CAF-02 –Tax Practices

Sir Abdullah Maqsood, ACA

CHAPTER 14
Returns
TABLE OF CONTENTS
1. Tax return
2. Persons liable to file a tax return
3. Method of filing of tax return
4. Revision of tax return
5. Due dates for filing of tax return
6. Filing of wealth statement
7. Filing of tax return on discontinuance of business
8. Extension of time for furnishing of tax return
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

1. TAX RETURN
A tax return is the prescribed document made for a tax year which is prepared by the taxpayer in
order to declare his taxable income and tax liability to the FBR.

2. PERSON LIABLE TO FILE A TAX RETURN

2.1 Persons liable to file a tax return
The following persons are required to furnish a return of income for a tax year:
• Every company
• Every person (other than a company) whose taxable income for the year exceeds the
maximum amount that is not chargeable to tax.
• Any non-profit organization.
• Every person whose income for the year is subject to final taxation.
• Person or classes of persons notified by the board with the approval of minister in-charge.

In addition to the above person return is also required to be filed by the person who: -
• has been charged to tax in any of the 2 preceding tax years.
• claims a loss carried forward.
• owns immovable property with a land area of 500 square yards or more or owns any flat
located in:
- areas falling in the municipal limits; or
- areas in a Cantonment; or
- the Islamabad Capital Territory.
• owns immoveable property located in rating area with a land area of 500 square yards or
more.
• owns a flat in a rating area having covered area of 2,000 square feet or more.
• owns a motor vehicle having engine capacity above 1,000 CC.
• has obtained National Tax Number; or
• holds commercial or industrial connection of electricity if annual bill exceeds Rs.500,000.
• is a resident person registered with any:
- Chamber of Commerce and Industry or
- trade or business association or
- market committee or
- 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; or
• is a resident individual required to file foreign income and assets statement.
• 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.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
2.2 Business bank account
1) “Business bank account” means a bank account utilized by the taxpayer for business
transaction declared to the Commissioner through original or modified registration form.
2) Only businesses, i.e. sole proprietor, AOP or companies are required to declare through FBR
e-portal.
3) Every taxpayer shall declare to the Commissioner the bank account utilized by the taxpayer
for business transactions.
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.
2.3 Persons not required to furnish a return of income
Following persons are granted immunity from the aforesaid provision of filling of tax return:
1. A widow.
2. an orphan below the age of 25 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:
• owning immovable property with a land area of 500 square yards or more or
• owning any flat located in areas falling in the municipal limits or areas in a Cantonment and
the Islamabad Capital Territory.
• owning immoveable property in rating area with a land area of 500 square
• owning a flat in a rating area having covered area of 2,000 square feet or more.
• owning a motor vehicle having engine capacity above 1,000 CC.

2.4 Powers to call returns and statements

The Commissioner may give notice to a person to furnish a return for a period of less than 12
months and return will be furnished by the due date as specified in the notice, where:
a. the person has died.
b. the person has become bankrupt or gone into liquidation
c. the person is about to leave Pakistan permanently
d. the Commissioner otherwise considers it appropriate.

Can Commissioner demand a return of income from a person?

If a person has not furnished return, Commissioner may, by notice, require him to file it within 30
days of date of service of notice. Commissioner may allow a longer period or shorter period.

For how many last tax years Commissioner can demand a return of income from a person?
The above notice may be issued for any of last 5 completed tax years. Further if a person has not
filed return for any of the last 5 completed tax years, notice may be issued for one or more of the
last 10 completed tax years. The time limit provided above shall not apply if Commissioner is
satisfied that a person who failed to furnish return has foreign income or owns foreign assets.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
2.5 Powers to enforce filing of returns
• The Board has power to issue income tax general order to persons who are not appearing
on active taxpayers list but are liable to file return.
• The income tax general order (issued above) will have the following consequences for the
persons mentioned therein:
a. disabling of mobile phones or mobile phones Sims
b. discontinuance of electricity and gas connection
c. restriction on foreign travel from the country for a citizen of Pakistan, except
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, if he is satisfied that:
a. the return has been filed; or
b. person was not liable to file the return.
• A person shall be included in the general order if following conditions are fulfilled:
a. notice for filing of return (under sub-section (4) of section 114) has been issued.
b. date of compliance of the notice (under sub-section (4) of section 114) has elapsed
the person has not filed the return.

2.6 Restriction placed on economic transactions by certain persons

Ineligible Person means a person who is not an eligible person.
Eligible person in case of individual means a person who has filed:
- 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
- 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.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
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:
- Booking, purchasing, or registering motor vehicles having invoice value exceeding Rs.7 million
- Registering or transferring immovable property having FBR value/DC rate exceeding Rs.100 Mn
- 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.
- Cash withdrawals from bank accounts exceeding Rs.100 million in all bank accounts held by an
individual.
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.

3. METHOD OF FILING OF TAX RETURN

A return of income shall be in the prescribed form and shall contain annexures and statements as
may be prescribed:
a. shall fully state all the relevant particulars or information including a declaration of the
records kept by taxpayer.
b. shall be signed by an individual or the person’s representative (If appointed).
c. shall be accompanied with due payment of tax as per return.
d. shall be accompanied with a wealth statement (u/s 116) and
e. shall be accompanied with a foreign income and assets statement. (u/s 116A)
A return filed electronically or on web or any computer readable media will also be treated
as return. The Board may make rules for:
• determining eligibility of the data of returns
• e-intermediaries who will digitise the data of returns and transmit the same to the Income
Tax Department under their digital signature
• other matters relating to electronic filing of returns
If a person files a return, it will be assumed that he himself has signed it, unless he proves otherwise.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

4. REVISION OF RETURN
4.1 Filing of revised return or statement
If a person discovers any omission or wrong statement in a return, he may revise it by fulfilling the
following conditions:
a. it is accompanied by the revised accounts or revised audited accounts.
(However, commissioner may waive this condition if he is satisfied that filing of revised accounts
is not necessary)
b. the taxpayer files the reason for revision of return, in writing, duly signed by him.
c. it is accompanied by approval of the Commissioner.
(However, this condition shall not apply if revised return is filed within 60 days of filing of
return.)
d. taxable income declared is not less than or the loss declared is not more than income or loss
already declared.
Provided also that condition specified in clause (c) shall not apply and the approval required
thereunder shall be deemed to have been granted by the Commissioner, if:
• the Commissioner has not made an order of approval in writing, for revision of return,
before the expiration of 60 days from the date when the revision of return was sought.
• taxable income declared is more than or the loss declared is less than the income or loss, as
the case may be, determined under Assessments.

4.2 Procedure for filing of revised return and statement

• If a taxpayer files a revised return voluntarily along with deposit of the amount of tax short
paid with the default surcharge, whenever it comes to his notice, before receipt of notice
from commissioner then no penalty shall be recovered from him.
• In case the taxpayer deposits the amount of tax as pointed out by the Commissioner during
the audit or before the issuance of notice, he shall deposit the amount of tax short paid, the
default surcharge and 25% of the penalties along with the revised return.
• In case the taxpayer revises the return after the issuance of a show cause notice, he shall
deposit the amount of tax short paid, default surcharge and 50% of the penalties along with
the revised return and after that, the show cause notice shall stand abated.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

5. DUE DATES FOR FILING TAX RETURN

Tax Year Ends Due Date for Filing
Rule for Company
If the tax year ends between January 1st to On or before December 31st next following the end
June 30th of the tax year
If the tax year ends between July 1st to On or before September 30th next following the end
December 31st of the tax year

Rule for Individual / AOP

Return of income by an individual or AOP On or before September 30th next following the end
(All year end) of the tax year
Return in response to notice u/s 117
Due date fixed for submission of tax return.
(discontinuance of business)
Return in response to notice u/s114(5) Due date specified in the notice for submission of tax
(return liable to be filed but not filed) return or 30 days from the date of issuance of notice.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

6. FILING OF WEALTH STATEMENT

6.1 Wealth statement
The Commissioner may by notice require any individual to file a wealth statement. It will contain
following particulars:
• the person’s total assets including foreign assets and liabilities including foreign
liabilities of the person, as on the date or dates specified in such notice.
• the total assets including foreign assets and liabilities including foreign liabilities of the
person’s spouse, minor children, and other dependents, as on the date or dates specified
in such notice.
• any assets including foreign assets transferred by the person to any other person during
the period or periods specified in the notice and the consideration for the transfer.
• the total expenditures incurred by the person, his spouse, minor children and other
dependents during the period or periods specified in the notice and details of such
expenditure, and
• the reconciliation of wealth statement.

Every resident individual shall furnish a wealth statement and wealth reconciliation statement
along with the return of income. It will be furnished by the due date for furnishing the return if
income. Every member of an AOP shall furnish wealth statement and wealth reconciliation
statement along with the return of AOP.

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. Revised wealth reconciliation and reasons for revision will also be filed.
If Commissioner is of opinion that revision is made not for the purpose of correcting a bona fide
omission or wrong statement, he will declare such revision as void through an order in writing after
providing an opportunity of being heard.

Note: Wealth statement can be revised within 5 years from the due date of filing of return.

6.2 Foreign income and assets statement

Every resident individual having:
• foreign income equal to or greater than 10,000 USD or,
• foreign assets with a value equal to or greater than 100,000 USD
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:
• the person’s total foreign assets and liabilities as on the last day of the tax year.
• any foreign assets transferred by the person to any other person during the tax year and
the consideration received; and
• complete particulars of foreign income derived, and the expenditure incurred during the
tax year and that the expenditure wholly and necessarily incurred.
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.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

Preparation of wealth statement

It is prepared as follows:
➢ It is a balance sheet of an individual in which personal assets and liabilities are shown
on any given date. It gives detail of personal assets and liabilities only. It does not reflect
business assets and liabilities rather it shows net equity of business. A wealth statement
is complete if there is reconciliation statement showing change in wealth.
➢ Cash and bank reconciliation statement is prepared from the cash & bank account. We
will start from opening balance of cash & bank and after adding cash inflows and
subtracting cash outflows, the remaining amount is closing balances of cash & bank
account. This closing balance is included in the assets of the wealth statement. If
expenditure side is not explained through the cash receipt side, then the difference is
unexplained investment and is taxable.
➢ After taking cash & bank reconciliation figure, wealth statement for the current year is
complete and a person can easily calculate the figure of increase/decrease in the net
wealth by subtracting the last year’s net wealth figure from the current year’s net wealth
figure.
Note: Assets and liabilities are recorded at historical cost and not at market value.
Example 1:
Here is the wealth statement in table form for Mr. Nadeem as on 30.06.2024:
Assets Amount (Rs.)
Plot at DHA, Lahore 3,500,000
Capital in ABC & Co 2,500,000
Jewelry 500,000
Shares in XYZ (Pvt.) Ltd 1,000,000
Cash 1,500,000
Bank 2,000,000
Total Assets 11,000,000
Less: Liabilities Amount (Rs.)
Personal Loan 1,000,000
Total Liabilities 1,000,000
During the year following information is provided:
➢ He earned salary income of Rs. 1,300,000 and paid tax Rs. 100,000.
➢ He sold shares of Rs. 200,000 for a consideration of Rs. 350,000.
➢ He settled his personal loan of Rs. 500,000.
➢ His household expenses aggregates to Rs. 850,000.
➢ He has given gift of Rs. 400,000 to his brother Kamran through crossed cheque.
➢ He has earned profit on ABC & Co of Rs. 450,000. His drawings from the firm during the
year was Rs. 275,000. He paid tax of Rs. 40,000 on firm income.
➢ He purchased a new plot at EME society for total consideration Rs. 2,000,000 payable in
20 installments. During the year he paid Rs. 700,000 in installments.
➢ On 30th June 2025, his bank balance was Rs. 475,000
Required:
Prepare the wealth reconciliation statement and wealth statement for 30 June 2025.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

Mr. Nadeem – Wealth Statement as on 30.06.2025 (Rs. in '000’)

Assets Amount
Plot at DHA 3,500
Capital in ABC (Note 1) 2,675
Advance for plot at EIVIE 700
Jewelry 500
Shares in XYZ 800
Cash 2,360
Bank 475
Total Assets 11,010
Less: Liabilities
Loan (500)
Closing Wealth 10,510

Wealth Reconciliation Statement – Mr. Nadeem (Tax Year 2025)

Particulars Amount
Opening Wealth 10,000
Add: Inflows
Salary Income 1,300
Gain on Sale of Shares (350 - 200) 150
Profit on ABC & Co 450
Total Inflows 1,900
Less: Outflows
Tax Paid on Salary (100)
Household Expenses (850)
Gift to Brother (300)
Tax on Profit of ABC & Co (40)
Total Outflows (1,290)
Closing Wealth 10,510

W-1: Cash and Bank Calculation

Cash and Bank Details Amount
1,500 + 2,000 + 1,300 + 275 + 350-100 - 850-500- 400 - 40 - 700 2,835
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

7. FILING OF TAX RETURN ON DISCONTINUANCE OF BUSINESS

• A person discontinuing a business shall give the Commissioner a notice within 15 days of
the discontinuance.
• 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 the tax year (of discontinuance) and will
end on the date of discontinuance.
• This period shall be treated as a separate tax year.
• If a taxpayer does not give notice of discontinuance and the Commissioner has grounds to
believe that a business has been discontinued or taxpayer is likely to discontinue the
business, The Commissioner may serve notice to furnish the return.
• A return furnished here will be treated as deemed assessed.

8. EXTENSION OF TIME FOR FURNISHING OF TAX RETURN

Eligible Persons:
A person required to furnish a return of income, or a wealth statement may apply to the
Commissioner for an extension of time.
Deadline for Application:
The application for extension must be made by the due date of furnishing the above documents.
Grounds for Granting Extension:
The Commissioner may grant the extension if satisfied that the person was unable to file due to:
- absence from Pakistan;
- sickness or other misadventure
- any other reasonable cause.
Maximum Period for Extension:
An extension should not exceed 15 days from the due date. In exceptional circumstances, a longer
time may be granted. Where the Commissioner has not granted extension, the Chief Commissioner
may, on application made by the taxpayer, grant an extension or further extension up to 15 days.
An extension of time granted as discussed above shall not change the due date for payment of
income tax payable on the basis of return and default surcharge shall be chargeable for delayed
payment of tax due.

Note: If a person gets an extension, he will still be liable to pay the default surcharge.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

ICAP PAST PAPERS

Question 1
Mr. Sami has received a notice in March 2010 from the Commissioner to file return of income for the
tax years 2003 and 2006 within 20 days of receiving the notice.
In your capacity as a tax consultant, advise Mr. Sami on the following issues along with appropriate
explanations:
i. Is the Commissioner justified in issuing the above notice?
ii. If Mr. Sami is not in a position to meet the deadline for filing the returns, can he get
an extension?
Question 2
Zucchini Associates (ZA), a tax consulting firm, has been invited by tax authorities to make a
presentation on "Tax years and filing of tax returns" at a taxation seminar.
Mr. Baqir, a senior partner at ZA, wants Mr. Bader, his newly appointed associate, to make the
presentation. Under the provisions of the Income Tax Ordinance, 2001, advise Mr. Bader about the
points to be included in his presentation as regards the following:
a. Description of normal, special, and transitional tax years.
b. Persons who are required to furnish a return of income for a tax year.
c. Circumstances under which a Commissioner of Income Tax can require a person to furnish
a return of income for a period of less than twelve months.
Question 3
Identify the due dates for filing of income tax return in each of the following cases:
i. A company whose income year ended on 30 September 2011.
ii. A company whose income year ended on 31 December 2011.
iii. A company whose income year would end on 31 March 2012.
iv. A member of an association of persons (AOP) if the income year of the AOP would end on 30
June 2012.
Question 4
Zubaida is operating a business as a Wedding Event Planner since past 12 years. She had filed her
complete return for the tax year 2007 on 20 August 2007. On 1 September 2012, Commissioner
Inland Revenue (CIR) served a Show Cause Notice, requiring her to explain certain receipts which
were credited to her account during the tax year 2007. Zubaida is uncertain as to whether CIR is
empowered to issue such a notice after a lapse of so many years.
Required:
Advise Zubaida about the validity of the Show Cause Notice issued by CIR under the Income Tax
Ordinance, 2001.
Question 5
Mr. Dynamic has received a notice from the Commissioner in which he identified certain errors and
deficiencies in the return filed for the last tax year.
Required:
a. State the deficiencies on account of which the return submitted by Mr. Dynamic may be regarded as
‘incomplete’ for tax purposes.
b. Narrate the circumstances under which the Commissioner may amend Mr. Dynamic’s assessment
order.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
Question 6
Zia has discovered an error in his annual income tax return submitted by him and intends to file a
revised return voluntarily.
Required:
Under the provisions of Income Tax Ordinance, 2001:
i. Narrate the conditions which Zia has to comply with in order to submit a valid revised
return.
ii. State the benefits which Zia could derive by filing the revised return voluntarily.
Question 7
(a) List the persons who are required to furnish a return of income for a tax year under the Income
Tax Ordinance, 2001.
(b) Specify the circumstances under which the Commissioner has powers to issue notice
demanding a return of income from certain person(s) for less than one year.
(c) State the powers of the Commissioner if a taxpayer fails to furnish return as required under part
(b) above, within the specified time.
Question 8
Zahid, the sole proprietor of FG and Company, is a resident individual and is in the process of filing
his wealth statement for the tax year 20X7. The relevant information is as under:
(i) Assets and liabilities disclosed in the wealth statement for tax year 20X6:
Assets Rupees
Agricultural land in Hyderabad 5,000,000
Residential property in DHA Karachi 3,000,000
Investment in shares of listed companies 1,100,000
Business capital – FG & Co. 4,000,000
Motor vehicle 1,540,000
Cash at bank 600,000
Cash in hand 300,000
Total Assets 15,540,000
Liabilities (Rupees)
Bank loan (1,500,000)
Net Assets 14,040,000

(ii) Details relating to FG & Co. – Tax Year 20X7:

Description Amount (Rs.)
Income from business 2,540,000
Drawings during the year 450,000

(iii) Balance of cash as on 30 June 20X7:

Type Amount (Rs.)
Cash in hand 157,500
Cash at bank 730,000
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
(iv) Transactions carried out by Zahid during the year:
• Paid an advance of Rs. 1,000,000 against purchase of a bungalow for Rs. 10,000,000
• Sold shares of a listed company for Rs. 350,000 (cost Rs. 50,000)
▪ Capital gain tax collected = Rs. 37,500
• Gifted shares (cost Rs. 100,000, FMV Rs. 150,000) to brother
• Paid Rs. 200,000 towards bank loan principal
• Personal expenses = Rs. 2,075,000
• Net receipts from agricultural income = Rs. 2,500,000
Required:
Prepare Zahid’s wealth statement and wealth reconciliation statement for tax year 20X7.
Question 9
Mukhtar, a resident individual, is in process of finalization of his wealth statement for the tax year
2021. He has provided you the following information:
i. During the tax year 2021, Mukhtar received share of profit of Rs. 1,400,000 from an AOP. As
on 30 June 2020, his total investment in the AOP was Rs. 5,300,000. He was also provided a
car worth Rs. 2,500,000 by the AOP for office use only.
ii. In 2014, he had purchased 10 tola gold for Rs. 500,000. At 30 June 2021, the market value of
the gold was Rs. 107,000 per tola.
iii. During the tax year 2021, he sold his personal car for Rs. 1,876,000. The car was purchased
in 2019 for Rs. 1,700,000.
iv. During the tax year 2021, he paid Rs. 600,000 against outstanding interest-free loan of Rs.
1,000,000. The loan was obtained in tax year 2020.
Required:
Under the provisions of the ITO, advise Mukhtar how the above matters would be dealt with in his
wealth statement and its reconciliation for the tax year 2021.
Question 10
i. Hasan, a Pakistani citizen, has been working in the UK since 2015. In tax year 2022, Hasan
invested in shares of a company, listed on the Pakistan Stock Exchange. Within the same tax
year, he subsequently sold these shares and realized a gain of Rs. 500,000. However, during
the tax year 2023, he did not earn any Pakistan source income.
ii. Mehjabeen, a US citizen, got married in Pakistan five years ago and has since been residing
in the country. In January 2023, Mehjabeen’s father passed away in the USA, bequeathing
her a property worth USD 400,000, situated within the USA. She neither earns income nor
holds any assets in Pakistan in her name, which has resulted in her not being required to file
a return of income until tax year 2022.
iii. XYZ (Pvt.) Limited ceased its business operations indefinitely on 31 August 2022. XYZ
submitted a notice of discontinued business to the Commissioner in accordance with
regulatory requirements. XYZ’s year-end falls on 31 December.
Required:
Discuss whether the above persons are required to furnish the return of income for the tax year
2023 under the provisions of the Income Tax Ordinance, 2001.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA

ICAP PAST PAPERS SOLUTIONS

Answer 1
(i) Where the Commissioner is of the view that Mr. Sami is required to file the return of income
but has failed to do so, the Commissioner is empowered to issue a notice requiring him to
furnish the return of income.
However, he can issue such notice in respect of the last five tax years, and therefore issuance
of notice for tax year 2003 cannot be justified.
Further, as per Section 114(4), Commissioner will give him 30 days from the date of service
of notice.
However, Commissioner may allow a longer period or shorter period. So regarding 20 days
being allowed, the notice is justified for TY 2006.

(ii) The Commissioner may extend the timeframe for furnishing the return, if he is satisfied that
the applicant is unable to furnish the return of income by the due date because of:
(Section 119(3))
• his absence from Pakistan;
• sickness or other misadventure; or
• any other reasonable cause.
However, an extension of time shall not exceed 15 days from the due date for furnishing the
return of income unless there are exceptional circumstances justifying a longer extension of
time.
Where the Commissioner has not granted extension for furnishing return, the Chief
Commissioner may, on application made by taxpayer, grant extension or further extension
up to 15 days.
In exceptional circumstances, longer time may be granted.

Answer 2
a) S. 74(1), (2) and (9)
b) S. 114(1), (1A)
c) S. 114(3)

Answer 3
(i) On or before 30 September 2012
(ii) On or before 30 September 2012
(iii) On or before 31 December 2012
(iv) On or before 30 September 2012

Answer 4
An assessment order can be amended within 5 years from the end of the financial year in which the
Commissioner has issued or is treated as having issued the original assessment order [S. 122(2)].
The last date in this case is June 30, 2013, therefore show cause notice issued is valid.
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
Answer 5
i) A return of income – [S. 114(2)]
a. shall be in the prescribed form and shall contain prescribed annexures and statements. The
Board may prescribe different returns for different classes of income or persons (including
persons subject to final taxation).
b. shall state all the relevant particulars, including a declaration of the records kept;
c. shall be signed by an individual and in case of other persons it shall be signed by person’s
representative;
d. shall contain evidence of payment of tax as indicated in return;
e. shall contain a wealth statement (u/s 116);
f. shall be accompanied with a foreign income and assets statement.
If any of the above conditions is not fulfilled, the return filed by Mr. Dynamic will be considered as
"incomplete".
ii) Following are the circumstances under which return of Mr. Dynamic can be amended:
Refer S. 122(5), (5A)

Answer 6
a) S. 114(6)
b) If Zia files return before receipt of notice of audit (voluntarily) by paying tax short
paid/evaded + default surcharge, then no penalty will be recovered.

Answer 7
i. Sec 114(1), 114(1A)
ii. The Commissioner may give notice to a person to furnish a return for a period of less than
12 months, if – [S. 114(3)]:
a. the person has died;
b. the person has become bankrupt or gone into liquidation;
c. the person is about to leave Pakistan permanently;
d. the Commissioner otherwise considers it appropriate.
3 If a person fails to file a return after receiving notice from Commissioner, the Commissioner
may,
based on available information and exercising his best judgment, make an assessment of the
income and tax. [S. 121(1)]

Answer 8
Mr. Zahid – Wealth Statement (Tax Year 20X7)
Particulars Amount (Rs.)
Assets
Agricultural land in Hyderabad 5,000,000
Residential property in DHA Karachi 3,000,000
Investment in shares of listed company 950,000 (1,100,000 – 50,000 – 100,000)
Business capital – FG & Company 6,090,000 (4,000,000 + 2,540,000 – 450,000)
Motor vehicle 1,540,000
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
Cash 157,500
Bank 730,000
Advance 1,000,000
Total Assets 18,467,500
Less: Liabilities
Bank Loan (1,500,000 – 200,000) (1,300,000)
Net Wealth 17,167,500

Working – Cash & Bank Movement (W)

Calculation Amount
(Rs.)
Cash & Bank Calculation: 600,000 + 300,000 + 450,000 – 1,000,000 + 350,000 – 887,500
37,500 – 200,000 – 2,075,000 + 2,500,000

Mr. Zahid – Wealth Reconciliation Statement (Tax Year 20X7)

Particulars Amount (Rs.)
Opening Wealth 14,040,000
Add: Inflows
Income from business 2,540,000
Gain on shares (350,000 – 50,000) 300,000
Net receipts from agricultural land 2,500,000
Total Inflows 5,340,000
Less: Outflows
Tax on capital gain 37,500
Share gifted 100,000
Personal expenses 2,075,000
Total Outflows (2,212,500)
Closing Wealth 17,167,500

Answer 9
Treatment in Wealth Statement Treatment in Wealth Reconciliation
Statement
Investments in AOP will be shown at Rs. Rs. 1,400,000 will be shown as an inflow
6,700,000 (5,300,000 + 1,400,000) (income)
Car provided by AOP is for official use only, No impact
therefore it will not be shown in wealth
statement
Gold will be shown as an asset at Rs. 500,000. No impact
Market value is ignored while preparing wealth
statement
 CAF-02 –Tax Practices
Sir Abdullah Maqsood, ACA
Cash and bank balance will increase by Rs. Gain on disposal of Rs. 176,000 (1,876,000 –
1,876,000 1,700,000) will be shown as inflow (income)
Loan payable of Rs. 400,000 (1,000,000 – No impact
600,000) will be shown as liability
Rs. 600,000 will be shown as deduction in cash
and bank balance

Answer 10
a)
i. Although Hasan did not earn any Pakistan source income during tax year 2023, he had been
charged to tax in respect of his capital gain income in tax year 2022. Therefore, he is required to
furnish a return of income for tax year 2023.
ii. In tax year 2023, Mehjabeen, a resident individual, has become an owner of foreign assets worth
USD 400,000, which is above the threshold of USD 100,000, requiring her to file a foreign income
and assets statement.
Consequently, Mehjabeen is required to file a return of income in tax year 2023.
iii. XYZ (Pvt.) Ltd is required to furnish a return of income for the period from 1 January 2022 to 31
August 2022.
This period will be considered a separate tax year.
b)
An assessment order can be amended within 5 years from the end of the financial year in which the
Commissioner has issued or is treated to have issued the original assessment order.
If an assessment order has been amended, Commissioner may further amend, as many times as may
be necessary, the original assessment within the later of –
(c)
5 years from the end of the financial year in which the Commissioner has issued or is treated as
having issued the original assessment order; or
(d)
1 year from the end of the financial year in which amendment was passed.