ASSESSMENT

Assessment:
Sec 2(5), “assessment” includes provisional assessment, re-assessment and amended assessment
Assessment under the Income Tax Ordinance, 2001 is generally made on the basis of returns filed
for a tax year. This is termed as Universal Self-Assessment Scheme (USAS) by the FBR,

Ways of framing the assessment

Under the Income Tax Ordinance, 2001 are as under:
1.  Normal assessment, usually referred to as ‘assessment’
2.  Best judgment assessment
3.  Provisional assessment in certain cases

1. Normal assessment:
Section 120 (ITO):
If a taxpayer has furnished a complete return of income other than a revised return, the Commissioner
shall be treated to have assessed the income and tax.
Return shall be complete if:

 in the prescribed form,

 accompanied by annexures, statements or documents,
 fully state all the relevant particulars or information,
 duly signed with evidence of payment due,
 and accompanied with a wealth statement in accordance with section 114(2).
Adjustments: sec 120(2A)
A return of income shall be processed through an automated system to arrive at correct amounts of total
income, taxable income and tax payable.
The system shall check:
(i) any arithmetical error in the return;
(ii) any incorrect claim
(iii) disallowance of any loss, deductible allowance or tax credit as specified; and
(iv) disallowance of carry forward of any loss.
 the Commissioner has powers to conduct audit of income tax affairs.
Incomplete returns
If the return of income furnished is not complete, the Commissioner shall issue a notice to the taxpayer
informing him of the deficiencies and directing him to provide certain information, by the date specified,
to make the return a ‘complete return’.
 If a taxpayer fails to fully comply, the return shall be treated as an invalid.
 if the taxpayer fully complies, , the return furnished shall be treated to be complete.
Such notice shall not be issued after expiry of 180 days from the end of the financial year is which return
was furnished

2. Best Judgement sec 121

This type of judgment is made where a person fails to:
1. furnish return of income in response to notice of a Commissioner under subsection 3 or 4 of
section 114
2. furnish a return as required under section 143 or section 144 (return to be filed by air
carrier or shipping companies); or
3. furnish the wealth statement as required under section 116; or
4. produce before the commissioner, or a special audit panel appointed under subsection (11) of
section 177 or any person employed by a firm of chartered accountants or a firm of cost and
management accountants under section 177, accounts, documents and records required to be
maintained under section 174, or any other relevant document or evidence that may be required
by him for the purpose of making assessment of income and determination of tax due thereon.
Under any of the above cases, the Commissioner may after making a best judgment assessment shall
issue the assessment the stating

 the taxable income;

 the amount of tax due;
 the amount of tax paid, if any; and
 the time, place and manner of appealing against the assessment order.
An assessment order under section 121 shall only be issued within six years from the end of the tax year
to which it relates.

1. Provisional assessment: sec 123

This type of assessment is applicable in case where any concealed asset of a person is impounded by any
agency of the Federal or Provincial Government. In such a case, the Commissioner is empowered to make
provisional assessment before making a best judgment assessment or amended assessment.
Commissioner may at any time before issuing any assessment order under section 121 or amended
assessment order under section 122, issue to the person a provisional assessment order or provisional
amended assessment order, as the case may be, for the last completed tax year of the person taking into
account the offshore asset discovered.
Where any concealed asset is impounded, it shall be taken into account in the computation of taxable
income and tax payable for the last completed tax year of the person during which the concealed asset
was accounted for.
The Commissioner shall finalize the provisional order or provisional amended assessment order as soon
as possible.

Amendment of assessment:
section 122 of the Ordinance:
The Commissioner may make such alteration or additions as he considers necessary.
The Commissioner is empowered to amend an assessment order issued on self-assessment basis u/s 120
or made to the best of Commissioner’s judgment u/s 121.
Amendment of assessment shall not be made after the expiry of 5 years, from the end of the financial year
in which the order is issued or treated as issued.
Revised return:
If a taxpayer furnishes a revised return of income the Commissioner shall treat the revised return as
amended assessment of the taxable income and tax payable
The taxpayer’s revised return shall be taken to be an amended assessment on the day the revised return
was furnished.
Commissioner is also empowered to amend further as many times as may be necessary,
limit for the tax authority to further amend an original assessment order.
(i) five years from the end of the financial year in which the original assessment order is issued or treated
as issued by the Commissioner; or
(ii) one year from the end of the financial year in which the amended assessment order is issued or is
treated as issued.
An assessment order or amended assessment shall only be amended, where the Commissioner has definite
information, acquired from an audit or on the basis of definite information the Commissioner is satisfied,
that:
(i) any taxable income has escaped assessment.
(ii) total income has been under assessed or assessed at too low tax rate or has been the subject of
excessive relief or refund; or
(iii) any amount under a head of income has been misclassified.
The Commissioner may amend, or further amend, an assessment order, if he considers that it is erroneous
in so far it is prejudicial to the interest of revenue.
Issuance of amended order:
Once the order of assessment is amended, the Commissioner shall issue an amended assessment order as
soon as possible stating:
(i) the amended taxable income of taxpayer;
(ii) the amended amount of tax due;
(iii) the amount of tax paid, if any, and
(iv) the time, place and manner of appealing the amended assessment.
No assessment shall be amended or further amended without giving the taxpayer an opportunity of being
heard.

Actions against assessment or amended assessment:

1. Revision of assessment by the Commissioner [Sec 122A]:
The Commissioner may, suo-moto call for the record of any proceeding in which an order has been
passed by any Officer of Inland Revenue other than the Commissioner.
Where, after making such an inquiry Commissioner considers that the order requires revision, then he
may make such revision to the order as he deems fit.
Any such order shall not be prejudicial to the person to whom the order relates.
The Commissioner shall not revise any order if:
(a) an appeal against the order lies to the Commissioner (Appeals) or to the Appellate Tribunal and the
time within which such appeal may be made has not expired; or
(b) The order is pending in appeal before the Commissioner (Appeals) or has been made the subject of an
appeal to the Appellate Tribunal.
2. Revision by Chief Commissioner [Sec 122B]:
The Chief Commissioner may, either of his own motion or on an application made by the taxpayer for
revision, call for the record of any proceedings with regard to collection or deduction of tax at source
under Income Tax Ordinance, 2001. Record of such proceedings shall be called in which an order has
been passed by any authority subordinate to him.
If, after making such inquiry as is necessary, The Chief Commissioner considers that the order requires,
revision, he may make such order as he may deem fit in the circumstances of the case. However, he shall
provide a reasonable opportunity of being heard by the taxpayer.
3. Powers of tax authorities to modify orders, etc. [Sec 124A]:
Where a question of law is decided either by a High Court or the Appellate Tribunal in case of a taxpayer.
In such a case the Commissioner may proceed to amend the assessment, to the extent it needs revision
due to the decision of High Court or Appellate Tribunal on the question of law.
Where decision of High Court or Appellate Tribunal is reversed or modified, the Commissioner may
modify assessment in which the said decision was followed within one year of the date of receipt of
decision.