KARACHI: The Federal Board of Revenue (FBR) has served recovery notices to two stock brokers for the Rs7 billion of evasion.
Sources said that the FBR unearthed Rs18 billion worth of undisclosed transactions by at least two stockbrokers. It has already served notices to the two brokers for the tax recovery.
Official documents confirmed that the Regional Tax Office (RTO) Karachi served notices to two trading right entitlement certificate holders for the recovery of seven billion rupees.
Sources said the RTO invoked section 111(1)(a), (b) and (d) of Income Tax Ordinance 2001, which mainly deals with unexplained income or assets, to raise the tax demand.
The FBR conducted scrutiny of declaration submitted by the stockbrokers for the year 2015-16. The cases of both the stockbrokers were selected by the FBR through computerised random balloting under Section 214C. The details of audit observations showed that the FBR retrieved details of transactions from a bank branch located in the premises of Pakistan Stock Exchange (PSX).
In case of one stockbroker, the FBR detected suppression of sales and concealment of investment to the tune of Rs13 billion.
The tax department asked the taxpayer to provide complete details of investors and transactions, but the taxpayer failed to provide the details within the stipulated timeframe. Therefore, the tax unit issued recovery notice of Rs4.6 billion to the taxpayers.
In another case, the tax authorities identified undeclared transactions of Rs5.9 billion based on information of withholding tax on brokerage commission.
The FBR asked the brokers to provide the details of each investor to adjust the amount claimed as withholding tax.
However, the broker failed to provide the details of investors. Therefore, the FBR rejected the claim and added the total transaction amount for the calculation of taxes and issued notice for recovery of Rs2.3 billion.
Pakistan Stock Exchange collected withholding tax from brokerage commission on transactions of sales and purchase of shares under a law (section 233(A)(1) of the income tax ordinance 2001). The FBR sources said the withholding tax is final tax. However, the taxpayer is required to provide details of investment as well as investors in case of adjustment or refund.