LAHORE: The Lahore High Court’s Rawalpindi bench has restricted the Federal Board of Revenue’s (FBR) authority to amend deemed tax assessments, ruling that Section 122(5A) of the Income Tax Ordinance, 2001 cannot be used for roving inquiries or speculative recovery of revenue.
In an income tax reference titled Commissioner Inland Revenue versus Sajid Hussain Gondal and others, a division bench comprising Justice Mirza Viqas Rauf and Justice Jawad Hassan clarified the scope of amendment powers under Section 122.
The reference, filed under Section 133 of the ordinance, challenged an order of the Appellate Tribunal Inland Revenue (ATIR), which had set aside an amendment made to a taxpayer’s deemed assessment for tax year 2019. The tribunal had earlier ruled that the FBR’s action under Section 122(5A) was unlawful.
The taxpayer had filed a return for tax year 2019 that became a deemed assessment under Section 120. Subsequently, the Additional Commissioner Inland Revenue issued a show-cause notice under Sections 122(9), 111(1), and 122(5A), alleging discrepancies in declared revenue, purchases, deductions, expenses, and capital declarations.
The department maintained that these discrepancies made the assessment erroneous and prejudicial to the interest of revenue, warranting amendment. Although the assessment was amended in June 2022 and upheld by the Commissioner (Appeals), the ATIR later struck it down in November 2023.
