KARACHI: Commissioners of Inland Revenue have been empowered to amend assessment on the basis of best judgment and make dis-allowances without specific supporting evidence.
According to interpretation of Finance Bill, 2020 by EY Ford Rhodes Chartered Accountants, the provisions of Section 122 of Income Tax Ordinance, 2001, since their inception have been the subject of controversies between the taxpayers and the tax authorities.
They contain two separate sets of provisions viz. sub-section (5) and sub-section (5A). Under the former, the Commissioner is authorized to amend an assessment based on ‘definite information’ “acquired from an audit or otherwise” that –
• any income chargeable to tax has escaped assessment; or
• total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or
• any amount under a head of income has been mis-classified.
It is pertinent to point out that the above provisions are borrowed from Section 65 of the Income Tax Ordinance, 1979 (since repealed) where they were taken from Section 34 of the erstwhile Income Tax Act, 1961.
However, the concept of audit has been introduced via the Ordinance and therefore, the acquisition of ‘definite information’ was also linked to audits conducted by the tax authorities in addition to from any other source.
As such, in order to make amendment in assessment in terms of sub-section (5) of Section 122, possession of ‘definite information’ either through audit or otherwise, is a pre-requisite.
The Bill proposes to amend the provisions of sub-section (5) of Section 122 to the effect that even if after an audit, definite information could not be acquired by the Commissioner, he can still amend the assessment on the basis of his best judgment and make disallowances without specific supporting evidence.
