ASSESSMENT PROCEDURES

Previously the procedure for calculation of taxable income under

different heads of income was discussed in this topic. We shall discuss
the procedures by Income Tax Authorities (ITA) to collect the revenue
from the assesse. Followings are the stages involved in the cycle of
assessment.
1. Assesse files the return of income
2. Assessment of return in maintained
3. Payment of tax by assesse
4. Recovery of tax from defaulter assesse
At the end of income year, it is necessary for every assesse to
inform the ITA about the total income they have earned during the
year. Assesse are also required to show the income earned which are
exempt of tax and if any such investment is made during the year or
any donation and approved charitable institution, the details must be
provided.
All these details are to be provided in a prescribed form. This
form is typically known as return of income or simply a return. When
this return is duly completed it is submitted to ITA, it is known as filing
the return of income.
WHO SHOULD FILE THE RETURN
It is necessary for the following persons to file the return of
income. Every person who has total income during previous income
year increased Rs. 40,000 in case of salaried person and exceed Rs.
30,000 in case of non- salaried person.
 A registered firm must file the return of its total income exceeds
Rs. 24,000
 Every company must file the return of income

The Income Tax Officer (ITO) has the power to extend the date
filing the return for a period amounting in all to maximum of 15 days, if
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the assesse satisfies him that the return could not filed within the
prescribed period due to genuine difficulty. If the assesse applies for
extension of more than 15 days then the ITO can allow it after getting
approval from the inspecting Assistant Commissioner.

The return of Taxable Income must be furnished by registered

post with acknowledged due or delivered by hand to the officer
authorized by the CBR for this purpose. If in the opinion of ITO a person
was chargeable to tax but has not filed the return of income he can
issue such a person, notice in writing to submit the return within the
specific period of time normally 30 days.

After the return of income has been filed the next step is that of
assessment which means of the complete scrutiny of the information
provided by assesse by his return.

PENALTIES, OFFENCE AND PROSIQUITION

Where in the post of any proceedings under Income Tax

Ordinance 2001, ITO, The Commissioner of Income Tax (CIT) is
satisfied that any person has either in the said proceedings or any
earlier proceedings relating to an assessment of tax, concealed his
income or furnished inaccurate particulars of such incomes, there may
be imposed on such a person, a penalty not exceeding to 50% than the
amount of tax which the said person sought to evade by the
concealment of his income or furnished of inaccurate particulars of
such income.

FOR EXAMPLE, the suppression of any item receipt liable to tax or

claiming any deduction or showing any expenditure not actually
incurred. Where any person makes a statement in any verification, any
return which is false; he shall be punishable with imprisonment for the
term which may extend to 3 years or with fine or with both.

Where any person conceals his income or deliberately furnishes

inaccurate particulars, the same punishment stands. However, where
any person knowingly or willfully aids a bets, assists insight or induces
another person to make or deliver a false return account statement,
certificate or declaration under ITO or himself knowingly or willfully
makes such false return on behalf of another person. He shall be
punishable with imprisonment for a term which extends to 3 years or
fine or both.
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 However, the following conditions are to be observed while
opposing the above mentioned penalties / punishments:
1. ITO should get prior approval of CIT in writing before imposing
the penalty
2. Before imposing the penalty, the assesse should be provided with
reasonable opportunity to defend his position.
INCOME TAX AUTHORITY / ADMINISTRATION
For the proper and efficient working of a system it is necessary
that properly qualified persons are appointed at different levels so that
they can guide the activities to achieve the desired results. For proper
administration of taxation system, the government also needs qualified
persons who should ensure the tax collection machinery should work in
efficient manner and correct amount of revenue is received on the
same hand, there is a need that this work should be done in justifiable
manner.
According to the sec 207, ITO 2001, the following ITA has been
specified:
1. Central Board of Revenue (CBR)
2. Regional Commissioner of Income Tax (RCIT)
3. Commissioner of Income Tax (CIT)
4. Income Tax Officer (ITO)

Apart from these authorities which are sec 207, certain other
bodies have also been created Income Tax Law. FOR EXAMPLE –
Directorate General of Inspection, Appellate Tribunal, Assistant Income
Tax Officers, etc.

Some of these authorities look after the general administration of

IT department and are known as Executive Authorities; the other
groups of authorities are known as judicial authority as they exercise

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judicial functions. Some authorities are given both Executive & Judicial
powers.
According to sec 209 of ITO 2001, the CBR assigns the functions
& areas to RC, CIT, DGI. Inspectors jurisdiction is determine by ITA
under whom they are working. In quite few cases, some powers have
been vested in the hands of more than one authority. It is been done
for immediate action which is sometimes in specific situation. In other
cases, powers originally provided to one ITA may be shifted to other
ITA; this is also done keeping in view the circumstances, loads of work
& importance of situation.
CENTRAL BOARD OF REVENUE (CBR)
It is the highest executive authority of IT in Pakistan. It is
statutory body appointed by central government for the purpose of tax
collection by the authority of CBR Act 1924. Apart from IT collection of
sales tax is also the responsibility of CBR. The board consists of 4
members. Federal Government also appoints full time chairman of the
board for the purpose of administration of IT law; the board can make
rules, issue orders, instructions & directions to the officers of IT
department.
POWERS & FUNCTIONS OF CBR
1. It has the power to declare foreign association whether
incorporated or not to be a company for purpose of IT.
2. CBR can declare a period to be treated as Income Year in case of
any person or class of persons
3. CBR can appoint as many CIT, RCIT, DGI, Appellate Commissioner
of IT, ITO or other ministry officers as necessary
4. It can transfer an appeal from Appellate assistant to CIT
5. It can delegate its power for reasons of administration
convenience

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 6. The board can authorize or assist or instruct the ITO in the course
of any proceedings
7. It can appoint number of qualified persons and fix their salaries
8. CBR can exercise power regarding recognized provident fund,
gratuity fund, etc.
REGIONAL COMMISSIONER OF INCOME TAX (RCIT)
The provision for appointment of RCIT was created in Finance
ordinance 1980. The appointment of RCIT was thought necessary in
order to decentralize the supervisory functions of CBR. It is an
executive as well as judicial ITA, the RC performs such functions as
may be assigned by the CBR. If the specific area is given in his
jurisdiction that area is known as region.
The CIT, Inspecting Officers are subordinate of RC within whose
jurisdictions they perform their functions. If a question arises with
regard to jurisdiction of two CIT the decision of RCIT is final. The
appointment of RCIT has enabled the tax payer to obtain
administration remedies (compensation) locally for which in the post
they had to approach the CBR.
POWERS & FUNCTIONS OF RCIT
1. If these CIT has decided the case the RCIT can revise the order
either on his own motion or receipt of revision, petition from
the assesse.
2. He can inspect the subordinate officers and regulates the
inspection work of inspecting assistant commissioner
3. RCIT conducts the internal audit of IT department
4. He can take actions regarding complaints
5. He is responsible for overall supervision of technical work
perform in the region, he observes all the periodic returns and
statements and keep close watch on the assessment and
collection of Income Tax

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 6. The CIT can perform any other function assigned by the CBR
COMMISSIONER OF INCOME TAX (CIT)
It is an important ITA which has both executive & judicial powers.
When appointed as in charge of zone, he is responsible for proper
administration for the area assigned to him. Along with the
administration authorities, he enjoys the judicial powers also he can
revise the orders passed by his subordinates.
FBR is the appointing authority for CIT. Normally the
commissioner is appointed for specific area but law allows it to be
without any territorial restriction. In organizational hierarchy CIT is
subordinate of RCIT whereas, Inspecting Assistant Commissioner, ITO &
Inspector of IT performing their functions are subordinate to him.
POWERS & FUNCTIONS OF CIT
1. The Commissioner exercise control over the subordinate officers
and other staff of Income Tax Department. He assigns work to
officers subordinate to him. If two or his subordinate if ITA are not
in agreement regarding their jurisdiction or regarding assessment
of a person CIT is the final authority to decide the dispute.
2. When a person committed and offence under IT law, the CIT may
either decide the punishment & proceeding for such an offence. If
the CIT is not satisfies with the decision of Appellate Tribunal, he
can request the Tribunal to refer the case to High Court provided
that the decision involves a point of law. The Commissioner may
disqualify an IT practitioner to appear before ITA if the
practitioner is guilty of misconduct.
INCOME TAX OFFICER
ITO occupies an important position in the IT department. He is a
front line officer of department who makes important decision
regarding assessment, collection of tax, and is responsible for
administration of IT machinery in his circle. He has the direct link with

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the assesse of the area. ITO may include Assistant ITO, Tax Recovery
Officer.
ITO has jurisdiction in respect of such persons or such area as the
Commissioner may direct within the area assigned to him. He has
jurisdiction over:
• Business carried on that area
• All persons residing in that area
• All income accruing, arising, or received within that area
In the course of any proceedings he may be instructed or assisted
by other ITA to whom he is subordinate or any other person authorized
on his behalf by FBR.

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POWERS & FUNCTIONS OF ITO
1. ITO issues are legal notices required under IT law regarding filing
various returns. His issues are noticed necessary for collection of tax
from assesse. He is empowered to make additional assessment if any
income has escaped assessment or the total income of assesse in
under assessed. He can impose penalties on following cases with prior
approval of the Commissioner in failure to obey notice issued by him or
obstructing ITA. Where a person without genuine reason fails to
provide within the prescribed time any return of total income,
statements, accounts or information. The ITO may impose penalty on
him. He can enter the premises within the area assigned to him for the
purpose of making the survey of person liable to tax, inspecting any
accounts or documents, taking notes from such accounts or making
such inquiries as may be necessary.
APPEALS AND REVISIONS
If an assesse or income Tax Authority is not satisfied within an
order passes under ITO 2001, the procedure to remove the grievance
has been provided within the law however, it should be clearly
understood that an appeal can’t be made against each & every orders
or decision. An assesse can file an appeal with the CIT (Appeals)
against the following orders:
 Amount of tax determine by the ITO after considering the books
of account and evidence
 Refusal to register the firm
 Refusal to allow refund
 Penalties imposed by the ITP
 Treating a resident or non-resident
 Treating a person to be an assesse in default
 Rectification of mistake apparent from record
 Any other orders pass by ITO

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COMMISSIONER OF INCOME TAX (CIT APPEALS)
Sec 127, of ITO 2001, specifies that an appeal may be filed by an
assesse against the appealable orders with CIT (Appeals). If the Income
Tax Department is not satisfied with the orders of ITO and appeal can
be made. The appeal must be filed within 30 days of receipt of the
order, the CIT (Appeals) can however, can extend this period. The CIT
(Appeals) fixes the date of hearing of an appeal and sends intimation
to the appellant and ITO. He can call any particulars required and ask
the Income Tax Panel to further inquire. The CIT (Appeals) in disposing
of an appeal can in case of any order of assessment, cancel the
assessment, declare the assessment as incorrect, increase the
assessment, and decrease the assessment, etc. or in case of an order
imposing penalty confirm it or cancel such orders, increase or reduce
the penalty or in any other case pass such orders as he thinks fit.
It is necessary that decision of appeal should be made within 3
months of appeal the appellate should give a notice stating that no
orders have been passed on this appeal if in spite of such a notice
decision is not made within 3 months since the appeal was presented.
The decision of an appeal will be deemed to be in favour of appellant.
APPEAL TO APPELLATE TRIBUNAL SEC 130-131
The Federal Government is the appointing authority of AT. It is
the 2nd code of appeals. If the assesse is not satisfied with the CIT
appeals, he can make 2nd appeal to AT. IT Department also if not
satisfied with the decision of CIT appeals can appeal to AT.
Appellate Tribunal consists of two types of members
 Judiciary member
 Accountant member
The appeal by the assesse or by department should be filed
within 60 days from date on which the orders are communicated to
assesse. AT is empowered to extend this period. The appeal should be

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filed on the prescribed form, AT gives the parties to the appeal and the
opportunity of being heard either in person or by authority
representative.

AT in disposing of appeal reduce or null the assessment,

increase, reject the appeal, cancel, charge the orders & issue direction,
increase or decrease the penalty. It is necessary that the decision of
appeal should be made within 6 months from when the appeal has
been made the power of tribunal, to grant a stay (injunction) from
recover of tax has now been expressly incorporated in the law by the
Finance Act 2003, the tribunal shall not, however, make an order which
have been effort of staying recovery of tax beyond the period of 6
months in aggregate.

As provided by the sec 133, the decision of AT on a point of fact

is final and no appeal can be made against such a decision if either the
assesse or IT Department is not satisfied with the orders of tribunal
involving the point of law, he may refer the appeal to High Court.

REFERENCE TO HIGH COURT Sec 133

If either the assesse or IT department is not satisfied with the

decision of AT, a request can be made by it to the tribunal to refer the
matter to HC, reference to HC is not possible on point of law not on the
point of fact. The applicant for reference should be made to AT within
90 days of date of order. If AT refuses to refer the case on ground that
no question of law is involved, the assesse may apply direct to HC. He
may admit such an application is point of law in involved. The case the
heard by a bench not less than 2 judges of HC.

APPEAL TO SUPREME COURT Sec 134

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 An appeal to SC if the HC certifies that case is fit to hear from SC.
Normally, HC certifies those cases for purpose where it feels that
correct interpretation of law will benefit not to parties to the case but
also other people in general. SC itself can also grant permission to
refer the case to them. The required action is taken by the ITA. If in the
order passes by SC the judgement of HC is changed. The decision of SC
is final and conclusive in according the cases.
Appeal against Timing of filing To whom the
the order of the appeal appeal is made
INCOME TAX 30 DAYS Commissioner of
ORDINANCE Income Tax
Commissioner of 60 days Appellate Tribunal
Income Tax
Appellate Tribunal 90 days High Court
High Court 120 Days Supreme Court

ALTERNATE DISPUTE RESOLUTION COMMITTEE (ADRC) Sec 134-

A
This section was introduced by Finance Act 2004; FBR has been
empowered to constitute an ADRC for resolving any dispute. The
agreed person can apply to FBR for appointment of committee in
connection with any matter pertaining to liabilities of IT, admissibility
of refund, waver of fine, relaxation of any time period or procedural or
technical condition. The board on recommendation of committee as it
deems with appropriate passes an order for resolution of dispute. In
case the agreed person is not satisfied with the orders of committee
and appeal or reference can be filed in appropriate forum within 60
days of such orders.
BURDEN OF PROOF Sec 135
The burden shall be on tax payer to prove on balance of
probabilities
 In case of an assessment order the extent to which the order
doesn’t correctly reflects the Tax payer liabilities
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  In case of any other decision the decision is incorrect.
According to burden of proof in case of appeal filed by
department will be a commissioner.
TAX EXEMPTION
Sec 41, ITO 2001, simply exempt the agricultural income from
paying tax, however, income derived from land shall be termed as
agricultural income if rent or revenue derived from land, land is
situated in Pakistan and land is used for agricultural purposes.
Sec 41, diplomatic & United Nation exemption
The income of an individual entitles to privileges under diplomatic
& consular privileges Act 1972 shall be exempted from tax or any
pension required by person being a citizen of Pakistan by the virtue of
person formal employment in UN or its specific agencies. (WTO, WWF,
ICJ)
Sec 43, formal government officials
The salary received by an employee of a foreign government as
remuneration for the services shall be exempted provided the
employee is a foreigner and not a Pakistani. The services performed by
the employee are of character similar to those performed by
employees of federal government in foreign countries and foreign
government grants a similar exemption to employees of federal
government performing similar services in such a foreign countries.
Sec 44, exemption under international agreement
This section covers tax treaties entered by Pakistan with other
countries and the exemption of projects under an aid agreement is in
progress, salaries income will be exempted provided that an individual
is a non resident or a resident solely by reason of the performance of
services under aid agreement and if the aid agreement is with foreign
country. The individual is the citizen of that country. And the salary is
paid by foreign government or public international organization out of

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funds or grants release as aid to Pakistan in pursuance of such
agreement.
Sec 50, foreign source income of short term residents
If an individual is not a Pakistani citizen fulfils the qualification
mentioned below shall be exempt from tax to the extent of his foreign
source income.
1) He is resident individual solely by reason of individual
employment
2) He is present is Pakistan for a period not exceeding 3 years.
RETURNS
Who is required to furnish the return?
• Every company
• Any / every person
Except for
• Widow
• Orphan below 25 years
• Non-resident person
A return must be in a prescribed form, and accompanied by such
annexures, statements, or document as may be prescribed plus the
information required including the declaration of the records kept by
the tax payers, a return must be signed by a person or his
representative. The commissioner can request the person to furnish
the return for a period of less than 12 months where the person has
died, he has become bankrupt, he is about to leave Pakistan
permanently and commissioner can otherwise consider it appropriate
to require such a return (just & equitable).
Where person are discontinues any business he must give
commissioner in writing within 15 days of discontinuous. However, in
normal circumstances, return of income, salary certificate along with
the wealth statement shall be furnished in a prescribed manner, where
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a person in not borne on the national tax no. register and fails to file an
application in a prescribed form, such a return shall not be treated as
valid return.
A person who is required to furnish the return may apply to the
commissioner for an extension of time to furnish. If the commissioner
is satisfied that the applicant is unable to furnish the return by due
date because of his absence from Pakistan or sickness or other
misadventure or any other reasonable cause the commissioner may be
in writing grant the applicant and extension of time for furnishing the
return. However, extension shall not exceed 15 days from due date
unless there are exceptional circumstances justifying longer extension
of time.
NATIONAL TAX NUMBER
Sec 181 of ITO 2001 is the relevant provision which provides that
every tax payer is legally bound to apply for a NTN card; the
commissioner having jurisdiction over an applicant may examine all
the relevant documents, evidence, and may direct insurance of NTN.
Without getting NTN one cannot file his return. The tax payer is
required to quote NTN in all his return & correspondence with CIT.
according to 194 of ordinance if personal knowingly or recklessly uses
a fake NTN of another person for the purpose of ordinance it will be
consider as offence with punishable with fine or imprisonment which
may exceed 2 years or both.
IMPOSITION OF PENALTIES IMPOSED BY ITA
The FBR, AT, Commissioner Appeals or the commissioner may
impose penalties on tax payer if the tax payer fails to comply with the
provision of ITO 2001.
A. Penalty for failure to furnish a return or statement –Any
person who without reasonable excuse fails to furnish within the time
allowed, a return of income or a statement as required by the ITO shall

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be liable to a maximum penalty of Rs. 500 per day for as long as
default continuous.
B. Penalty for non-payment of tax – A tax payer who fails to pay
any tax due under ITO shall be liable for penalty equal to
 In the case of 1st default 5% of amount of tax non-payable
 In the case of 2nd default 20% penalty of amount of tax in
default
 In the of 3rd default, additional penalty of 25% of amount of
tax in default
 In the case of 4th & subsequent default, an additional
penalty of up to 50% of the amount of tax in default as
determined by the commissioner. However, the total
penalty in respect of the tax in default shall not exceed
100% of such amount of tax
C. Penalty for concealment of income – Where the
commissioner is satisfied that any person has in set proceedings
relating to the assessment, concealed income, or furnished inaccurate
particulars of such income, the commissioner of AT may by an order in
writing impose a penalty equal to the amount of tax which the person
sought to evade by concealment or furnishing inaccurate particulars
D. Penalty of failure to maintain records – A person without
reasonable excuse fails to maintain record as required under ITO shall
be liable for a penalty equal to

 In the case of 1st failure Rs. 2000

 In the case of 1st failure Rs. 5000
 In the case of 1st failure Rs. 10000

E. Penalty for non-compliance with notice – Any person who

without reasonable excuse fails to comply with any notice served to

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the person for furnishing of statement shall be liable to a penalty of Rs.
2000
No penalty is imposed on any person unless he is given a
reasonable opportunity of being heard.

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