The Federal Board of Revenue (FBR) in Pakistan has granted the Commissioner Inland Revenue the authority to issue assessment orders against a tax return on the very date it is filed.
This development is part of the recent updates to the Income Tax Ordinance of 2001, which elucidates the assessment procedures concerning taxpayers’ income tax affairs by tax authorities.
Section 120 of the Income Tax Ordinance, 2001 outlines the provisions related to assessments:
Sub-Section (1): When a taxpayer submits a complete income tax return (excluding a revised return under sub-section (6) of section 114) for a tax year ending on or after July 1, 2002:
• (a) The Commissioner shall be considered to have made an assessment of taxable income for that tax year and the corresponding tax due, in line with the amounts specified in the return.
• (b) The return shall be regarded, for all intents and purposes of this Ordinance, as an assessment order issued to the taxpayer by the Commissioner on the day the return was filed.
Sub-Section (1A): Irrespective of the provisions in sub-section (1), the Commissioner may conduct an audit of a person’s income tax affairs under section 177, with all the relevant provisions of that section applying accordingly.
Sub-Section (2): A return of income will be deemed complete if it complies with the provisions of sub-section (2) of section 114.
Sub-Section (3): If a return of income filed is incomplete, the Commissioner will issue a notice to the taxpayer, indicating the deficiencies (except for an incorrect amount of tax payable on taxable income, as stated in the return, or short payment of tax payable). The taxpayer will be directed to provide the required information, particulars, statements, or documents by a specified date in the notice.
Sub-Section (4): If a taxpayer fails to fully comply with the notice’s requirements under sub-section (3) by the due date, the furnished return will be considered invalid, as if it had not been filed.
Sub-Section (5): If, in response to a notice under sub-section (3), the taxpayer fully complies with the requirements of the notice by the due date, the return will be treated as complete on the day it was filed, and the provisions of sub-section (1) will apply accordingly.
Sub-Section (6): No notice under sub-section (3) shall be issued after 180 days from the end of the financial year in which the return was filed, with the provisions of sub-section (1) applying accordingly.
This newly empowered authority of the Commissioner Inland Revenue aims to expedite the assessment process and enhance efficiency in the tax system. The changes reflect the government’s commitment to promoting transparency and facilitating the tax assessment procedure for taxpayers while ensuring compliance with tax regulations.
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