In a recent development, the Federal Board of Revenue (FBR) has clarified the provisions of Section 125 of the Income Tax Ordinance, 2001, shedding light on the authority granted to the tax office in issuing assessment orders related to disputed property.
The Income Tax Ordinance, 2001, which has been updated up to June 30, 2021, incorporated amendments introduced through the Finance Act, 2021.
Section 125 of the Income Tax Ordinance, 2001, reads as follows:
“125. Assessment in relation to disputed property.— Where the ownership of any property, the income from which is chargeable to tax under this Ordinance, is in dispute in any Civil Court in Pakistan, an assessment order or amended assessment order in respect of such income may be issued at any time within one year after the end of the financial year in which the decision of the Court is made.”
This provision empowers the tax office to take action in cases where the ownership of a property generating taxable income is in dispute within the jurisdiction of a Civil Court in Pakistan. The assessment order or amended assessment order related to the income from such disputed property can be issued within one year after the conclusion of the financial year in which the court makes its decision.
The objective behind Section 125 is to ensure the timely and effective assessment of income tax in cases where property ownership disputes may have delayed the tax assessment process. By providing a clear timeframe of one year following the court’s decision, the provision seeks to strike a balance between the need for tax collection and the legal complexities associated with property disputes.
Tax experts suggest that this provision is particularly crucial in streamlining the assessment procedures, preventing undue delays caused by legal battles over property ownership. It allows the tax authorities to proceed with their assessment duties without being hindered by protracted legal disputes.
It is essential for taxpayers and property owners to be aware of Section 125 and its implications. Failure to comply with the assessment orders issued under this provision may lead to legal consequences, including penalties and fines. As such, individuals involved in property disputes that impact income tax assessments should seek professional advice to navigate the complexities of tax laws and ensure compliance with the relevant regulations.
The FBR’s clarification on Section 125 serves as a reminder of the government’s commitment to maintaining a fair and efficient tax system. By providing a legal framework to address challenges arising from disputed property ownership, the tax authorities aim to uphold the integrity of the tax collection process while respecting the legal rights of the individuals involved in such disputes.
Section 125 of the Income Tax Ordinance, 2001, plays a pivotal role in facilitating the timely assessment of income tax in cases where property ownership is in dispute. The provision reflects the government’s efforts to balance the interests of tax collection and legal justice, ensuring a smooth functioning of the taxation system in Pakistan.
