KARACHI – The Federal Board of Revenue (FBR) has taken a significant step toward improving tax compliance by announcing its intention to issue assessment notices covering the past ten years to potential taxpayers and individuals who have failed to file a tax return for any of the last five years.
The move is in line with the FBR’s recent update to the Income Tax Ordinance of 2001.
Under the revised Section 121 of the Income Tax Ordinance, 2001, the Commissioner of Inland Revenue is now authorized to issue assessment notices to new taxpayers and those who have failed to file returns in any of the past five years. This development signifies the government’s commitment to enhance tax compliance and broaden the taxpayer base.
Section 121 of the updated Income Tax Ordinance, 2001, defines the process for best judgment assessment:
Sub-Section (1): Where a person fails to:
Furnish a statement as required by a notice under sub-section (5) of section 115.
Furnish a return of income in response to a notice under sub-section (3) or sub-section (4) of section 114.
Furnish a return as required under section 143 or section 144.
Furnish the statement as required under section 116.
Produce accounts, documents, and records required to be maintained under section 174 or any other relevant documents or evidence needed for the assessment of income and determination of tax, the Commissioner may, based on available information or material, make an assessment of the taxable income or income of the person and the tax due thereon.
Additionally, any assessment made under this section will be considered to have been made on the basis of the return or revised return filed by the taxpayer, and it shall be of no legal effect.
Sub-Section (2): After making an assessment under this section, the Commissioner will issue an assessment order to the taxpayer. The assessment order will specify the taxable income, the amount of tax due, any tax paid, and the details of the appeals process.
Sub-Section (3): An assessment order under this section will only be issued within five years after the end of the tax year or income year to which it relates. However, the provision includes a proviso stating that if a notice for furnishing a return of income is issued for one or more of the last ten completed tax years, an assessment order can only be issued within two years from the end of the tax year in which such notice is issued.
The move to issue assessment notices covering the last ten years to potential taxpayers and non-filers is aimed at improving tax collection and compliance in Pakistan. It encourages individuals to fulfill their tax obligations and helps broaden the taxpayer base. The government, through the FBR, is committed to ensuring a fair and effective tax system that benefits the economy and the nation as a whole. This step reinforces the importance of tax compliance in building a stronger and more prosperous Pakistan.
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