s income chargeable to tax under the head “Income from Other Source” in the tax year immediately preceding the financial year in which the difference is discovered.
(4) Sub-section (1) does not apply,
(a) to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect.
(b) to any amount referred to in sub-section (1), relating to a period beyond preceding five tax years or assessment years.”
The concept of year of discovery was however limited by time by way of sub-section 111(4)(b) that stated that the amount so referred relating to a period beyond preceding five years will remain out of the provisions of this section. This means that discovery is also subject to time limitation.
The concept became absolutely clear by the change in law made by the Finance Act, 2010 when sub-section (2) of Section 111 was amended in the manner as described below:
“The amount referred to in sub-section (1) shall be included in the person’s income chargeable to tax in the tax year to which such amount relates.”
The original section stated:
“(2) The amount referred to in sub-section (1) shall be included in the person’s income in immediately preceding the financial year in which it was discovered by the Commissioner.”
FBR explained the amendment by way of following statement in their circular explaining the provision of Finance Act, 2010 as under:
“Under the existing provision of sub-section (2) of section 111 of the Income Tax Ordinance, 2001, any un-explained amount/investment, on discovery, was required to be added to the income of the taxpayer in the financial year preceding immediately to the year of such discovery. This treatment in taxation of unexplained amount suffered a disconnect vis-a-vis these facts of the case pertaining to the year to which the un-explained income/investment pertained. Such treatment, apart from resulting in technical lacunae, also has the potential to effect adversely the quality of assessment/revenue. Therefore, an amendment in sub-section (2) of section 111 has been made through the Finance Act, 2010 to add such unexplained amount/investment be taxed in the year to which it pertains.”
This means that law in Pakistan at present is unambiguously clear to the effect that undisclosed or unexplained income can be taxed in the year of acquisition not being year of discovery.
Amended section 111(2) of the ordinance and time of limitation
Section 111(2) of the Ordinance now specifically relates the matter of taxing undisclosed income with the date of origination of income and acquisition of asset and not with the year when such income and asset is discovered or revealed. This in practical sense, means that taxation of such assets in the cases where the return has been filed will have to be made by amending the assessment already made under Section 122 of the Ordinance. There is a concept of time limitation under Section 122 that has been contained in sub-sections (2) and (4) of Section 122 of the Ordinance. These sub-sections have been reproduced as under:
“122(2) No order under sub-section (1) shall be amended by the Commissioner after the expiry of five years from the end of the financial year in which the Commissioner has issued or treated to have issued the assessment order to the taxpayer.”
“122(4) Where an assessment order (hereinafter referred to as the “original assessment”) has been amended under sub-section (1), (3) or (5A), the Commissioner may further amend, as many times as may be necessary, the original assessment within the later of –
(a) five years from the end of the financial year in which the Commissioner has issued or is treated as having issued the original assessment order to the taxpayer; or
(b) one year from the end of the financial year in which the Commissioner has issued or is treated as having issued the amended assessment order to the taxpayer.”
In Pakistani tax jurisprudence the concept of time limitation has been well settled since inception. The Full Bench of the Supreme Court of Pakistan headed by Justice Cornelius in the case of Nagina Silk Mills, Lyallpur vs ITO reported as (1963) PLD XV, 322 unequivocally settled the subject on page 332 as under:
“The Courts must lean against giving a statute retrospective operation on the presumption that the Legislature does not intend what is unjust. It is chiefly where the enactment would prejudicially affect vested rights, or the legality of past transactions, or impair existing contracts, that the rule in question prevails. Reference may be made in this connection to page 206 of Maxwell on the Interpretation of Statutes, Eleventh Edition. Even if two interpretations are equally possible, the one that saves vested rights would be adopted in the interest of justice, specially where we are dealing with a taxing statute. The appellant herein had already acquired the vested right of escaping assessment, by lapse of time, when the 1960 Ordinance was enforced. In all probability, the Legislature never intended that the period of limitation prescribed in the Act should become variable with the changes in the “financial year” or “year” inserted in the Act for certain other purposes, namely, to accord with the new accounting years| adopted by Government. The conclusion we have reached therefore is that the period of “four years” mentioned in subsection (2) of section 34 must continue to receive a stable interpretation and it must be held to mean a period of four years consisting of twelve months each. On this view clearly the assessment even in the second case was open to exception as having been made beyond the time during which the Income-tax Officer had power to pass such an order.
The result is that the appeals succeed. The High Court were not right in summarily dismissing the prayer for a writ of certiorari in each of these cases. We hereby direct that the two impugned orders be quashed as illegal and passed without jurisdiction. In view of the difficult nature of the question of law involved, we would leave the parties to bear their own costs.”
This means that an assessment can only be amended/reopened within 5 years. This subject, without any ambiguity, means that Section 111(2) read with Section 122(2) or (4) reflects that undisclosed or unexplained asset can only be taxed within 5 years of acquisition in the case of a person that has filed a return of income where such income and asset has not been disclosed. Any assessment prior to that year cannot be amended/reopened as identified above. This is called income that escaped assessment as referred by the Supreme Court.
This aspect can be well explained as under:
— Assets were acquired out of undisclosed income in 2008;
— Assets were acquired in 2012;
— Assets were was discovered in 2017; and
— Returns filed up to all years till Tax Year 2016.
As per Section 122(2) only the tax year up to 2011 can be amended or reopened. Accordingly assets acquired in 2012 can be taxed by reopening assessment year 2012-2013 whereas those acquired in 2008 cannot be taxed as any year beyond 2011 cannot be reopened now in 2017.For filers, any undisclosed asset remain non-taxable on account of combined reading of Section 111(2) read with Section 122(2) and (4) of the Ordinance. The legal provisions are unambiguous on this matter.
This understanding of time limitation relates to the cases where a return has been filed.
Cases of non-filers
Now the question arises for cases where the person is a non-filer. In this case, Section 122 comes into play in a different manner. First milestone will be requirement and time limitation for filing the return of income under
Section 114 of the Ordinance, followed by a notice of filing the return in the current year with respect to income or asset so discovered. Prior to the amendment in 2016, there was a time limit for filing the return within five years. The law stated as under:
“114 (5) A notice under sub-section (4) may be issued in respect of one or more of the last five completed tax years or assessment years.”
In 2016, that time limit for non-filer has been extended to ten years. The law states as under:
“114 (5)A notice under sub-section (4) may be issued in respect of one or more of the last five completed tax years or assessment years:
Provided that in case of a person who has not filed return for any of the last five completed tax years, notice under sub-section (4) may be issued in respect of one or more of the last ten completed tax years.”
Now we analyze the time limitation in the case where there is a non-filer and there is a discovery in the current year and the asset was acquired nine years ago.
— Assets acquired out of undisclosed income in 2005;
— Assets acquired in 2008; and
— Assets discovered in 2017.
Taxation officer can now give notice to file the return for the year up to Tax Year 2006 (ten years). So at the first stage, assets acquired in 2005 become time barred. Now the question is whether assets acquired in 2008 can be brought within the tax net. If we read the provisions relating to reopening of assessment then it transpires that time limitation is in relation to date of ‘filing’. In this case, since all the returns will be filed in 2017 therefore limitation for all the returns to be filed will apply from 2017. Accordingly, assets acquired in 2008 can be brought to tax in 2o17. This means that in case of non-filer the immunity or perpetual amnesty arises after ten years as against five years in the case of filer.
Nevertheless, there is a very strong argument that amendment made in Section 114(5) relating to extension of time limit for non-filer as introduced in 2016 by way of Finance Act, 2016, cannot have a retrospective effect and same cannot be applied for return filing requirements that had attained limitation under Section 114(5) before this amendment in 2016. This vested right arises on account of the fact that prior to amendment made in 2016 such persons were not required to file return for any period beyond past five years. This could mean that immunity or amnesty of five years period also extends to non-filers.
Status of assets which escaped assessment
The aforesaid discussions lead to the conclusion that any asset being five or ten years old, as the case may, that remained untaxed cannot be taxed under the Pakistan taxation laws, both in cases of a filer and a non-filer respectively. The next important question is the status of the assets created out of such income. This may lead to a case where there is no discovery but a disclosure/voluntary submission by the taxpayer in the wealth statement or books of accounts. This is a very difficult and sensitive question to answer.
The only practical answer to this proposition is that in this case the taxpayer has the option to use the asset, for business purposes without any tax consequence. The question that remains unanswered is whether such person is entitled to record in the wealth statement. In author’s view for all practical proposes it would remain an academic question as no action can be taken for the recovery of tax that remained untaxed due to time limitation. In this respect, it is also important to note that there are very few jurisdictions where wealth statement form part of tax filing.
On the practical side, this matter can be illustrated by an example. Mr A conducted business in Pakistan from 1970 to 2010 and earned income and created assets out of such income. Mr A never filed any return of income from 1970 to 2010. There has been no National Tax Number for Mr A or the business conducted by Mr A. From 2010 Mr A closed the business and converted all assets into cash and deposited the same in a bank account that was not declared in any tax records. There was no business transaction during that period from 2010 to 2017. There has been no notice for any undisclosed income earned during 1970 to 2010 at any point of time. Now in 2017 Mr. A decided to restart the business with the funds lying in that bank account. The legal position as explained is clear that tax department has no right to tax the income earned during 1970 to 2010 on account of time limitation provided in the law. Whether or not the accumulated sum is the capital of Mr. A, eligible to be reflected in the wealth statement of Mr. A is a question where there is no doubt in the mind of the author. However, lack of clarity in practical sense is one of the reasons of re-accumulation of untaxed wealth. This is not an amnesty. It is an operation of law of limitation. This fine distinction needs to be fully appreciated if there is a desire to bring in documentation in this country.
Change in character of asset – is ‘asset’ or ‘amount’ immune
Discussion in this paragraph will assist in answering the question raised in paragraph above. Under Section 111 an asset created in a particular year that is immune is ‘the money’ or ‘value’ of such asset. In other words, if there is change in the character of the asset, then whether or not the law will apply in the same manner. This matter can be explained in relation to illustration A, by way of a fact, that assets created in 2008 was ‘Cash’, whereas in 2017 when such asset was discovered or voluntarily disclosed is a ‘Building’ has been acquired from such cash. If the asset discovered in 2017 is ‘Building’ then can taxation officer tax that ‘Building’ as undisclosed or unexplained asset on the ground that it relates to 2017 the year that can be reopened. The practical answer to this question is in negative as the law has used the word ‘money’ or ‘valuable article’ not a particular asset. If that amount can identifiably be related to that money then such building will also qualify for immunity or amnesty by way of time limitation as discussed above.
Effect of section 214a of the
The Finance Act, 2009 introduced a new section 214A in the Ordinance regarding ‘condonation of time limitation’. This section states:
“Where any time or period has been specified under any of the provisions of the Ordinance or rules made there under within which any application is to be made or any act or thing is to be done, the Board may, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate.
Explanation, For the purpose of this section, the expression “any act or thing is to be done” includes any act or thing to be done by the taxpayer or by the authorities specified in section 207.
Provided that the Board may, by notification in the official Gazette, and subject to such limitations or conditions as may be specified therein, empower any Commissioner or Chief Commissioner under this Ordinance to exercise the powers under this section in any case or class of cases.”
Can the concept of condonation as referred to in this Section apply in the manner that application of Section 111(2) read with Section 122(2) or (4) in the manner referred above is overridden. In other words, can there be an analogy that Board may decide under this section that for assets relating to
Section 111(2) provisions of limitation prescribed in Section 122(2) or (4) of the Ordinance will not apply. The apparent answer is in negative.
Any assertion to this effect is not the correct application of law as this ‘general’ provision of law cannot override the concept of time limitation for assessment in a ‘particular case’. If any such application of law is made then whole concept of time limitation will be ruined, as it would mean that in any case Board may change the concept of limitation. There is a concept of finality of assessment that has been accepted in all decisions of the Supreme Courts in India and Pakistan. Further if this condonation principle would have been correct and applicable then there was no reason to specifically provide for an amendment of limitation period in section 114(5) for non-filers. This means that time limitation cannot be extended by applying ‘condonation’ provisions. As stated above this proposition is not correct and conceivable.
The worst situation which we consider is practically, legally and socially unacceptable, will be a general notification by the Board that in all cases where provisions of Section 111(2) is applicable, the provisions of Section 122(2) and (4) will not be applicable. This would mean that a specific provision of law is being overridden by a secondary regulation being a notification by the Board. This is totally untenable.
This represents that Section 214A has no effect on Section 111(2) of the Ordinance. The immunity and amnesty exists that cannot be taken away by any misapplication of law.
Discussion in the aforesaid paragraphs may be summarized as under:
— Source of income or asset is related to particular year therefore in the cases where a return has been filed, amendment/reopening under Section 122 can only be made within five years. Resultantly income or assets discovered in the current year which relates to any period prior to five years cannot be taxed;
— In the case of a person being a non-filer, this time limitation after July 1, 2016 is ten years; however, whether or not such time period of ten instead of five years can be applied for years prior to 2016 is highly questionable and benefit of doubt lies with the non-filer;
— If the discovery in the current year is in a form different from the one in which it was in the year it relates and if it is proven that this changed form has been acquired from that source then time limitation will also apply to the changed form; and
— Section 214A of the Ordinance relating to condonation of limitation cannot be applied to change this substantive legal provision.
The aforesaid discussion concludes that income or asset whether in or outside Pakistan created from any source prior to five years cannot be taxed under the present law. Resultantly the question is whether or not, is there any fiscal condition for Pakistan tax residents to incorporate offshore assets, sourced prior to five years in their Pakistan tax compliance. This important subject needs to be clarified for facilitating Pakistani tax citizens and tax residents.Syed Shabbar Zaidi, "Undisclosed income/assets: Time limitation and right of taxation," Business Recorder. 2017-11-30.
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