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“All Citizens are Equal before Law and are Entitled to Equal Protection of Law”-Article 27 of the Constitution of the People’s Republic of Bangladesh

Issue No: 175
January 30, 2005

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Star Law analysis

Self-Assessment in income-tax system: an observation

Md Zahidul Islam

The regular income-tax system involves filing of a return of income with the income-tax Department along with the statement of accounts maintained, if any, production and examination of books of accounts, determination of total income, issue of a demand notice for payment of tax and finally its payment. As this regular procedure is a lengthy and cumbersome one especially for assessees of low-income groups, the National Board of Revenue (NBR) in 1964- 65 introduces an alternative method, which is known as self- assessment procedure in our income tax system. This procedure, however, proves unsuccessful and ceases to run. After the evolution of Bangladesh it is reintroduced in 1981. The sections 83A, 83AA and rule 38 of the Income Tax Ordinance, 1984 provide all about self-assessment procedure.

In a self-assessment system a person is required to file his/her return along with the evidence of payment of tax payable by him/her, assessed by himself/herself. If the assessee does the assessment and files required documents carefully following the guidelines laid down in sections 83A, 83AA of Income Tax Ordinance, 1984 and rule 38 made there-under, the Deputy Commissioner of Taxes (DCT) or any other official authorised by him/her shall receive the return and will issue a receipt of the return with his/her signature and official seal affixed thereon and the said receipt shall constitute an order of assessment which means the income of and the tax payable by the assessee have been duly assessed.

Who can carry out self-assessment?
Every assessee, whose income is chargeable to tax under any head, may avail of the benefit of the self-assessment procedure. The returns should be filed on or before-
*By an individual assessee by the 30th of September next following the income year.
*By a company by the 15th of July next following the income year or, where 15th July falls before the expiry of 6months from the end of the income year, before the expiry of such 6 months. [Section 75(2) C].

Process of paying tax under the self-assessment scheme
Where the assessee is not a Private Limited Company
The assessee has to-
*Super-scribe 'Self-assessment' on the top of the return form.
*File it by the 30th of September next following the income year.
*Pay on or before the date the tax amount calculated at the rates applicable to the total income shown in the return.
*If he/she is an individual assessee with a statement of assets and liabilities in the form specified in rule 25.
*Where income is derived from business or profession and books of accounts have been maintained, the return shall accompany a copy of the trading, profit and loss account and balance sheet.
*Where no books of account have been maintained, the return shall accompany a statement showing the particulars of income and expenditure and a bank certificate from a schedule bank confirming maintenance of an account either in the name of the assessee or in the name of the business or profession in the year of commencement of the business.
*Where income is derived from any head other than business or profession, the return shall accompany a statement showing particulars of income.
*The return is to be duly verified by the assessee and found to be correct and complete in all respects.

But the self-assessment return will not be accepted if it shows-
*Loss or less income than last assessed income or income below the taxable limit.
*Making or accepting gifts or any tax-free income.

Accordingly, the receipt of any return submitted in accordance with these provisions shall be deemed to be an order of assessment. However, nothing in this rule shall apply to a new assessee deriving income from business or profession whose return shows an income less than 15% of the capital invested in business or profession.

Self-assessment for Private Limited Companies
A private limited company also may file return under the self-assessment scheme .The self-assessed return will be accepted if the following conditions are satisfied: -
*The returns should be filed on or before 15th July next following the income year or, where 15th July falls before the expiry of 6 months from the end of the income year, before the expiry of such 6 months. [Section 75(2) C].
*Income shown in the return is higher by not less than 10% of the last assessed income and has also increased by at least a further 10% for each preceding assessment year in respect of which the assessment is pending.
*Tax is paid on the basis of the declared income or on fifty thousand taka, whichever is the higher, on or before the date on which return is filed.
*The return shall accompany a copy of the accounts of the company audited by a Chartered Accountant.

Hence, the DCT shall assess total income of the assessee on the basis of the return and communicate the assessment order to the assessee within 30 days next following.

Realising a taxpayer-friendly procedure
Self-Assessment procedure proves a simple and easy one in the sense that the assessee was assessed on the basis of his return submitted. There is no provision for further audit or enquiry. In other words, there is little chance to get harassed. The DCT, however, shall make an audit only when a return filed by an individual shows the income as 15% higher, and in case of a private limited company, 20% higher than the last assessed income.

Penalty measures in Self-Assessment
Indeed, a member of a civilised society takes paying taxes as a moral responsibility, and feels that it augments his social dignity. Regrettably, in our country, the mentality to pay taxes as a civil responsibility has not grown up yet. The more one can evade taxes, the cleverer one feels oneself to be. And more regrettably, such evading or avoiding tax does not cast any social stigma on them, rather they in course of time become leaders of the land. The penalty provisions in Self-Assessment system, therefore, bears rationale. According to penalty provisions, if any definite information regarding concealment of income comes to the DCT, he usually orders for fresh assessment, and the penalty for such concealment of income or furnishing inaccurate particulars of income is five times the tax sought to be evaded.

Though having the stern penalty measures, an honest assessee should not feel uncomfortable with the self-assessment scheme. As a matter of fact, this scheme of self-assessment has been taken to relieve the assessee of procedural formalities. If understood properly, taxpayers certainly will embrass it cordially. Undoubtedly it deserves that welcome.

Md Zahidul Islam, a legal researcher, is currently working for ERGO (Legal Counsels), Dhaka.



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