The Administrative Review (प्रशासकिय पुनरावलोकन) process in Nepal is a crucial first step for taxpayers who are dissatisfied with a tax assessment or decision made by a tax officer of the Inland Revenue Department (IRD). It provides an internal departmental mechanism to challenge an order before escalating the dispute to an independent judicial body like the Revenue Tribunal.
The framework for Administrative Review is primarily governed by the respective tax laws, notably Section 115 of the Income Tax Act, 2058 (2002), and similar provisions in the Value Added Tax (VAT) Act and the Excise Duty Act.
Purpose and Scope
The Administrative Review mechanism is designed to achieve the following:
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Internal Correction: Allow the tax administration to review its own decisions and correct any factual errors, misapplication of law, or procedural lapses made by the assessing officer.
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Dispute Resolution: Resolve disputes swiftly and cost-effectively within the department, reducing the burden on the formal court system (Revenue Tribunal).
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Fairness: Ensure the taxpayer has a right to be heard by a higher-level authority within the IRD, typically the Director General (or an officer authorized by the Director General).
This review can be applied against various departmental decisions, most commonly an Amended Tax Assessment (full audit/re-assessment) under Section 101, but also decisions related to interest, penalties, or fines.
Key Steps and Time Limits
The administrative review process is strictly bound by certain timelines and procedural requirements:
Step 1: Application Filing
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Who to Apply to: The application for Administrative Review must be submitted to the Director General (DG) of the Inland Revenue Department (or the head of the concerned office, depending on the tax law).
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Time Limit: The taxpayer must file the application within 35 days from the date of receiving the notice of the assessment or decision they wish to dispute.
Step 2: Mandatory Deposit Requirement
The application for Administrative Review is only valid upon mandatory deposit of the assessed tax, fees, and penalties:
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Undisputed Amount: 100% of the tax, fees, and penalties that the taxpayer agrees to pay.
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Disputed Amount: 25% of the tax, fees, and penalties that the taxpayer disputes.
Step 3: Review and Decision by the IRD
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Examination: The reviewing authority (DG or designated officer) thoroughly examines the application, the original assessment order, the evidence submitted by the taxpayer, and any additional documents requested.
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Time Limit for Decision: The DG must issue a decision on the administrative review application within 60 days from the date of filing.
Outcome and Deemed Rejection
The review process can result in three outcomes:
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Confirmation: The DG finds the original tax officer’s assessment to be correct and confirms the decision.
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Variation/Set Aside: The DG agrees with the taxpayer’s claim, wholly or partly, and sets aside or varies the original assessment, often ordering a reassessment.
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Deemed Rejection: If the DG fails to provide a decision within the 60-day time limit, the application is statutorily deemed to be rejected by the Inland Revenue Department.
In case of Confirmation or Deemed Rejection, the taxpayer is then legally entitled to pursue the next level of appeal.
Appeal to the Revenue Tribunal
The administrative review is a mandatory prerequisite for an appeal to the Revenue Tribunal in Nepal. If the taxpayer remains dissatisfied with the DG’s decision (either an explicit rejection/confirmation or a deemed rejection), they may file an appeal to the Revenue Tribunal.
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Timeline to Tribunal: The appeal must be filed within 35 days of receiving the DG’s decision or the date the application is deemed rejected.
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Deposit for Tribunal: A further deposit is required for the Revenue Tribunal appeal, but the 25% amount already deposited for the Administrative Review is credited against the new requirement.
The Administrative Review, therefore, serves as a vital filter in the tax dispute resolution process, offering taxpayers a structured, in-house opportunity to challenge departmental decisions before incurring the higher costs and longer timelines associated with formal judicial appeal.