TAX PAYER’S REGISTRATION:

For first time submitting returns, registration is required. For Income Tax registration, Iris is the
online portal where a person is enrolled by providing all the details that the online registration
system asks for. After registration, we log onto Iris, and file our income tax return. If a person
already has national tax number then he will enroll himself by clicking on “e-enrollment for
registered persons”.
An individual, a company and an associati on of persons (AOP) or foreign nati onal would
be treated as registered, only when they are e-enrolled on the Iris portal. E-enrollment
with FBR provides you with a Nati onal Tax Number (NTN) or Registrati on number and
password. In case of individuals, 13 digits Computerized Nati onal Identi ty Card (CNIC) will
be used as NTN or Registrati on number. NTN or Registrati on number for AOP and
company is the 7 digits NTN received aft er E-enrollment. These credenti als allow access
to Iris portal, the online Income Tax system, which is only way through which online
Income Tax Return can be fi led.

RETURNS:
By definition, a tax return is a form, filed with a taxing authority (FBR) that reports income,
expenses, and other pertinent tax information.

Returns are going to submit in every financial, fiscal or special year in order to prevent one-self
from penalties. In Pakistan returns filing time period is from “1 st September till 31st September”.

Sections:

According to ITO 2001, returns are going to be submitted under section 114, 115, and 116
depending upon nature and criterion in which the pertinent falls as per FBR.

Here is the detail of sections and how returns are filed.

Sec-114:

Sec 114 allows following persons to submit their returns, also it is compulsory for them to
submit their returns under this section

 The person having NTN number (issued from FBR) or having CNIC number.
 Owner of immovable property including Flat (250 sq. yards), House (500 sq. yards or 10
Marla), or Land depending upon location and market rates.
 Owner of vehicle (1000cc or above).
 Owner of a company or person doing some sort of business.
 Person authorized with any sort of authorized body including PMDC, chamber of
commerce and trade, etc.
  Person doing sale and purchase of asset.

Note: Person facing any sort of physical disability, he may have option to select his
representative to submit returns on his behalf

Sec-114 (1)

This subsection covers

1. Normal returns (All income heads)

2. Salary returns
3. Other than salary returns.

If we talked about normal returns, we must give all information about all heads of income and
detailed information in a following way.

 Salary (where we get, how much)

 Property Income (total worth, tax amount, and where we get it from)
 Business Income (type of business, Area where business activities perform, Balance
sheets of that business)
 If foreign business company is doing some business in Pakistan, it is compulsory for
them to file their returns. If companies do so, they can carry forward their losses for 6
years (current year and previous 5 years). Otherwise, they are not eligible to C/F their
losses.

Sec-115

This section told us who is liable and who is not liable to file returns. This section deals with
Non-adjustable taxes (FTR). If there is a single source of income, then this section allows filing
the returns.

The persons that are not liable to file returns are follows.

1. Widows
2. Person having age less than 25
3. Non-Resident of the country (the person who does live Pakistan less than 80 days are
considered as non-resident).
4. Mental disabled person.

If the person is unable to submit return under sec 114, then there is an ease that person can
pay it in 115 but again he must be having

 Single Source of income

 FTR
Then his return will be considered as submitted under sec 114.

Sec 116:

This section deals with wealth statement of pertinent. It covers following aspects

 Assets (local as well as foreign assets)

 Liabilities (how much, nature of liabilities)
 Expenses (utility, taxes, fuel, rent, education, zakat, charity, charity, insurance
grocery, etc.)
 Reconciliation (your income and expenses through software)

If wealth statement is not submitted, return of 114 will not be accepted.

But in case of Non-Resident it’s up-to him to show or not to show their wealth statement.

It is very important for wealth statement to be correct and it is on cost. Otherwise serious
inquiries will be held if fraud happens.

Consequences and scenarios:

In the regard of return following scenarios will be disused and observed by FBR to make return
authentic and formal.

Revision of returns:

If return is submitted wrong, then there is a time period of 60 days to correct it by person
himself (pertinent). After this you must get permission from commissioner and some inquiry
will be held to reopen/ revise return.

In this revision if pertinent have to pay extra amount then it is easy to get commissioner’s
permission. But if pertinent has to collect cash in the form of refunds an inquiry will be held
which is bit difficult.

Extension:

Commissioner must approve the revision within 60 days, otherwise permission is assumed to
be given.

 If pertinent is unable to file return until 31 st September, then he/ she (pertinent) has
a chance to get extension of 15 days from commissioner by giving valid reason that
might be
 Pertinent was ill
 Pertinent was out of country
 Death or emergency in belongings of pertinent.
But if the initial 15 days expired and again pertinent did not file return, then he has to give
application to chief commissioner for more 15 days extension.

Mistakes and penalties:

If pertinent revise his mistake or errors in return he files within 60 days, and commissioner does
not find his error then there is no penalty. But if commissioner finds and error or mistakes while
evaluating records, he can charge following penalties

 Remaining amount + Default charges (applied from 1 st October until date pertinent
pay amount) + 25% of remaining amount.

If commissioner sent pertinent a notice, then penalty will be.

 Remaining amount + Default charges (applied from 1 st October until date pertinent
pay amount) + 50% of remaining amount.

Informing commissioner:

If the person is going to liquidate his company, or immigration is done then he just has to take
permission from commissioner 15 days prior. Then commissioner will made special year (from 1
month to 11 months depends) for the person according to sec 117.

In case of death or bankruptcy it is not compulsory to submit returns for whole year.

ASSESSMENTS:
Self-Assessment:
Under Income Tax Ordinance 2001, taxpayer can now prepare their income tax return and
compute their tax liability without any difficulty. The salient features of income tax law are:
1. No assessing officer will determine anyone’s income and compute their tax liability. Now
everyone will declare their income and determine their tax liability themselves.
2. Filing of income tax return itself will be an assessment order and taxpayer’s eligibility for
refund will flow from their tax return.
3. A certain percentage of returns filed shall be selected for tax audit on the basis of risk
assessment to verify the accuracy and correctness of taxpayers’ income tax return.
4. Tax audit will not necessarily mean an amendment of the assessment.
5. Taxpayers’ original assessment can only be amended on the basis of information
acquired during tax audit or any other source.
6. If selected for audit, there will be no pre-designated auditors to carry out audit. The
officials making selection for audit will be different from those who do actual audit. In
 other words taxpayers will have no designated Income Tax Officer holding jurisdiction
on them.

Income Tax Assessment

Assessment is the act through which the taxable income, the tax liability or the amount of
refund is determined and crosschecked by the commissioner from Board of Revenue for its
authentication.
Previously, the commissioner used to access taxpayer’s income tax return manually and then
assesses his/her income tax return to check the if the taxpayer has filed the correct income tax
return by calculating the tax liability correctly and deposited it national treasure. This procedure
used to take weeks.
The whole process which enables the tax department to finalize an assessment is termed as
Assessment Procedure. This procedure involves the following steps:
1. Filing of return of total income
2. Examining the return  and documents in order to form an opinion
3. Issuance of assessment order
4. Payment of the amount of tax payable, if any

But now online assessment is done by the software called “Iris” itself and assessment order is
issued to the taxpayer. The issuance of assessment order means the acceptance or
acknowledgement of the commissioner regarding taxpayer’s income tax return. Now that the
system is online, the assessment order is generated by the system within hours of filing the
income tax return.
The assessment order contains following information:
1. Taxable Income
2. Amount of Tax Paid
3. Amount of Tax Due
4. Date, time, place and manner of appealing the assessment order (In case of non-
agreement)

Special Audit
In case the commissioner thinks that it is necessary for a taxpayer to get his/her books of
accounts audited. In such case, he may ask the taxpayer to get his account books audited.
However, he has to give the taxpayer reasonable opportunity of being heard before giving such
directions.
Income tax commissioner can access the taxpayer’s income tax returns of previous five years.
The commissioner cannot access taxpayer’s income tax returns after the span of five years. He
has the authority to speculate taxpayer’s income tax return for verification, rechecking and
clearance of any past ambiguity. If the commissioner is of opinion that the tax liability of the
taxpayer is to be increased, it is mandatory on the commissioner to inform the taxpayer by
writing a letter and discussing it with him/her that he is increasing taxpayer’s tax liability on
certain facts and figures. Otherwise his order will be void (cancelled).
Amended Assessment
Income tax assessment can be amended or revised under section 122. The Commissioner has
power to amend or revise an assessment by making an alteration or additions if he considers
that it is necessary to ensure that the taxpayer is liable for the correct amount of tax. An
assessment order can only be amended within 5 years from the end of the financial year in
which the commissioner has issued the original assessment order. The Commissioner has
power to make further amendments as many times as many necessary within
1. Five years from the end of financial year in the income tax return was submitted
2. One year from the end of the financial year in which amendment was made

No assessment shall be amended or further amended under section 122 unless the taxpayer
has been provided with an opportunity of being heard.
Best Judgment Order
If the commissioner has any doubts regarding the taxpayer’s income tax return, he will send a
notification to taxpayer in order to get him/herself audited or come and meet the
commissioner to clear the ambiguities. The commissioner will give reasonable time to taxpayer
in order to clarify his/her point of view and produce the demanded documents.
If commissioner has sent two notices to a taxpayer and he/she did not respond, reply or go to
the commissioner (in case the commissioner has asked to come for inquiring the matter), the
commissioner holds the authority to take the decision on the basis of information available that
is gathered and made available by the assessing officers. The commissioner can be the
assessing officer himself.
The best assessment is based on following points:
1. If the assesse fails to respond to a notice sent by the commissioner asking him to give
certain information
2. If he/she fails to fulfill the Special Audit ordered by the commissioner
3. The assesse fails to file the return within due date or extended time limit

The best judgment order will contain the following information:

1. Taxable Income
2. Amount of Tax Paid
 3. Amount of Default
4. Amount of Tax Due
5. Date, time, place and manner of appealing the assessment order (In case of non-
agreement)

Although it is very difficult to challenge the best judgment order but it can be challenged under
certain situations.

APPEALS:
Whenever a dispute or difference of opinion is brought before the Appellate Authorities for
decision, it is known as “appeal”.
If you think that the assessments order you received by the commissioner is faulty and you
don’t agree with that, then you can file appeal to the seniors to revise it. It refers to solve the
disagreement between the taxpayer and the income tax department.

Stages of Appeal:

1. APPEAL TO THE COMMISSIONER (APPEALS):

“Commissioner (Appeals)” means a person appointed to be a Commissioner Inland Revenue

(Appeals) under section 208 of the Income Tax Ordinance, 2001. When you get the assessment
order from the commissioner and you think that the order isn’t correct, then you’ll have to
write an application to the Commissioner appeal, within 30 days of getting the order from the
commissioner. The appeal charges against assessment are Rs.1000, fee of Rs.1000 in case of
company and Rs.200 in other cases shall be payable. You have to attach documents, orders, and
your queries with the grounds of appeals with application or challan. Commissioner appeal
have 120 days to take decision, he can take 60 days extension with solid reason for the extension .
Commissioner appeal takes decision after discussions with both the parties i.e. tax payer and
the commissioner.

2. APPEAL TO INCOME TAX APPELLATE TRIBUNAL:

“Appellate Tribunal” is the highest appellate authority within the framework of the Income Tax
Ordinance, 2001. The main function of ITAT is to hear the appeals against the decisions given by
the Commissioner (Appeals) and to decide the matter under the provisions of the law.
You can appeal against the order/decision of the commissioner appeal to the Income Tax
Appellate Tribunal (ITAT) within 60 days of commissioner appeals orders. Commissioner also
has the authority to challenge the decision. If tax payer goes to ITAT, he has to pay the fees but
if commissioner goes to ITAT for challenging the decision, he doesn’t have to pay the fee. The
applicant has to provide the ground of appeal and ITAT takes decision within 180 days. Income
Tax Appellate Tribunal is the final fact finding authority.

Members of the Appellate Tribunal:

Appellate tribunal shall have two types of members:

i. Judicial Members:

Any of the following persons may be appointed as judicial member:

 High court judge

 District court judge
 Lawyer in high court for 10 years
ii. Accountant Member:

Any of the following persons may be appointed as judicial member:

 CA with ten years practice

 ICMA with 10 years practice
 Regional commissioner

Recovery of tax:
Even if you appeal, the recovery of tax is inevitable with respect to commissioner’s orders. But
you can delay it if:

 You pay 10% of the amount of default tax

 Get stay orders from ITAT (ITAT give stay order of 6 months, but after this period
commissioner can take legal actions).

Status of the Appellate Tribunal’s Decision:

If the matter before the ITAT relates to the Question of law, then the case may be referred to
the High court. But if the matter related to Question of tax, then the ITAT decision would be
final and could not be challenged further.

3. APPEAL TO HIGH COURT:

After the tribunal, the tax payer or tax department may file a reference application in order to get the
advisory of high court on any law. High court will take decision within 6 months. High court can
also grant a stay order for 6 months till the time the court takes decision. In High court
decision is taken by two bench i.e. two judges. And whoever will do appeal among both the
parties would have to pay the High court fees.

Section 133:

 The taxpayer or the commissioner who does not agree upon the order of the tribunal
can appeal into the high court within 90 days after receiving the order from tribunal.
 The application should be with a statement of case to the high court.

 If the high court is satisfied that there is some misleading information in the tribunal
order, then the appeal would be processed otherwise rejected.
 The high court upon hearing the appeal, pass judgement on the points which needs to
be modified again. The court sends judgement under seal of the court to tribunal.
 If the tax is refundable according to the new high court order, the commissioner must
adjust or return it within the 30 days of judgement.

4. APPEAL TO SUPREME COURT:

Supreme Court is the final stage for the submission of appeal of dispute parties against any
order of the High court. In any case, High court certifies to be fit one for appeal to Supreme
Court.

5. ALTERNATE DISPUTE RESOLUTION:

If both the parties want to settle the matter out of the court then they have to write an
application to the board to form an Alternative Dispute Resolution Committee. They make a
special committee within 60 days of application. It is mandatory for a person to submit case
withdrawal from ITAT or High Court, and submit the letter in the committee within 75 days;
otherwise the committee would dissolve and the case will go back to where it first came from
i.e. ITAT or High court.
Members of board:

 Represent department: He should not be less than commissioner’s rank

 Represent Tax payer: Chamber of commerce or , CA with10years of

experience
 Judiciary: Retired judge of high court or district court

Hearing:
After the letter received order must be passed within 120 days for both parties. If the
commissioner is right, then court ask for recovery. But if the commissioner is wrong he has to
refund. If ADRC does not give any decision within 120 days the case is dissolved and sent back
to the tribunal or high court. Burden of proof is on the tax payer.

The committee takes decision on the agreement of majority number of members. The
decision this committee takes, can’t be challenged; it’s a final decision and everyone have to
accept it.