Commissioner can revise assessments where income is under-assessed, tax is misclassified or revenue interests are prejudiced
The Federal Board of Revenue (FBR) has outlined the powers of the Commissioner to amend or further amend tax assessment orders for Tax Year 2027 under Section 122 of the Income Tax Ordinance, 2001.
The FBR’s Income Tax Ordinance, updated up to June 30, 2026, applies to Tax Year 2027, covering July 1, 2026 to June 30, 2027.
Under Section 122, the Commissioner may amend an assessment order issued or treated as issued under Section 120 or an assessment made under Section 121 by making alterations or additions considered necessary.
Five-year time limit for amendments
The Ordinance provides that an assessment order generally cannot be amended after five years from the end of the financial year in which the Commissioner issued, or was deemed to have issued, the assessment order.
Where an assessment has already been amended, the Commissioner may further amend it as many times as necessary within the later of five years from the end of the financial year of the original assessment or one year from the end of the financial year in which the amended assessment was issued.
Grounds for amending assessment
Section 122 allows amendment of an assessment where, based on an audit or definite information, the Commissioner is satisfied that:
• income chargeable to tax has escaped assessment;
• total income has been under-assessed;
• income has been assessed at an excessively low tax rate;
• excessive relief or refund has been granted; or
• an amount has been misclassified under a head of income.
The Commissioner may also amend or further amend an assessment where it is considered erroneous and prejudicial to the interests of revenue, subject to the relevant provisions of the Ordinance.
The law further provides that, for matters not disputed in an appeal, the Commissioner has the power to amend or further amend an assessment under the revenue-interest provision.
Revised returns treated as amended assessments
Where a taxpayer submits a revised return under Section 114(6) or 114(6A), the Commissioner is treated as having made an amended assessment of taxable income and tax payable according to the revised return.
The revised return itself is treated, for the purposes of the Income Tax Ordinance, as an amended assessment order issued by the Commissioner on the day it was furnished.
What constitutes definite information?
Section 122 broadly defines definite information. It includes information relating to sales or purchases of goods, receipts from services and other taxable receipts.
It can also cover information concerning the acquisition, possession or disposal of money, assets or valuable articles, investments made and expenditure incurred by the taxpayer.
Taxpayer must be given an opportunity to be heard
The FBR has also specified an important procedural safeguard. No assessment can be amended or further amended under Section 122 unless the taxpayer has been provided an opportunity of being heard.
An order must generally be made within one year of the issuance of the show-cause notice. The Commissioner may extend this period for recorded reasons, but the extension cannot exceed 90 days.
Certain periods are excluded from the calculation, including periods covered by a stay order or Alternative Dispute Resolution proceedings, as well as proceedings relating to agreed assessment under Section 122D. An adjournment taken by the taxpayer for up to 60 days is also excluded.
Amended order must disclose revised tax liability
After making an amended assessment, the Commissioner must issue an amended assessment order to the taxpayer as soon as possible.
The order must specify the amended taxable income, amended tax payable, tax already paid, if any, and the time, place and manner for filing an appeal.
An amended assessment order is treated in all respects as an assessment order under the Income Tax Ordinance, except for the specific limitation concerning the Commissioner’s amendment powers.