12/22/2025

Who files return?

What happens after filing?
If return not filed/wrong?
Special situations: foreign assets/provisional.
Court orders/appeals

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Income tax authorities [Sec. 207]

There shall be following Income Tax authorities:-
(a) Federal Board of Revenue (Board);
(b) Chief Commissioner Inland Revenue;
(c) Commissioner Inland Revenue;
(d) Commissioner Inland Revenue (Appeals);
(e) Officer of Inland Revenue
(i) Additional Commissioner Inland Revenue;
(ii) Deputy Commissioner Inland Revenue;
(iii) Assistant Commissioner Inland Revenue;

Who is required to file a return of income?

The following persons are required to furnish a return of income for a tax
year:
1. Every company;
2. Every person (other than a company) whose taxable income for the
year exceeds the maximum amount that is not chargeable to tax (rs
600,000)
3. Non-profit organization;
4. Every person whose income for the year is subject to final taxation.
5. Persons or classes of persons notified by the board with the approval of
the minister incharge.

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In addition to the above, return is also required to be filed by the person

who,-
(i) Has been charged to tax in respect of any of the two preceding tax
years;
(ii) Claims a loss carried forward for a tax year;
(iii) Owns immovable property with a land area of 500 square yards or more
or owns any flat located in areas falling within the municipal limits
existing immediately before the commencement of local government
laws in the provinces; or areas in a cantonment; or the islamabad
capital territory.
(iv) Owns immoveable property with a land area of five hundred square
yards or more located in a rating area;
(v) Owns a flat having covered area of two thousand square feet or more
located in a rating area;
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VI. Owns a motor vehicle having engine capacity above 1000 CC;
VII. Has obtained national tax number or
VIII. Is the holder of commercial or industrial connection of electricity where the
amount of annual bill exceeds rs.500,000.
IX. Is a resident person registered with any chamber of commerce and industry or any
trade or business association or any market committee or any professional body
including pakistan engineering council, pakistan medical and dental council,
pakistan bar council or any provincial bar council, institute of chartered
accountants of pakistan or institute of cost and management accountants of
pakistan.
X. Is a resident person being an individual required to file foreign income and assets
statement under section 116a; or
XI. Persons or classes of persons notified by the board (with the approval of the
minister in-charge)
XII. Every individual whose income under the heading ‘income from business’ exceeds
rs.300,000 but does not exceed rs. 400,000 is also required to file tax return. 6

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Persons not liable to file tax return under section 115.

The following persons are granted immunity from filing of tax return:
Following persons:
1. A widow;
2. An orphan below the age of twenty-five years;
3. A disabled person; or
4. A non-resident person.
Shall not be required to furnish a return of income for a tax year solely by reason of:
1. Owning immovable property with a land area of 500 square yards or more or any flat
located in areas falling within the municipal limits, existing immediately before the
commencement of local government laws in the provinces; or areas in a cantonment;
or the islamabad capital territory.
2. Owns immoveable property with a land area of five hundred square yards or more
located in a rating area;
3. Owns a flat having covered area of two thousand square feet or more located in a
rating area;
4. Owns a motor vehicle having engine capacity above 1000 cc; 7

Scenario-Based Question (Tax Year 2025)

For each of the following five independent situations, state with reasons whether the
person is required to file a return of income or not required, in light of Sections 114 &
115 of the Income Tax Ordinance, 2001.
a. Mr. Ali works in a multinational company in Karachi and earns a gross salary of Rs.
1,500,000 during the year. He also owns a 1300 CC Toyota Corolla purchased two
years ago.
b. XYZ Welfare Trust, a registered non-profit organisation, receives donations from local
businesses and uses them for running a free school. Although it has no taxable
income, the trustees are unsure whether filing is still compulsory.
c. Mrs. Sara, a widow, lives in Islamabad with her children. She has no taxable income
but owns a 600-square-yard residential plot inherited from her late husband.
d. Mr. Bilal, a small shopkeeper in Lahore, earns Rs. 280,000 profit from his kiryana
store during the year. He does not own a motor vehicle, does not possess an NTN,
and has no membership in any business association.
e. NOVA (Pvt) Ltd, a private limited company incorporated in 2025, has not yet
commenced business operations. Despite having no income or assets, the company
secretary wants to know if the company is still obliged to file a return. 8

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Suggested Answers
a. Taxable salary exceeds the basic exemption limit. Additionally, he owns a car above
1000 CC which independently makes return filing compulsory.→ Mr. Ali must file a
return of income.
b. Every non-profit organisation is legally bound to file a return, regardless of taxable
income or loss.→ XYZ Welfare Trust must file a return.
c. Normally, ownership of a 600 sq. yard property triggers compulsory [Link] Section
115 grants immunity to widows, meaning property ownership alone does not create
filing liability.→ Mrs. Sara is NOT required to file a return.
d. His business income is only Rs. 280,000, which is below the Rs. 300,000 threshold. He
also does not meet any other compulsory filing condition.→ Mr. Bilal is NOT required
to file a return.
e. Every company, regardless of business activity or income, must file a return under
Section 114.→ NOVA (Pvt) Ltd must file a return.

Can Commissioner demand a return of income from a person for a period

of less than 12 months? Sec 114(3)
The Commissioner may, by notice in writing, require a person, or a person’s
representative, as the case may be, to furnish a return of income by the
date specified in the notice for a period of less than twelve months, where:
1. the person has died;
2. the person has become bankrupt or gone into liquidation;
3. the person is about to leave Pakistan permanently;
4. the Commissioner otherwise considers it appropriate to require such a
return to be furnished.

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Scenario-Based Question (Section 114 – Powers to Call Returns and Statements)

For each of the following independent cases, explain whether the Commissioner of Inland Revenue can issue
a notice to call for return of income, and if yes, what time limit will apply.
a. Mr. Hamid, a businessman, died in May 2025 before filing his return of income for the current tax year.
His legal heirs are uncertain whether they will receive any notice for filing.
b. NOVA Pvt. Ltd. went into liquidation in February 2025 without filing its return for tax year 2024. The
Commissioner is considering requiring its liquidator to submit a return for the incomplete year.
c. Mr. Ahsan, who has not filed returns for the last four completed tax years, is found by the Commissioner
to still be running a profitable business in Lahore. The Commissioner is deciding how many past years’
returns he can legally demand.
d. Mrs. Fatima, who has not filed any returns for the past seven completed tax years, is discovered to own a
luxury villa and receive significant undisclosed rental income. The Commissioner wants to know if he can
call returns beyond the usual five-year period.
e. Mr. Shahid, a Pakistani resident, has been living partly in Dubai and is suspected of holding foreign bank
accounts and an overseas apartment. He has never filed a return in Pakistan. The Commissioner wishes
to issue notices even for 10+ years back.

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Suggested Answers
a. if a person dies, the Commissioner can require the legal representative to furnish a
return for a period of less than 12 months up to the date of death. Since Mr. Hamid died
before filing, the Commissioner may issue notice to his heirs to submit a return for
income earned up to May 2025.
b. If a person has gone into liquidation or bankruptcy, the Commissioner can require a
return for less than 12 months. Since NOVA has gone into liquidation, the Commissioner
may issue notice to the liquidator to file return for the period ending on liquidation date.
c. Law allows Commissioner to issue notice to any person who was required to file but
failed. This can cover any of the last five completed tax years. Mr. Ahsan missed four
years, so the Commissioner can legally demand returns for all those four years.
d. If a person has not filed for any of the last 5 years, notice may be issued for up to 10
years. Mrs. Fatima has failed for 7 years. Hence, Commissioner can call returns for all 7
years (within the 10-year scope).
e. Where the person has foreign income or assets and Commissioner records reasons in
writing can demands return even for more than 10 years. Since Shahid owns foreign
assets, Commissioner may issue notices even for more than 10 years back.
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Can Commissioner demand a return of income from a person. S114(4)?

The Commissioner may, by notice in writing, require any person who, in the
Commissioner’s opinion, is required to file a return of income for a tax year or
assessment year but who has failed to do so to furnish a return of income for that
year within thirty days from the date of service of such notice or such longer or
shorter period as may be specified in such notice or as the Commissioner may allow.

If person who has filed return for any If person who has not filed return for
of the last five completed tax years. any of the last five completed tax
Any such notice may be issued in years.
respect of one or more of the last five Notice may be issued in respect of one
completed tax years or assessment or more of the last ten completed tax
years. years.

Provided further that the above time-limitation shall not apply if the
Commissioner is satisfied on the basis of reasons to be recorded in writing that a
person who failed to furnish his return has foreign income or owns foreign assets.
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Powers to demand return

Mr. Kamran has not filed return If person who has filed return for any
after TY 2019. On 15th June 2022 of the last five completed tax years
Commissioner wants to issue commissioner may issue notice for
notice for filing of return to Mr last five completed tax years.
Kamran. For how many tax years 2021
return can be demanded in the 2020
absence of any other 2019
information? 2018
2017
So returns can be demanded for any
or more of the above TY
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Powers to demand return

Mr. Kamran has not filed return If the Commissioner is satisfied on the
after TY 2019. On 15th June 2022 basis of reasons to be recorded in
Commissioner wants to issue writing that a person who failed to
notice for filing of return to furnish his return has foreign income
Mr Kamran for TY 2014 and or owns foreign assets than time limit
Commissioner is satisfied that will not be applied and commissioner
Mr Kamran has foreign income or can issue notice for demand of return
owns foreign assets in TY 2014. for any tax year on this ground.
Can commissioner issue notice to So in this case commissioner can issue
file return for TY 2014? notice to file return for TY 2014.

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Powers to demand return

Mr. Kamran has never filed If person who has not filed return for
return. On 15th June 2022 any of the last five completed tax
Commissioner wants to issue years. Notice may be issued in respect
notice for filing of return to of one or more of the last ten
Mr Kamran. For how many years completed tax years.
notice can be issued to file return So in the above case notice can be
of total income in the absence of issued from TY 2012 to 2021
any other information?

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Powers to enforce filing of returns. (S-114B )

▪ The Board shall have the powers to issue income tax general order in respect of persons
who are not appearing on ATL but are liable to file return.
▪ The income tax general order issued may entail any or all of the following consequences
for the persons mentioned therein, namely:
▪ disabling of mobile phones or mobile phone SIMS
▪ discontinuance of electricity and gas connection
▪ restriction on foreign travel from the country for a citizen of Pakistan, excluding
persons holding National Identity Card for Overseas Pakistanis (NICOP), minors,
students, persons proceeding abroad for Hajj or Umrah and such other classes of
persons as notified by the Board.
▪ The Board or the Commissioner having jurisdiction over the person mentioned in the
income tax general order may order restoration of mobile phones, mobile phone sims and
connections of electricity and gas, in cases where he is satisfied that the return has been
filed or person was not liable to file return.
▪ No person shall be included in the general order unless following conditions have been
met with, namely:
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▪ Notice under section 114(4) has been issued by commissioner

demanding return of income
▪ Date of compliance of the notice under sub-section (4) of section 114
has elapsed and
▪ The person has not filed the return.

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2.6 Restriction placed on economic transactions by certain persons (Section 114AC,

15th Schedule)
Ineligible Person means a person who is not an eligible person.
Eligible person in case of individual means a person who has filed:
i. return of income of the immediately preceding tax year and has sufficient resources
in the wealth statement in the case of an individual or in the financial statements in
the case of company/AOP respectively OR
ii. sources of investment and expenditure statement declaring sufficient resources and
furnishing explanation thereof for a particular purchase
In the case of the individual, the eligible person shall include his immediate family
members.
Sufficient resources shall mean one hundred and thirty percent (130%) of the cash and
equivalent assets comprising market value of all the assets declared by a person either in
his sources of investment and expenditure statement, or wealth statement/financial
statement filed for the latest tax year.
Immediate family members in respect of an individual, shall include his parents, spouse
and dependent children. 19

Sources of investment and expenditure statement shall mean a declaration by a person

filed on the Board‘s web portal, specifying the sources of funds for making such
transaction. This statement shall not be construed as nature and source of income for
the purposes of section 111.
Restriction for ineligible person (Subject to the Board Notification in future)
The Finance Act, 2025 has introduced the following restrictions on an ineligible person:
i. Booking, purchasing, or registering motor vehicles having invoice value exceeding Rs.7
million
ii. Registering or transferring immovable property having FBR value/DC rate exceeding
Rs.100 million
iii. Opening or maintaining securities or investment accounts having acquisition cost
exceeding Rs.50 million. This will only apply where the investment amount up to PKR
50 million shall be new investment in any financial year.
iv. Cash withdrawals from bank accounts exceeding Rs.100 million in all bank accounts
held by an individual.

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Exceptions from the above restrictions

Public companies and non-residents are only barred from making cash withdrawals and
other restrictions as above will not apply.
Exchange transactions for acquisition of vehicle/property/securities
Where an asset has been purchased by way of exchange of capital assets already
declared in the wealth statement, or financial statement, or sources of investment and
expenditure statement, the disposal of such capital assets shall be treated to be part of
cash equivalent assets to the extent of the value mentioned in the agreement.

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When a return is considered as complete? Sec 114(2)

A return of income:
1. Shall be in the prescribed form and shall contain prescribed annexures,
statements and documents. The board may prescribe different returns
for different classes of income or persons (including persons subject to
final taxation).
2. Shall state all the relevant particulars including a declaration of the
records kept;
3. Shall be signed by an individual and in other cases it shall be signed by
persons representative.
4. Shall contain evidence of payment of tax as per return.
5. Shall contain a wealth statement (u/s 116); and
6. Shall be accompanied with a foreign income and assets statement (as
required under section 116a).
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Is return filed electronically considered as correct under the law? Sec 114(2A)
A return filed electronically on web or any computer readable media will also
be treated as return.
The board may make rules for:
a) Determining eligibility of the data of returns
b) E-intermediaries who will digitize the data of returns and transmit it to the
income tax department under their digital signatures and
c) Other matters relating to electronic filing of returns, statements or
documents etc.

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Summary – Filing of Revised Return / Statement

If a taxpayer, after filing a return, discovers any omission or wrong statement, they may file
a revised return.
Conditions for filing a revised return:
a. Must be accompanied by revised accounts or revised audited accounts (if applicable).
Commissioner may waive this if not necessary.
b. Must include reasons for revision in writing, duly signed by the taxpayer.
c. Must have Commissioner’s approval in writing.
Approval not required
a. if filed within 60 days of the original return.
b. If after 60 days but Commissioner does not respond within 60 days, approval is
deemed granted.
Income/Loss restriction – Revised return cannot reduce income or increase loss already
determined by:
Best Judgment Assessment (S-121)
Amended Assessment (S-122)
Revision by Commissioner (S-122A, 122B)
Appeal or Tribunal Orders (S-129, 132, 133) 24

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How much amount is required to be paid when filing a revised return on account of
tax evaded, default surcharge and penalty?

Time of furnishing revised return Amount required to be deposited

Before receipt of notice of audit Tax short paid/evaded + default surcharge + No
penalty
During audit and before receipt of Tax pointed out by Commissioner + default
show cause notice for amendment of surcharge +25 % of penalty
assessment
After issuance of show cause notice Tax evaded + default surcharge +50% penalty [ If
for amendment of assessment this amount is paid the show cause notice shall
have no effect]

If a person files a return it will be assumed that he himself has signed it, unless he
proves otherwise.
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Scenario – Revised Return (Section 114(6) & 114(6A))

NOVA Pvt. Ltd. filed its return for Tax Year 2025 on 30 September 2025. Consider the
following independent situations and answer what is asked in each part:
(a) On 20 October 2025, NOVA discovers it omitted to declear bank profit in return filed
for tax year [Link] whether a revised return is permissible and whether
Commissioner’s approval is required.
(b) On 31 December 2026, NOVA seeks to revise by reducing taxable income below what
was already fixed in an amended assessment under [Link] whether revision
is legally allowed and explain if approval could cure the defect.
(c) On 10 December 2025, NOVA wants to files a revised return to add foreign rental
income, attaching audited accounts and reasons. NOVA applied to The Commissioner
but he does not respond for 60 days. Can NOVA revise the return without approval.
(d) During audit proceedings in January 2026, undeclared sales are pointed out. Before
any show-cause notice under s.122(9), NOVA files a revised return and deposits tax +
default surcharge + 25% of penalties. Explain whether the revision is valid and
whether Commissioner’s approval is required.
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(a) If a revised return is filed within 60 days of the original filing, no Commissioner’s
approval is needed. Must attach reasons (and revised accounts if necessary).Revision
allowed. Approval not required.
(b) A revised return cannot reduce income or increase loss below what was already fixed
in a legal order (e.g., Best Judgment, Amended Assessment, Revision by
Commissioner, Appeals, Rectification). Approval cannot cure this substantive bar.
Revision not allowed. Approval irrelevant.
(c) After 60 days, Commissioner’s approval is normally required. But if the Commissioner
is silent for 60 days, approval is deemed to be granted. Revision allowed. Approval is
deemed granted.
(d) During audit but before SCN, taxpayer may revise if it pays tax + default surcharge +
25% penalties. No separate approval is needed. Conclusion: Revision allowed. No
approval required.

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Business bank account [Sec. 114A]

(1) Every taxpayer shall declare to the Commissioner the bank account
utilized by the taxpayer for business transactions.
(2) Business bank account shall be declared through original or modified
registration form.
“Business bank account” means a bank account utilized by the taxpayer for
business transaction declared to the Commissioner through original or
modified registration form. Only businesses i.e. sole proprietor, AOP or
companies are required to declare through FBR e-portal.
Note: Last date to declare business bank accounts is 30 September 2021
Legal implication for not declaring Business bank account An expense
incurred for business purpose shall be inadmissible while computing income
from business u/s 21.

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Wealth statement [sec. 116]

Wealth statement contain following particulars –
(a) The total assets and liabilities of the person, his spouse, minor children and other
dependents on the date specified in the notice;
(b) Assets transferred by the person to any other person during the period specified in
the notice and the consideration for the transfer;
(c) The detail of total expenditures incurred by the person, his spouse, minor children
and other dependents during the period specified in the notice; and
(d) Wealth reconciliation statement. It will be furnished by the due date specified in the
notice. [S. 118(4)]
▪ Every resident individual shall furnish a wealth statement and wealth reconciliation
statement along with the return.
▪ It will be furnished by the due date for furnishing the return.
▪ Every member of an aop shall furnish. Wealth statement and wealth reconciliation
statement along with the return of AOP.
▪ The commissioner may by notice require any individual to file a wealth statement.
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Who is required to file wealth statement

▪ Every resident individual shall furnish a wealth statement and wealth
reconciliation statement along with the return.
▪ Every member of an AOP shall furnish. wealth statement and wealth
reconciliation statement along with the return of AOP.
It will be furnished by the due date for furnishing the return. [S. 118(4)]

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Can wealth statement once furnished be revised?

If a person discovers any omission or wrong statement in wealth statement, he can
revise it by intimation to the commissioner.
Revision can be made before the receipt of notice for amendment in assessment tax
year to which its relates, is made. Revised wealth reconciliation and reasons for revision
will also be filed.
If commissioner is of opinion that revision is made for correcting a bona fide omission
or wrong statement, he will declare such revision as valid (after providing an
opportunity of being heard).
Wealth statement cannot be revised after the expiry of 5 years from the due date of
filing of return.

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Foreign income and assets statement [S. 116a]

Every resident individual having:
▪ Foreign income equal to or greater than 10,000 united states dollars or
▪ Having foreign assets with a value equal to or greater than 100,000 united states dollars
Shall furnish a foreign income and assets statement.
It shall be in the prescribed form and verified in the prescribed manner.
It will give particulars of:
(a) The person’s total foreign assets and liabilities as on the last day of the tax year;
(b) Any foreign assets transferred by the person to any other person during the tax year and
the consideration received; and
(c) Complete particulars of foreign income derived and the expenditure incurred during the
tax year and that the expenditure wholly and necessarily for the purposes of deriving
the said income.
The commissioner may by notice require any individual to furnish the foreign income and
assets statement who (in the opinion of the commissioner) was required to furnish it but
who has failed to do so. It will be furnished by the date specified in the notice.
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Preparation of Wealth Statement

1. Identify Assets and Liabilities: The wealth statement is essentially a
balance sheet of an individual, which includes personal assets and
liabilities on a given date. It does not reflect business assets and liabilities
but shows the net equity of the business. Assets and liabilities include
cash, bank balances, investments, properties, loans, etc.
2. Prepare Cash and Bank Reconciliation Statement: Start from the
opening balance of cash & bank and after adding cash inflows and
subtracting cash outflows, the remaining amount is the closing balances
of cash & bank account. This closing balance is included in the assets of
the wealth statement. If the expenditure side is not explained through
the cash receipt side, then the difference is unexplained investment and
is taxable.
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Notice of discontinued business [Sec. 117]

(1) A person discontinuing a business shall give Commissioner a notice within
15 days of the discontinuance.
(2) The person discontinuing a business shall, himself or on being required by
the Commissioner by notice, furnish a return. The period of return will
start from the 1st day of tax year (of discontinuance) and will end on the
date of discontinuance. This period shall be treated as a separate tax year.

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What powers are available to the Commissioner in respect of a person who

has not given the notice of discontinuance of business to Commissioner?
If a taxpayer does not gives notice of discontinuance and the Commissioner
has grounds to believe that:
a business has been discontinued or
taxpayer is likely to discontinue the business, he may serve notice to furnish
the return. Commissioner will notify the period for which return is required.
What is the status of return furnished by a person who has discontinued
his business?
A return furnished here will be treated as deemed assessed.

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Method of furnishing returns and other documents [Sec. 118]

1. A return of income,
2. a wealth statement
3. a foreign income and assets statement
shall be furnished in the prescribed manner.

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Date of fling of Income Tax Return

For Companies
Tax year ends Due date for filing
If the tax year ends between January 1st to On or before December 31st next following
June 30th the end of the tax year
If the tax year ends between July 1st to On or before September 30th next
December 31st following the end of the tax year
Other than Companies
- Return required to be filed through On or before September 30th next
e-portal in case of salaried individual following the end of the tax year
- Return of income by an individual or AOP
A return required to be furnished for discontinued business (under section 117) shall
be furnished by the due date specified in the notice.
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Extension of time for furnishing returns and other documents [sec. 119]
(1) A person required to furnish –
(a) A return of income (u/s 114 or 117);
(b) A wealth statement (u/s 116),
May apply to the commissioner for an extension of time.
The application for extension will be made by the due date of furnishing the
above documents.
After receiving application if commissioner is satisfied that the applicant is
unable to furnish the return by the due date because of –
(a) Absence from pakistan;
(b) Sickness or other misadventure; or
(c) Any other reasonable cause,
The commissioner may grant the applicant an extension of time.
An extension should not exceed 15 days from the due date. In exceptional
circumstances longer time may be granted. 38

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Where the Commissioner has not granted extension for furnishing return,
the Chief Commissioner may on application made by taxpayer grant
extension or further extension upto 15 days.
In exceptional circumstances longer time may be granted.
If a person gets extension he will still be liable to pay the default surcharge.

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Return Filing & Related (114–119)

114 – Return of Income
▪ Every company, individual above threshold, foreign asset holder, NTN holder, etc. must file.
▪ Commissioner can call for return (<12 months) in special cases (death, bankruptcy, leaving Pakistan, etc.).
▪ Notice up to 5 years (10 if no return at all).
▪ No time bar if foreign assets not disclosed.
115 – Persons not required
▪ Widow, orphan <25, disabled person, or non-resident → exempt from filing solely due to owning property or motor
vehicle.
116 – Wealth Statement
▪ Resident individual must file if taxable income, foreign assets, or as required by Commissioner.
▪ Must reconcile with income return.
116A – Foreign Income & Assets Statement
▪ Resident individuals holding foreign income/assets must file separately.
117 – Notice of Discontinued Business
▪ Person discontinuing business must notify Commissioner within 15 days.
▪ Must file a return of income for the period from start of year to discontinuance → treated as a separate tax year.
▪ If no notice given, Commissioner may issue notice to furnish such return.
▪ Return filed under this section treated as return under section 120 (self-assessment applies).
118 – Method & Medium
▪ Prescribed forms; e-filing mandatory for company, AOP, or categories specified by FBR.
119 – Extension of Time
▪ Commissioner may extend filing date (normally 15 days, longer with FBR approval).
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Normal assessments [sec. 120]

What is the status of complete return of income filed by taxpayer?
If the taxpayer has furnished a complete return of income (other than a
revised return),-
a. It will be considered that commissioner has made an assessment of
taxable income and tax due thereon; and
b. Return shall be considered as an assessment order issued by
commissioner on the day the return was furnished.
A return shall be considered as complete if it fulfills the conditions
mentioned in sec114(2)

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A return furnished shall be processed through automated system to arrive at correct

amounts of total income, taxable income and tax by making adjustments for-
(a) Any arithmetical error;
(b) Any apparent incorrect claim,
(c) Disallowance of any loss, deductible allowance or tax credit and
(d) Disallowance of carry forward of loss
Adjustments shall be made after issuing a system generated notice to the taxpayer.
The response of taxpayer shall be considered before making any adjustment.
In case no response is received in 30 days of notice, adjustments shall be made.
If no adjustment is made in 6 month of filing of return, the amounts in the return (as
declared by the taxpayer) shall be assumed to be adjusted and taxpayer shall be
informed automatically through iris.
Note: provisions of this sub-section shall apply from the date notified by fbr. However
FBR has yet not notified any date. Resultantly, the concept of self-assessment is still
applicable.

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For the purposes of this section,

(a) ''arithmetical error” includes any wrong or incorrect calculation of tax (including
any minimum or final tax)
(b) An incorrect claim apparent from return” is a claim, in the return:
(i) Of an item, which is inconsistent with another entry of the same or other item in
return;
(ii) Of any tax payment which is not verified from the collection system; or
(iii) For a deduction, where deduction exceeds specified statutory limit (amount,
percentage, ratio, fraction)

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Best judgment assessment [Sec. 121]

If a person fails to: The commissioner may,

1. Furnish return of income in response of 1. Uses any available information (like
notice under subsection 114; or past records, bank data, withholding
2. Furnish a return as non-resident ship tax, industry info).
owner or aircraft owner; or 2. Use sectoral benchmark ratios
3. Furnish the wealth statement; or (profit margins, GP ratio, NP ratio,
4. Produce before commissioner or a special recovery rates, wastage, etc., set by
audit panel appointed (u/s 177) or FBR).
5. Any person employed by a firm of
chartered accountants, (u/s 177) accounts, Effect on earlier assessment
or documents required for making If a return was already treated as
assessment of income and tax assessed U/S 120, it becomes invalid
once best judgment assessment is
issued.
44

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Assessment Order
Time Limit

After making an assessment, the Best judgement assessment can be issued

commissioner shall issue the within 6 years after the end of the tax year
assessment order stating- to which it relates.
▪ The taxable income;
▪ The tax due;
Where notice for furnishing a return of
▪ The tax paid, if any; and
income is issued for one or more of the last
▪ The time, place and manner of
10 completed tax years best judgement
appealing the assessment order.
assessment order shall be issued within 2
years from the end of tax year in which
notice for filing of return is issued

45

Question – Section 121 (Best Judgment Assessment)

Prime Textiles International (PTI), a taxpayer, faced several compliance issues in Tax Year 2025.
Required: In each of the following independent situations, explain with reference to Section 121 of the
Income Tax Ordinance, 2001, whether the Commissioner is empowered to make a best judgment
assessment, the legal basis, and the consequences:
a. PTI failed to furnish a return of income in response to a notice under Section 114(3).
b. PTI failed to furnish its wealth statement as required under Section 116.
c. PTI did not produce records and invoices demanded during an audit under Section 177.
d. What options are available to Commissioner to determine taxable income under best judgment
assessment.
e. A deemed assessment was already in place under Section 120, but later the Commissioner passed a
best judgment assessment order under Section 121.
f. Time Limits:
I. If PTI defaulted for Tax Year 2025, by what date must the Commissioner finalize the best judgment
assessment?
II. If a notice was issued for Tax Year 2021 (within last 5 years), by what date must the Commissioner
finalize the order?
III. If a notice was issued in Tax Year 2024 for Tax Year 2016 (within last 10 years), by what date must the
Commissioner finalize the order?

46

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Answer – Section 121 (Best Judgment Assessment)

(a) If a taxpayer fails to file a return in response to a notice, the Commissioner
may assess income and tax to the best of his judgment based on available
information. Since PTI failed to comply, the Commissioner is legally
empowered to issue a best judgment assessment.
(b) Failure to file a wealth statement in response of commissioner notice,
allows the Commissioner to proceed with best judgment assessment. Since
PTI did not provide the wealth statement, the Commissioner can assess its
income on available data.
(c) When the taxpayer fails to produce accounts, documents, or other
evidence during audit, the Commissioner may determine taxable income
to the best of his judgment. Since PTI refused to provide records, the
Commissioner is justified in issuing a best judgment assessment.
(d) Commissioner can use available information or sectoral benchmark ratios
to determine taxable income. 47

(e) Once a best judgment assessment is passed, any assessment deemed to have been
made under Section 120 loses its legal effect. Thus, PTI’s earlier deemed assessment
automatically becomes invalid and is replaced by the Commissioner’s best judgment
assessment.
(f) Time Limits for Best Judgment Assessment
i. Normal case – Tax Year 2025.a best judgment assessment must be made within 6
years from the end of the tax year to which it relates. TY 2025 ends on 30 June
[Link] date for order 30 June 2031.
ii. Notice for past 4 years (Tax Year 2021) Since TY 2021 falls within normal 6-year limit,
the order can be made within 6 years from end of that tax year to which it relates. TY
2021 ended on 30 June [Link] date for order 30 June 2027.
iii. Notice for past 10 years (Tax Year 2016, notice in TY 2024) If a notice is issued under
for one of the last 10 completed years, assessment must be finalized within 2 years
from the end of the tax year in which notice was issued. Notice issued in TY 2024
(ending 30 June 2024).Last date for order 30 June 2026.

48

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Time limit for Best Judgment

Assessment- Example

Mr. Kamran has not filed return Maximum time limit to issue best
for TY 2019 but has filed return judgement assessment order is
for TY 2020. Commissioner has Within 6 years after the end of the tax
issued notice on 31-12-2021 to year to which it relates.
file return but no compliance was TY to which it relate 30-6-2019
made. Now commissioner wants Six years from end 30-6-2025
to issue best judgment
assessment order. What is the
time limit to issue best judgment
assessment order?
49

Time limit for Best Judgment

Assessment- Example

Mr. Kamran has not filed return Maximum time limit to issue best
for TY 2016 but has regularly judgement assessment order is
filed return onwards. Now on 15th Within 5 years after the end of the tax
July 2021 commissioner wants to year to which it relates.
issue best judgment assessment TY to which it relate 30-6-2016
for TY 2016. Can best judgment Six years from end 30-6-2022
be framed for TY 2016? After 30th June 2022 best judgment
assessment order can not be issued

50

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Time limit for Best Judgment

Assessment- Example

Mr. Noman has not filed return If NO return filed during last Five completed
for TY 2014 and onwards. Now on TY notice for furnishing a return of income
can be issued for one or more of the last 10
15-12-2021 commissioner issued
completed tax. If no compliance made best
notice to file the returns but no judgement assessment order can be issued
compliance was made. Now Within 2 years from the end of tax year in
Commissioner wans to frame which notice for filing of return is issued.
best judgment assessment for TY TY in which notice issued 2022
2014. Can best judgment be End of TY in which notice issued 30-6-22
Two years from end 30-6-24
framed for TY 2014?
Last date to issue best judgment assessment
order is 30-6-2024
51

Time limit for Best Judgment Assessment- Example

Mr. Anzar has not filed return for TY As NO return has been filed during last Five
2010 and onwards. Now on 15-12-2021 completed TY notice for furnishing a return of
commissioner wants to issued notices income can be issued for one or more of the last
to filing the returns. 10 completed tax year. So last completed tax year
For how many years notice can be is 2021 and commissioner can issue notice till TY
issued for furnishing returns of 2012 for filing returns.
income? If no compliance was made best judgement
If no compliance was made for how assessment order can be issued for all 10 years
many years best judgement assessment within 2 years from the end of tax year in which
ca be framed and what will the time notice for filing of return is issued.
limit to issue best judgement Date of notice 15-12-22
assessment order? End of TY in which notice issued 30-06-22
Two years from end 30-06-24
Last date to issue best judgment assessment
order is 30-6-2024 52

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Amended Assessment [122]

When can assessments be amended? Time Limits

On Audit or Definite Information (s.122(5)): First amendment (S.122(2)):
1. If income escaped assessment. Within 5 years from the end of the financial year in
which the original assessment order was issued or
2. If assessed at too low a rate.
treated as issued.
3. If excessive relief/refund granted.
Further amendment (s.122(4)):
4. If income misclassified. Later of:
Erroneous and prejudicial to revenue. a. 5 years from end of FY in which original
Commissioner can amend any order that assessment issued, OR
harms revenue. b. 1 year from end of FY in which amended
Revised Return filed by taxpayer (s.122(3)): assessment was issued.
Revised return automatically becomes an Show-cause notice period (s.122(9)):
amended assessment order • Final order must be passed within 180 days of show
How many times can assessment be amended? cause notice, extendable by max 90 days (with
As many times as necessary, provided it is within the reasons recorded).
prescribed time limits. • Exclusions allowed for stay orders, ADR proceedings,
agreed assessment under s.122D, or adjournment by
53
taxpayer (max 60 days).

Circumstance (ground) on the basis of

which assessment can be amended

Definite information” includes information on:

▪ sales or purchases of any goods made by the taxpayer,
▪ receipts of the taxpayer from services rendered,
▪ other receipts that maybe chargeable to tax under this Ordinance,
▪ the acquisition, possession or disposal of any money, asset, valuable
article or investment or
▪ expenditure incurred by the taxpayer.
A change of opinion is not a definite information or make the
assessment erroneous.

54

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Scenario-Based Question – Section 122 (Amendment of Assessments)

Sapphire Textiles Ltd. (STL) filed its return of income for Tax Year 2020, on 30 th September 2020 and the
Commissioner treated it as an assessment under Section 120. Later, during review and audit, different
independent issues arose in multiple situations:
Under Section 122 of the Income Tax Ordinance, 2001, discuss in each of the following independent situations
(a) STL filed a revised return under Section 114(6) in Tax Year 2021, correcting its earlier return. Can this
revised return be treated as an amended assessment order?
(b) On audit in 2022, it was discovered that STL had omitted Rs. 50 million taxable receipts, resulting in
income escaping assessment. Can the Commissioner amend the assessment?
(c) STL’s income was misclassified in the original return (part business income wrongly shown as capital
gains).Can the Commissioner amend the assessment order?
(d) The original assessment order (Tax Year 2020) was found in 2023 to be erroneous and prejudicial to
revenue (too much refund granted).Can the Commissioner amend it?
(e) The Commissioner amended the assessment order of Tax Year 2020 in 2022 once already. In 2024, further
definite information arises showing under-assessment. Can the assessment be amended again?
(f) Time Limits:
(i) If the original assessment for Tax Year 2020 was issued in October 2020, by what date can the
Commissioner amend it?
(ii) If the order was amended once in December 2022, by what date can a further amendment be made?
(iii) If a show-cause notice (SCN) was issued on 1st July 2023, by what date must the amended order be
finalized? 55

Suggested Answer – Section 122 (Amendment of Assessments)

(a) When a taxpayer furnishes a revised return, the Commissioner is treated as having
made an amended assessment order as per that revised return. Hence, STL’s revised
return automatically becomes an amended assessment order from the date it was filed.
(b) If income chargeable to tax has escaped assessment, the Commissioner may amend the
order. Since STL omitted Rs. 50 million receipts, the Commissioner is legally empowered
to amend the assessment based on this definite information.
(c) An assessment can be amended where any amount has been misclassified under a
wrong head of income. Since STL wrongly classified part of business income as capital
gains, the Commissioner can amend the order.
(d) Law empowers the Commissioner to amend or further amend an order if it is erroneous
in so far as it is prejudicial to the interest of revenue. Since STL was granted excessive
refund, the assessment is erroneous and prejudicial. Thus, the Commissioner may
amend it, subject to time limits.
(e) The Commissioner may further amend an assessment as many times as necessary
within the prescribed time limits. Since STL’s assessment was amended once in 2022,
the Commissioner may amend it again in 2024, provided it falls within the allowed
period. 56

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(f) Time Limits

(i) Original assessment issued in 30-Sep- 2020 (FY 2021):
The order can be amended within 5 years from the end of FY in which order was issued.
End of FY 30 June 2021.
Last date 5 years from the end of FY = 30 June 2026.
(ii) Amended once in December 2022:
Further amendment allowed within later of:
a. 5 years from end of FY of original order (i.e., 30 June 2026), OR
b. 1 year from end of FY in which amended order issued (30-June 2024).
Later date = 30 June 2026.
(iii) Show-cause notice (SCN) issued on 1 July 2023:As per law, amended order must be
made within 180 days of SCN, extendable by 90 days with reasons in writing. SCN issued
on 1 July [Link] deadline = 27 December 2023 (180 days).Extended maximum = 26
March 2024. Time limit: 27 Dec 2023 (normal), 26 Mar 2024 (extended).

57

Time limit for

Amended Assessment

First amendment Commissioner may further amend, as

An assessment order can be many times as may be necessary, the
amended within 5 years from the original assessment within the later of
end of the financial year in which (a) 5 years from the end of the
the Commissioner has issued or is financial year in which the
treated to have issued the Commissioner has issued or is
original assessment order. treated as having issued the
If return filed on 30-8-2020 original assessment order; or
End of FY 30-6-2021 (b) 1 year from the end of the financial
Within 5 years 30-6-2026 year in which amendment was
passed. 58

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Time limit for First

Amended Assessment

Mr. Amir filed return of TY 2020 An assessment order can be amended

on 30-09-2020. within 5 years from the end of the
Identify the date by which financial year in which the
Amendment of assessment can Commissioner has issued or is treated
be made by commissioner? to have issued the original assessment
order.
Return filed on 30-9-2020
End of FY 30-6-2021
Within 5 years 30-6-2026

59

Time limit for First

Amended Assessment

Mr. Amir filed return of TY 2014 An assessment order can be amended

on 30-09-2014. within 5 years from the end of the
On 30th Sep 2021 commissioner financial year in which the
want to issue notice for first Commissioner has issued or is treated
amendment of assessment ? to have issued the original assessment
order.
Return filed on 30-9-2014
End of FY 30-6-2015
Within 5 years 30-6-2020
th
On 30 Sep 2021 commissioner can
not issue first amendment order. 60

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Time limit for Further

Amended Assessment

Mr. Amir filed return of TY 2020 Second amendment within the later of
on [Link] was selected (a) 5 years from the end of the
for audit and the first amendment financial year in which the
of assessment took place on Commissioner has issued original
March 2026. Identify the date by assessment order that is 30-6-2026
which 2nd Amendment of (b) 1 year from the end of the financial
assessment can be made by tax year in which amendment was
authorities? passed.
End of FY of amendment 30-6-2026
Within One ear 30-6-2027
Therefore Commissioner can amend for 2nd
time by 30 June 2027 61

Time limit for Further

Amended Assessment

Mr. Amir filed return of TY 2020 Second amendment within the later of
on [Link] was selected (a) 5 years from the end of the
for audit and the first amendment financial year in which the
of assessment took place on Commissioner has issued original
March 2024. Identify the date by assessment order that is 30-6-2026
which 2nd Amendment of (b) 1 year from the end of the financial
assessment can be made by tax year in which amendment was
authorities? passed.
End of FY of amendment 30-6-2024
Within One ear 30-6-2025
Therefore Commissioner can amend for 2nd
time by 30 June 2026 62

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To Increase Revision by the Commissioner To decrease

Amendment [Sec. 122A] Revision

▪ This section allows the Commissioner to When revision is NOT allowed?

review and revise orders passed by an 1. If appeal lies to Commissioner
Officer of Inland Revenue, but only in favor (Appeals) or Appellate Tribunal and the
of the taxpayer. time limit to file appeal has not expired.
▪ After inquiry, if the Commissioner finds that
2. If the order is already pending in appeal
the order requires revision, he may revise it
before Commissioner (Appeals) or
as he deems fit.
Limitation / Restriction Appellate Tribunal.
Cannot be prejudicial to the taxpayer. Time limit for giving effect
▪ Meaning: Commissioner cannot revise If Commissioner remands the case to a
an order to increase tax liability. lower authority for modification, alteration,
▪ Revision power is only beneficial (for directions, or de novo (new) proceedings,
example, to correct an officer’s mistake the lower authority must pass the order
in favor of taxpayer). within 120 days of Commissioner’s order.
63

Scenario-Based Question – Section 122A (Revision by the Commissioner)

Falcon Textiles (FT), a taxpayer, received various orders from different Officers of Inland
Revenue. Applying Section 122A of the Income Tax Ordinance, 2001, discuss whether the
Commissioner can revise the orders in each case and state the legal basis.
(a) FT was granted a small refund by the Taxation Officer. Later, the Commissioner
reviewed the case and found that FT was entitled to a much larger refund. Can the
Commissioner revise the order?
(b) The Commissioner wanted to revise an order to enhance FT’s tax liability because the
officer had under-assessed income. Is this permissible?
(c) An order passed by the Officer of Inland Revenue is still within the time limit for
appeal to Commissioner (Appeals). Can the Commissioner revise it under Section
122A?
(d) An order passed by the Officer of Inland Revenue is already pending in appeal before
the Appellate Tribunal. Can the Commissioner revise it?
(e) The Commissioner remanded a case back to the Officer of Inland Revenue with
directions to pass a fresh order. By what time must the fresh order be passed?
64

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Suggested Answer – Section 122A (Revision by the Commissioner)

(a) The Commissioner may suo moto call for the record and revise any order if he considers
revision necessary. This section requires that the order cannot be prejudicial to the
taxpayer. Since revision here benefits FT (higher refund), the Commissioner may revise
the order.
(b) Revision must not be prejudicial to the taxpayer. Increasing FT’s tax liability would be
prejudicial. Hence, the Commissioner cannot revise the order for this purpose.
(c) Commissioner cannot revise an order if an appeal lies against it and the time limit for
appeal has not expired. Therefore, revision is barred in this case.
(d) Law prohibits revision where the order is pending in appeal before Commissioner
(Appeals) or Appellate Tribunal. Since FT’s order is already pending in appeal, the
Commissioner cannot revise it.
(e) If the Commissioner remands a case for modification, alteration, directions, or de novo
proceedings, the Officer must issue the fresh order within 120 days.

65

Revision by the Chief Commissioner

122B

This section empowers the Chief Commissioner to Process

revise orders relating to exemption or lower rate ▪ Chief Commissioner can call for records.
certificates for tax collection or deduction at source. ▪ Conduct any inquiry as necessary.
What type of orders can be revised? ▪ Provide the taxpayer with a reasonable
Orders relating to issuance of exemption certificates opportunity of being heard.
or lower rate certificates for tax deduction or ▪ Then pass such order as he deems fit.
collection at source.(e.g., exemption from Limitation
withholding tax on imports, supplies, contracts, or Unlike Section 122A, this section does not expressly
reduced tax deduction rates). restrict revision to only taxpayer’s benefit.
How can revision be initiated? However, opportunity of being heard is mandatory,
▪ Suo moto (own motion), OR so no adverse order can be passed without due
▪ On application by the taxpayer. process.

66

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Scenario-Based Question – Section 122B (Revision by the Chief Commissioner)

Nova Engineering Ltd. (NEL), a taxpayer, received various exemption and lower rate
certificates relating to withholding of tax at source. Applying Section 122B of the Income
Tax Ordinance, 2001, discuss in each of the following independent cases whether the
Chief Commissioner can revise the order and on what legal basis.
(a) NEL applied for revision of an order where the officer had wrongly restricted its
exemption certificate for tax deduction at source on supply contracts.
(b) The Chief Commissioner, on his own motion (suo moto), called for the record of an
order granting NEL a lower rate certificate for withholding on imports.
(c) Before passing the revision order, the Chief Commissioner did not provide NEL an
opportunity of being heard. Is such a revision valid?
(d) The Chief Commissioner, after inquiry, found that the exemption certificate issued to
NEL was issued without proper verification. He intends to pass an order revising it.
Can he do so?

67

Suggested Answer – Section 122B (Revision by the Chief Commissioner)

(a) The Chief Commissioner may revise orders on an application made by the taxpayer.
Since NEL itself applied for revision of the exemption certificate, the Chief
Commissioner is empowered to review the record and issue a fresh order after
inquiry and hearing.
(b) The Chief Commissioner may also initiate revision suo moto. Hence, by calling for
records of the lower rate certificate on imports, the Chief Commissioner is acting
within his lawful authority.
(c) Before making a revision order, the Chief Commissioner must provide the taxpayer a
reasonable opportunity of being heard. Failure to provide this makes the order
defective and against principles of natural justice.
(d) Law allows the Chief Commissioner, after inquiry, to make such order as he deems fit.
Since inquiry revealed that NEL’s exemption certificate was improperly issued, the
Chief Commissioner can revise it, provided that NEL is first given a hearing.

68

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Agreed assessment in certain cases [Sec 122D]

Allows a taxpayer to settle a case through agreement with the department instead of going through long
appeals. The matter is referred to an Assessment Oversight Committee (AOC) which decides the settlement.

When does it apply? If taxpayer accepts decision

▪ Only when a notice for amendment of assessment (SCN) has 1. Must deposit tax + penalty +
been issued. default surcharge.
▪ The taxpayer, in addition to replying to the Commissioner, may 2. Commissioner amends
also file an offer of settlement before the Committee. assessment accordingly.
Who decides? 3. Taxpayer waives appeal rights.
An Assessment Oversight Committee (AOC), consisting of: 4. No further proceedings on those
1. Chief Commissioner Inland Revenue (CCIR) issues (except if tax not
2. Commissioner Inland Revenue (CIR) deposited).
3. Additional Commissioner Inland Revenue (ACIR)
If taxpayer is not satisfied OR
Process
[Link] files settlement offer → Committee examines it.
Committee cannot reach consensus
[Link] may call records & hear taxpayer. 1. Case goes back to the
[Link]’s decision = by consensus (accept/modify). Commissioner → decided based
[Link] communicated to taxpayer. on taxpayer’s reply to SCN.
Limitations: Section 122D does not apply in case where: 2. Committee’s proceedings then
1. Case involves concealment of income, OR have no effect.
2. interpretation of a question of law (which may affect other) 69

Scenario-Based Question – Section 122D (Agreed Assessment in Certain Cases)

Orion Chemicals Ltd. (OCL) received a show cause notice under Section 122(9) for
amendment of its assessment. Applying Section 122D of the Income Tax Ordinance,
2001, explain the position in each of the following independent situations:
(a) OCL filed an offer of settlement along with its reply to the Commissioner. Can such an
offer be entertained?
(b) The Assessment Oversight Committee (AOC) reviewed the settlement offer, called for
records, heard OCL, and reached a consensus decision modifying the offer. What are
OCL’s obligations if it accepts this decision?
(c) If OCL accepts the Committee’s decision and deposits the tax, can it later file an
appeal against the amended assessment order?
(d) Suppose the Committee could not reach consensus, OR OCL did not agree with the
Committee’s decision. How will the case be finalized?
(e) State the composition of the Assessment Oversight Committee (AOC).
(f) The case against OCL involves concealment of income and interpretation of law
having implications for other taxpayers. Can OCL still opt for agreed assessment?
70

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Suggested Answer – Section 122D (Agreed Assessment)

(a) When a taxpayer receives a notice for amendment of assessment, they may file an offer of settlement
in the prescribed form before the Committee, in addition to replying to the Commissioner. Therefore,
OCL’s offer of settlement is valid and can be entertained.
(b) If the Committee accepts or modifies the taxpayer’s offer and OCL agrees, then OCL must deposit the
agreed tax, penalty, and default surcharge. The Commissioner will amend the assessment accordingly
once payment is made.
(c) Once OCL accepts the Committee’s decision and pays the agreed amount, it must waive the right of
appeal. Hence, no appeal can be filed against such amended assessment.
(d) If the Committee cannot reach consensus OR the taxpayer is not satisfied, the case is referred back to
the Commissioner. The Commissioner then decides based on OCL’s reply to the original SCN.
Committee proceedings have no further effect.
(e) The Assessment Oversight Committee consists of three income tax authorities having jurisdiction over
the taxpayer: Chief Commissioner Inland Revenue (CCIR)Commissioner Inland Revenue (CIR)Additional
Commissioner Inland Revenue (ACIR)
(f) Law states that this agreed assessment procedure does not apply to cases involving:
1. Concealment of income, OR
2. Interpretation of a question of law which affects other cases.
Since OCL’s case involves both concealment and interpretation of law, it cannot be settled under
Section 122D.
71

Provisional assessment in certain cases [Sec. 123]

If a concealed assets or undeclared offshore asset is discovered, the Commissioner can
immediately issue a provisional assessment order (before making any final assessment
under Section 121 or 122).
Which year does it apply to?
Issued for the last completed tax year of the person, taking into account the
concealed/offshore asset.
Who issues it?
Commissioner Inland Revenue.
Made before:
a. a best judgment assessment (s.121), OR
b. an amended assessment (s.122).
▪ The Commissioner must finalize the provisional order as soon as practicable (no fixed
time mentioned in law, but intention is early completion)
▪ Any property or asset acquired from income subject to tax under this Ordinance, But not
declared by the taxpayer.
72

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Scenario-Based Question – Section 123 (Provisional Assessment in Certain Cases)

The tax year under consideration is Tax Year 2025. The taxpayer is a company named
Galaxy Enterprises (Pvt) Ltd.
During an investigation:
▪ In July 2025, the FIA (Federal Investigation Agency) impounded a concealed
property belonging to Galaxy Enterprises.
▪ Later, the Commissioner also discovered an undeclared offshore bank account of
Galaxy Enterprises that was never reported.
Based on the above facts, answer the following questions with reference to Section 123
of the Income Tax Ordinance, 2001:
(a) What action can the Commissioner take in respect of the concealed property?
(b) What action can the Commissioner take in respect of the offshore bank account?
(c) For which tax year can the Commissioner issue a provisional assessment order in
such cases?
(d) When should the Commissioner finalize the provisional order?
(e) Define the term “concealed asset” under the Ordinance.
73

Answer – Section 123 Application

(a) Since FIA impounded a concealed property of Galaxy Enterprises, the Commissioner
may issue a Provisional Assessment Order for the last completed tax year (2025)
before passing any order under Section 121 (best judgment) or Section 122
(amended assessment).
(b) As the Commissioner discovered an undeclared offshore asset, he is empowered to
issue a Provisional Amended Assessment Order for the last completed tax year
(2025), taking into account this offshore account.
(c) In both cases (concealed asset and offshore asset), the Commissioner can only issue
the provisional order for the last completed tax year i.e., Tax Year 2025 in respect of
Galaxy Enterprises.
(d) The Commissioner must finalize the provisional assessment as soon as practicable
(law does not fix an exact time limit, but intent is without unnecessary delay).
(e) Concealed asset means any property or asset acquired from income chargeable to
tax under the Ordinance, which was not declared by the taxpayer.

74

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Assessment (120–123)
120 – Self-Assessment
▪ Return filed = deemed assessment order on date of filing.
▪ Subject to audit, amendment, or rectification.
121 – Best Judgment Assessment
▪ If no return, Commissioner assesses on available info or sectoral ratios.
122 – Amendment of Assessment
▪ Amendment if income escaped, under-assessed, or excessive relief given.
▪ First amendment → 5 years from end of FY in which original assessment issued.
▪ Subsequent amendments later of
a. 5 years from end of FY in which original assessment issued, OR
b. 1 year from end of FY in which amended assessment was issued.
122A – Revision by Commissioner
▪ Commissioner may revise order if erroneous and prejudicial to tax payer.
122B – Revision by Chief Commissioner
▪ Chief Commissioner may revise Commissioner’s order relating to lower rate certificate.
123 – Provisional Assessment (Offshore / Concealed Assets)
▪ If offshore/concealed assets discovered, provisional assessment made → regularized later after
hearing.
75

Assessment in relation to disputed property [Sec 125]

How Taxation Works in Case of Disputed Property
1. If A is receiving income (rent, profit, etc.):
Tax is imposed on A, because income is in A’s possession, regardless of dispute.
2. If B is receiving income:
Tax is imposed on B, because B is actually enjoying the income.
3. If neither A nor B receives income, and instead income is being deposited with the
Civil Court until ownership is decided:
1. Then Section 125 applies.
2. In this case, no one can be taxed until the Court decides ownership.
3. Once the Court decides, the Commissioner has 1 year after the end of the
financial year of the decision to issue an assessment or amended assessment
order against the lawful owner.

76

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Section 125 – Assessment in relation to Disputed Property

The ownership of a commercial property is under dispute between Mr. A and Mr. B in a
Civil Court. During the litigation:
[Link] Mr. A receives the rental income from the property, who will be taxed?
[Link] Mr. B receives the rental income, who will be taxed?
[Link] the rental income is deposited with the Civil Court until final decision, which
provision will apply and within what time limit can assessment be made once the Court
decides the ownership?

77

Answer
[Link] Mr. A receives the income:
1. Mr. A will be taxed because he is in actual receipt of income.
2. Under the charging provisions of the Income Tax Ordinance, the person who
enjoys/receives income is liable to tax.
[Link] Mr. B receives the income:
1. Mr. B will be taxed because he is in receipt of income.
2. Same principle applies — the recipient of income is taxable.
[Link] income is deposited with the Civil Court:
1. In this case, Section 125 of the Income Tax Ordinance, 2001 applies.
2. The Commissioner cannot tax either A or B until the Court decides the
ownership.
3. Once the Civil Court passes its decision, the Commissioner has 1 year after the
end of the financial year of the Court’s decision to issue an assessment or
amended assessment order against the rightful owner.
78

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Evidence of assessment [sec. 126]

Any assessment order issued will not be:
▪ Quashed or considered void for want of form and
▪ Considered as invalid because of reason of any mistake, if taxpayer is
designated in it according to common understanding.

79

Scenario-Based Question
Ali & Co. received an assessment order for Tax Year 2024. Ali challenges the validity of the
order on the following grounds:
1. The order contains a minor spelling mistake in the company name (written as “Aly & Co.”).
2. The order omitted the company’s National Tax Number (NTN).
3. Ali claims the order should be void because it did not follow proper formatting as per
official notification.
4. The company argues that the assessment amount is wrong and wants to dispute it.
Required:
With reference to Section 126 of the Income Tax Ordinance, 2001, discuss whether Ali’s
objections are valid.

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Answer
[Link] mistake in name
1. Not valid grounds. Under Section 126(2)(b), any mistake or omission does not void the order if the
taxpayer can still be identified according to common understanding.
2. Hence, “Aly & Co.” still clearly refers to “Ali & Co.” → order remains valid.
[Link] of NTN
1. Not valid grounds. The order is not void for omission if it substantially conforms with the
Ordinance.
2. Since Ali & Co. is still clearly identifiable, the omission of NTN does not affect validity (Sec.
126(2)(b)).
[Link] formatting
1. Not valid grounds. Section 126(2)(a) provides that orders cannot be declared void for want of form,
as long as the substance is correct.
[Link] over assessment amount
1. Valid grounds. Section 126(1) says assessment order is conclusive evidence of correctness except
in appeal/revision proceedings under Part III.
2. Therefore, Ali must challenge the amount through appeal under Section 127 (before
Commissioner Appeals), not by attacking the order’s form.

81

Return Filing & Related (114–119)

114 – Return of Income
▪ Every company, individual above threshold, foreign asset holder, NTN holder, etc. must file.
▪ Commissioner can call for return (<12 months) in special cases (death, bankruptcy, leaving Pakistan, etc.).
▪ Notice up to 5 years (10 if no return at all).
▪ No time bar if foreign assets not disclosed.
115 – Persons not required
▪ Widow, orphan <25, disabled person, or non-resident → exempt from filing solely due to owning property or motor
vehicle.
116 – Wealth Statement
▪ Resident individual must file if taxable income, foreign assets, or as required by Commissioner.
▪ Must reconcile with income return.
116A – Foreign Income & Assets Statement
▪ Resident individuals holding foreign income/assets must file separately.
117 – Notice of Discontinued Business
▪ Person discontinuing business must notify Commissioner within 15 days.
▪ Must file a return of income for the period from start of year to discontinuance → treated as a separate tax year.
▪ If no notice given, Commissioner may issue notice to furnish such return.
▪ Return filed under this section treated as return under section 120 (self-assessment applies).
118 – Method & Medium
▪ Prescribed forms; e-filing mandatory for company, AOP, or categories specified by FBR.
119 – Extension of Time
▪ Commissioner may extend filing date (normally 15 days, longer with FBR approval).
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Assessment (120–123)
120 – Self-Assessment
▪ Return filed = deemed assessment order on date of filing.
▪ Subject to audit, amendment, or rectification.
121 – Best Judgment Assessment
▪ If no return, Commissioner assesses on available info or sectoral ratios.
122 – Amendment of Assessment
▪ Amendment if income escaped, under-assessed, or excessive relief given.
▪ First amendment → 5 years from end of FY in which original assessment issued.
▪ Subsequent amendments later of
a. 5 years from end of FY in which original assessment issued, OR
b. 1 year from end of FY in which amended assessment was issued.
122A – Revision by Commissioner
▪ Commissioner may revise order if erroneous and prejudicial to tax payer.
122B – Revision by Chief Commissioner
▪ Chief Commissioner may revise Commissioner’s order relating to lower rate certificate.
123 – Provisional Assessment (Offshore / Concealed Assets)
▪ If offshore/concealed assets discovered, provisional assessment made → regularized later after
hearing.
83

Special & Miscellaneous (124–126)

124 – Effect of Orders
▪ Appellate/tribunal/court orders must be given effect in revised assessment.
125 – Disputed Property
▪ Where property ownership under court dispute, assessment allowed within 1
year after decision.
126 – Evidence of Assessment
▪ Assessment order or certified copy = conclusive evidence.
▪ Technical mistakes/omissions don’t invalidate it.

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Supreme Court

High Court

APPELLATE AUTHORITIES
Appellate. Tribunal Inland
Revenue

Commissioner Inland
revenue (Appeals)
85

Appeal to the Commissioner

A person dissatisfied Condition for filing an An appeal shall

with orders passed by appeal An appeal (a) Be in the prescribed
a Commissioner may cannot be filed if the form;
file an appeal to the taxpayer has not paid (b) Be verified in the
Commissioner the tax along with the prescribed manner;
(Appeals) return. (c) State the grounds of
appeal;
(d) Be accompanied by
fee

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Appeal to Commissioner (Appeals)

Who can appeal? Any aggrieved taxpayer against an order of Commissioner/Tax Officer
where tax impact < Rs. 20 million.
Filing of Appeal (Sec. 127)
▪ Prescribed form + verification + grounds of appeal.
▪ Fee (assessment cases):
▪ Company: Rs. 5,000
▪ Others: Rs. 2,500
▪ Fee (other orders):
▪ Company: Rs. 5,000
▪ Others: Rs. 1,000
▪ Tax due with return (Sec. 137(1)) must be paid before appeal.
▪ Time limit:
▪ Assessment/penalty orders → within 30 days of notice of demand.
▪ Other cases → within 30 days of intimation of order.
▪ Delay: May be condoned by Commissioner (Appeals).

87

Appeal to Commissioner (Appeals)

Disposal of Appeal (Sec. 128). Commissioner (Appeals) issues notice of hearing to both taxpayer &
Commissioner.
▪ Stay of recovery:
▪ Can stay recovery of tax for 30 days if undue hardship is caused.
▪ Can extend another 30 days, but final order must be passed within that time.
▪ May adjourn hearings.
▪ May allow new grounds of appeal if omission was not willful.
▪ May call for further info or inquiry.
▪ New evidence/documents only allowed if taxpayer had sufficient cause for not producing earlier.
Decision in Appeal
▪ Commissioner (Appeals) may:
▪ Confirm, modify, or annul assessment order.
▪ In other cases, make any order deemed fit.
▪ Cannot increase assessment/decrease refund without giving taxpayer a chance to be heard.
▪ For AOP cases, can direct Commissioner to amend members’ assessments (Sec. 122(2) time limit not
applicable).
▪ Order timeline:
▪ Within 120 days of filing appeal (extendable by 60 days with reasons recorded).
▪ Exclusions: adjournments at taxpayer’s request, stay orders, remands, ADR, etc.
▪ Final order served on taxpayer & Commissioner. 88

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Appeal to the Appellate Tribunal [Sec. 131]

Who can appeal?
Any taxpayer (except SOEs) or tax department if aggrieved by an order of Commissioner.
Time limit: 30 days from receipt of order.
Requirements:
▪ Prescribed form & verification
▪ Prescribed fee: Rs. 20,000 (company), Rs. 5,000 (others)
Late appeal: Tribunal may allow if sufficient cause shown.
Tax payment: Tax is still payable unless Tribunal grants stay order (valid 90 days, extendable till disposal if
hearing schedule followed).
Procedure for Disposal of Appeal [Sec. 132]
Decision timeline: Normally 90 days, extendable by 90 more with approval.
First hearing: Tribunal informs taxpayer about Alternative Dispute Resolution (ADR).
Hearings: Strict schedule; adjournment only with strong reasons + minimum Rs. 50,000 cost.
Powers of Tribunal:
• Can affirm, modify, annul, or remand the assessment.
• Must give taxpayer chance before increasing assessment/penalty or reducing refund.
• Can direct Commissioner to amend assessments of AOP members.
• For non-assessment decisions: may affirm, vary, annul, or give directions.
Finality: Tribunal’s order is final (except reference to High Court under Sec. 133).
Communication: Orders must be sent to taxpayer and Commissioner. 89

Basis Commissioner (Appeals) (Sec. 127–128) Appellate Tribunal (Sec. 131–132)

Any person (other than SOEs) or Tax Dept.
Any person aggrieved by order of aggrieved by order of Commissioner/Chief
Who can appeal? Commissioner/Tax Officer with tax impact Commissioner/Board subject to pecuniary
< Rs. 20m jurisdiction (monetary limit involved in
dispute)
Time limit to file Within 30 days of service of order/notice Within 30 days of service of order
Prescribed form + verification + fee +
Formality Prescribed form + verification + fee
payment of tax with return (Sec. 137(1))
▪ Co. (assessment): Rs. 5,000
▪ Others: Rs. 2,500 ▪ Co.: Rs. 20,000
Fee
▪ Other orders: Rs. 5,000 (Co.) / Rs. ▪ Others: Rs. 5,000
1,000 (others)
Tribunal may stay recovery up to 90 days
Can stay recovery max 30 days (+30 days)
Stay of recovery (continue till appeal decided if not disposed
if hardship proved
within time)
Within 90 days (pending appeals: 180 days;
Within 120 days (extendable by 60 days
Decision deadline further condonation possible for +90 days
with reasons). Exclusions apply.
with Law Minister approval)
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Basis Commissioner (Appeals) (Sec. 127–128) Appellate Tribunal (Sec. 131–132)

Strict schedule, no adjournment except
Possible; may allow new grounds & new
Adjournments with compelling reasons & cost (min Rs.
evidence if justified
50,000)
Confirm, modify, annul assessment / Affirm, modify, annul, remand, or make
Powers
give any suitable order. suitable order.
Same restriction: cannot increase
Enhancement of Cannot increase assessment/decrease
tax/penalty or reduce refund without
assessment refund without hearing taxpayer.
giving hearing.
May authorize Commissioner to amend Same — Tribunal may authorize
AOP case impact members’ assessments (Sec. 122(2) time Commissioner to amend AOP members’
limit not applicable). assessment (122(2) not applicable).
Decision of Tribunal is final except
Order served on taxpayer &
Finality appeal under Sec. 133 (Reference to High
Commissioner.
Court).

91

Crumble Cookies Pvt. Ltd., a company, received the following independent orders for
different Tax Years from tax authorities:
1. Order A (Assessment Order) – Passed by a Taxation Officer creating additional
demand of Rs. 15 million.
2. Order B (Penalty Order) – Passed by the Commissioner Inland Revenue imposing a
penalty of Rs. 25 million.
3. Order C (Assessment Order) – Passed by the Chief Commissioner creating demand of
Rs. 30 million.
Requirements:
a. For each order (A, B, and C), state where the appeal lies (Commissioner (Appeals) or
Appellate Tribunal). (3 marks)
b. State the time limit to file each appeal. (1.5 marks)
c. State the prescribed fee payable in each case. (1.5 marks)

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Answer
a) Where appeal lies?
▪ Order A (Rs. 15m by Tax Officer): → Appeal lies with Commissioner (Appeals) (since
order < Rs. 20m and passed by Tax Officer).
▪ Order B (Rs. 25m Penalty by Commissioner): → Appeal lies with Appellate Tribunal
(since > Rs. 20m and passed by Commissioner).
▪ Order C (Rs. 30m by Chief Commissioner): → Appeal lies with Appellate Tribunal
(since passed by higher authority).
b) Time limit:
All appeals must be filed within 30 days of service of order.
c) Prescribed fee:
▪ Order A: Rs. 5,000 (company, Commissioner (Appeals)).
▪ Order B: Rs. 20,000 (company, Tribunal).
▪ Order C: Rs. 20,000 (company, Tribunal).

93

Reference Application before High Court [Sec 133]

Who can apply?
▪ Any aggrieved person , OR
▪ The Commissioner (Inland Revenue / FBR)
Both may file a reference application before the High Court within 30 days of communication of the order of the
Appellate Tribunal or Commissioner (Appeals), subject to pecuniary jurisdiction.
▪ Fee: Rs. 50,000 if filed by taxpayer.
▪ Commissioner’s application must be accompanied by written authorization of the Chief Commissioner.
Main procedure
1. Application filed in prescribed form along with a statement of case (facts, findings, and question of law or mixed
question of law & fact).
2. Applicant must also file complete record of the Tribunal/Commissioner (Appeals) within 15 days.
3. High Court, if satisfied that a question of law / mixed law & fact arises, admits the case.
4. Heard by a Special Bench (≥2 judges) of the High Court.
5. Decision, Six months from filing; condonation possible. High Court must ensure adequate benches to meet timelines.
Effect & Powers of High Court
1. High Court decides the legal question and modifies Tribunal/Commissioner (Appeals) order accordingly.
2. Copy of judgment sent back to Tribunal/Commissioner (Appeals).
3. Tax remains payable as per Tribunal/Commissioner (Appeals) order, but recovery paused for 30 days from its
communication.
4. High Court may stay recovery (on taxpayer’s application) if at least 30% of disputed tax is deposited.
5. Stay automatically lapses after 6 months, unless reference is decided earlier or order withdrawn.
6. If refund arises but Commissioner intends to appeal to Supreme Court, High Court may postpone refund till disposal
of Supreme Court appeal. 94

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Super Summary – ADRC (Section 134A)

[Link] can apply?
1. Any aggrieved taxpayer (individual, company, SOE) with a tax dispute pending in court or appeal
forum.
2. SOEs (state-owned enterprises) must apply (compulsory), no Rs.50m limit applies to them.
[Link] can apply?
1. If tax liability ≥ Rs.50m, or refund issue.
2. For waiver of default surcharge/penalty.
3. For any special relief needed to resolve dispute.
4. Not allowed if criminal proceedings are involved.
[Link] to apply?
1. File application to FBR with:
1. Proposed solution (e.g., how much tax willing to pay).
2. Undertaking to accept ADRC decision.
3. Withdrawal of all pending litigation after decision.
[Link] of ADRC (by FBR within 15 days):
1. Chairperson: Retired High Court Judge (from panel).
2. Member 1: Chief Commissioner IR of jurisdiction.
3. Member 2: Taxpayer’s nominee (CA/Advocate/Ex-IRS Officer/Businessman).
4. Restriction: Nominee cannot be taxpayer’s auditor/representative.
95

Super Summary – ADRC (Section 134A)

5. Proceedings & Timeline:
1. ADRC can examine case, call inquiry, order audit, or seek expert opinion.
2. Must decide within 45 days (extendable to 60 days).
3. Recovery of disputed tax is automatically stayed once ADRC is formed.
[Link]:
1. By majority vote.
2. Not a precedent for other cases.
3. Binding on Commissioner only when taxpayer withdraws pending appeals within 60 days.
4. If taxpayer doesn’t withdraw → decision not binding.
[Link] of decision:
1. Commissioner must also withdraw departmental appeals within 30 days.
2. Taxpayer must pay tax as per ADRC decision in given time.
3. If ADRC fails to decide in 60 days → FBR dissolves committee → case goes back to court/appeal (to be
decided in 90 days).
[Link] points:
1. Members (except CCIR) get remuneration.
2. FBR may make rules for ADRC.

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Question;
ABC Ltd. (a private manufacturing company) has a tax demand of Rs. 120 million raised
after an audit for Tax Year 2023. ABC Ltd. has already filed an appeal before the
Commissioner (Appeals), which is still pending. The company believes the demand is
excessive and wants to settle the matter quickly.
Separately, Pak Energy (Pvt.) Ltd., a state-owned enterprise (SOE), has a disputed refund
claim of Rs. 20 million pending before the Appellate Tribunal.
Both companies approach their tax advisors to ask:
[Link] they apply for ADRC? If yes, under what conditions?
[Link] documents/undertakings must accompany their applications?
[Link] will the ADRC be constituted and within what time frame?
[Link] is the timeline for ADRC decision and what happens if no decision is made?
[Link] will the ADRC decision become binding on the Commissioner?

97

Answer
Under Section 134A (Alternative Dispute Resolution Committee, ADRC), an aggrieved
taxpayer may apply to FBR for ADRC where a case is pending in court or appellate forum
in the following cases:
Tax liability of Rs. 50 million or more or admissibility of refund.
Disputes relating to waiver of default surcharge or penalty.
Any other hardship requiring specific relief.
For state-owned enterprises (SOEs), the Rs. 50 million limit does not apply — ADRC is
mandatory for them.
Application to ABC Ltd.
Dispute amount: Rs. 120 million (above Rs. 50m threshold).Pending appeal before
Appellate Tribunal. Therefore, ABC Ltd. can apply to FBR for constitution of ADRC.
Application to Pak Energy (SOE)
Refund claim: Rs. 20 million. Even though below Rs. 50m, ADRC is mandatory for SOEs.
Pak Energy must apply to FBR for ADRC.

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Procedure & Documents

•Application to FBR must include:
• Settlement proposal,
• Offer of tax payment,
• Undertaking to accept ADRC decision & withdraw litigation.
•For SOE, withdrawal of all pending litigation must be immediate.
Constitution of ADRC
•FBR constitutes committee within 15 days of application.
•Members:
• Retired High Court Judge (Chairperson),
• Chief Commissioner having jurisdiction,
• Taxpayer’s nominee from approved panel.
Decision & Timelines
•ADRC must decide within 45 days, extendable by 15 days.
•If no decision in 60 days → FBR dissolves ADRC → case returns to appellate forum, which must decide within 90 days.
•Tax recovery remains stayed during ADRC proceedings.
Binding Effect
•Decision becomes binding when taxpayer:
• Withdraws pending appeals within 60 days,
• Communicates withdrawal order to Commissioner.
•Then Commissioner is also bound to withdraw his appeal within 30 days.

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