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Tag: assessment

  • What is provisional assessment of taxable income?

    What is provisional assessment of taxable income?

    A provisional assessment is calculation of tax due on a person who has failed to file income tax return for a tax year. A commissioner of Inland Revenue of Federal Board of Revenue (FBR) has been empowered to make provisional assessment of such person under Income Tax Ordinance, 2001.

    According to Tenth Schedule of Income Tax Ordinance, 200, the Provisional assessment is:

    (1) Where for a tax year person’s tax has been collected or deducted in accordance with rule 1 and the person fails to file return of income for that tax year within the due date provided in section 118 or as extended by the Board, the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114, within sixty days of the due date provided in section 118 or as extended by the Board make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon.

    (2) In making the provisional assessment under sub-rule (1), the Commissioner shall impute taxable income on the amount of tax deducted or collected under rule 1 by treating the imputed income as concealed income for the purposes of clause (d) of sub-section (1) of section 111:

    Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.”

    “Explanation.- For the removal of doubt it is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub-section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, section of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.”

  • Fee for filing tax appeals increased substantially

    Fee for filing tax appeals increased substantially

    ISLAMABAD: A substantial increase has been made to fee amount for filing appeal against an assessment order. The increase has been made part of statute through Finance Act, 2020.

    Officials at Federal Board of Revenue (FBR) said that an amendment to sub-section 4 of the Section 127 of Income Tax Ordinance, 2001 has been made through Finance Act, 2020. Prior to this amendment the fee amount of Rs1,000 was prescribed for all taxpayers for filing appeal.

    However, through the amendment the prescribed fee shall be Rs5,000 in case of company and Rs2,500 in case of other than a company.

    The fee for filing appeal in other than assessment cases has also been increased. The fee in case of company has been increased to Rs5,000 from Rs1,000. In case of other than company the fee amount has been increased to Rs1,000 from Rs200.

    Another amendment has been made to section 131 of the Income Tax Ordinance, 2001 regarding fee for filing appeal before appellate tribunal.

    Prior to the amendment an amount of Rs2,000 was prescribed as fee for filing appeal. However, post amendment the prescribed fee shall be Rs5,000 in case of a company and Rs2,500 in case of other than a company.

  • Assessment oversight committees formed to settle taxpayers’ cases

    Assessment oversight committees formed to settle taxpayers’ cases

    ISLAMABAD: Assessment oversight committees have been formed at all tax offices of Inland Revenue in order to settle the cases of taxpayers in expeditious manner, officials at Federal Board of Revenue (FBR) said.

    The committees have been formed following amendment made to Income Tax Ordinance, 2001 through Finance Act, 2020, which was recently approved by the National Assembly.

    The committee shall comprise the following tax authorities having jurisdiction over the taxpayer, namely:

    (a) the Chief Commissioner Inland Revenue;

    (b) the Commission Inland Revenue; and

    (c) the Additional Commissioner Inland Revenue.

    A new section 122D has been inserted to Income Tax Ordinance, 2001 for agreed assessment in certain cases.

    Under this section where as taxpayer, in response to a notice under sub-section of Section 122, intends to settle his case, he may file offer of settlement in the prescribed form before the assessment oversight committee in addition to filing reply to the commissioner.

    The committee after examining the offer may call for the record of the case and after affording opportunity of being heard to the taxpayer, may decide to accept or modify the offer of the taxpayer through consensus and communicate its decision to the taxpayer.

    Where the taxpayer is satisfied with the decision of the committee:

    (a) the taxpayer shall deposit the amount of tax payable including any amount of penalty and default surcharge as per decision of the committee;

    (b) the commissioner shall amend assessment in accordance with the decision of the committee after tax payable including any amount of penalty and default surcharge as per decision of the committee has been paid;

    (c) the taxpayer shall waive the right to prefer appeal against such amended assessment; and

    (d) no further proceedings shall be undertaken under this ordinance in respect of issues decided by the committee unless the tax has not been deposited by the taxpayer.

    According to the amendment, where the committee has been able to arrive at the cons or where the taxpayer is not satisfied with the decision of the committee, the case shall be referred back to the commissioner for decision on the basis of reply of the taxpayer in response to notice under section 122 notwithstanding proceedings or decision, if any, of the committee.

    This section shall not apply in cases involving concealment of income or where interpretation of question of law is involved having effect on other cases.

    Further, the FBR may make rules regulating the procedure of the committee and for any matter concerned with, or incidental to the proceedings of the committee.

  • FTO committee expresses distress over tax recovery from bank accounts

    FTO committee expresses distress over tax recovery from bank accounts

    ISLAMABAD: The advisory committee of the Federal Tax Ombudsman (FTO) has expressed distress over attachment of bank accounts and coercive recovery by Federal Board of Revenue (FBR) from bank accounts of taxpayers.

    A meeting of the advisory committee of the FTO was held recently and discussed various issues related to refunds and coercive recovery of the FBR from bank accounts of taxpayers, according to the FTO new letter issued last month.

    The committee expressed great distress about the attachment of bank accounts and coercive recoveries. The participants suggested that attachment of accounts may be affected only after Tribunal’s decision.

    On the issue of refunds, the participants observed following:

    Delayed refund is a serious issue which continuously poses challenge to the survival of business community.

    Refund amount should be paid after two stages of appeals in favor of taxpayer, even if department then goes to reference before the higher court.

    An online system for tracking of refund by claimants should be put in place by FBR.

    A system of adjustment of refund in the next return should be devised to get rid of the chronic issue of delayed refund.

    Even after verification of claim, cheques are not issued in time.

    The refund payment system ought to be dovetailed with magnitude of amount as 70-75 percent of refunds fall in the category of up to Rs100,000 only and need automated settlement.

    Compensation for delayed refunds should be ensured as delayed has its own cost.

    Regarding assessment by the tax officials, the FTO advisory committee observed following:

    Arbitrary, coercive and malafide assessment is the root cause of all subsequent tax maladministration and victimization of business community.

    There is no accountability on arbitrary, coercive and malafide assessment.

    There should be some check on the quality of assessment made by an assessing officer.

    At times undated orders are issued.

  • Income Tax Ordinance 2001: Commissioner IR empowered to make assessment for non-compliant taxpayers

    Income Tax Ordinance 2001: Commissioner IR empowered to make assessment for non-compliant taxpayers

    KARACHI: In a significant move to enhance tax compliance, the Federal Board of Revenue (FBR) has updated the Income Tax Ordinance, 2001, granting Commissioners of Inland Revenue the authority to conduct ‘best judgement assessment’ for taxpayers who fail to file their annual returns and meet their tax obligations.

    Under Section 121 of the amended ordinance, the commissioner is empowered to initiate a best judgement assessment in several scenarios. These include a taxpayer’s failure to furnish a statement as required by a notice under sub-section (5) of section 115, failure to submit a return of income in response to a notice under sub-section (3) or sub-section (4) of section 114, and failure to furnish a return as required under section 143 or section 144, among others.

    The section stipulates that if a taxpayer neglects to produce necessary accounts, documents, and records required for assessment, the Commissioner may, based on available information and to the best of their judgement, assess the taxable income and determine the corresponding tax liability. Any such assessment is considered to have been made independently of the taxpayer’s filed return or revised return, rendering the latter of no legal effect.

    Upon completing the assessment, the Commissioner is obligated to issue an assessment order to the taxpayer promptly. The order must include details such as the taxable income, the amount of tax due, any tax payments made, and information regarding the process of appealing the assessment order, including the time, place, and manner.

    The revised ordinance also imposes a time constraint on the issuance of assessment orders under this section. Sub-section (3) dictates that such orders can only be issued within five years after the end of the tax year or the income year to which they relate. However, an exception is provided in cases where a notice for filing a return of income under sub-section (4) of section 114 is issued; in such instances, the assessment order must be issued within two years from the end of the tax year in which the notice is served.

    The FBR’s move is aimed at bolstering the country’s tax collection efforts by ensuring that taxpayers fulfill their obligations and discouraging non-compliance. The provision of ‘best judgement assessment’ grants tax authorities the tools necessary to make informed decisions in the absence of complete and accurate information from non-compliant taxpayers.

  • Income Tax Ordinance 2001: Notice can not be issued after 180 days for incomplete return

    Income Tax Ordinance 2001: Notice can not be issued after 180 days for incomplete return

    KARACHI: A commissioner of Inland Revenue is required to send notice to taxpayers for incomplete annual income returns within 180 days from end of financial year in which return was filed.

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  • Income Tax Ordinance, 2001: Commissioner IR can issue assessment order on day return filed

    Income Tax Ordinance, 2001: Commissioner IR can issue assessment order on day return filed

    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.

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