ISLAMABAD: Federal Board of Revenue (FBR) has abolished the power of Commissioner Inland Revenue regarding provisional assessment.
The FBR for explaining the important changes to Income Tax Ordinance, 2001 through Finance Act, 2017 has issued Income Tax Circular No. 04 of 2017. The FBR said that concept of provisional assessment under Section 122C of Income Tax Ordinance, 2001 had been abolished.
The FBR said that prior to the Finance Act, 2017, under section 122C of the Ordinance the Commissioner was empowered to make provisional assessment specifying the income assessed and the tax payable thereon, by exercising his best judgment and utilizing any available information in respect of any person who has failed to furnish a return of income in response to a notice under sub-section (3) or (4) of section 114 of the Ordinance.
Such order attained finality after the expiry of 45 days from the date of service of such order if the taxpayer failed to furnish a complete return of income. Also, there was no right of appeal under section 127 of the Ordinance against a provisional assessment order passed under section 122C of the Ordinance which attained finality after the expiry of 45 days from the date of service of such order. Through the Finance Act, 2017 the concept of provisional assessment has been done away with. However, simultaneously an amendment has been made in section 121 of the Ordinance, whereby, as an alternative to invocation of 122C of the Ordinance, Commissioners have now been empowered to make a best judgment assessment on the basis of available material/information if a taxpayer fails to furnish a return in response to notice issued under section sub-section (3) or sub-section (4) of the Income Tax Ordinance, 2001.
Therefore, with effect from July 01, 2017 section 121 shall be invoked as a result of the failure of a taxpayer to furnish a complete return of income in response to a notice under sub-section (3) or (4) of section 114 of the Ordinance.
