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Amendment in section 122 by fbr regarding amendment in assessment and time limit for proceedings
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FBR amends Section 122 of IT Ordinance regarding time limit for proceedings

The Federal Board of Revenue (FBR) will enforce new amendment to Section 122 of the Income Tax Ordinance, 2001 for completion of proceedings against taxpayers within 120 days where notices were issued after July 1, 2021.

The FBR, Monday, directed Commissioners Inland Revenue to implement a major change in the Income Tax Ordinance 2001, brought through Finance Act, 2021, regarding completion of proceedings in 120 days under Section 122 of the Income Tax Ordinance, 2001. for this purpose, FBR has issued an income tax circular 4 of 2021 regarding Finance Act, 2021 — Amendment in Section 122 of the Income Tax Ordinance, 2001.

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“Historically, owing to availability of extended period of time, the completion of proceedings under Section 122 of the Income Tax Ordinance, 2001 within desired time has remained a challenge and diverse treatment was meted out viz-a-viz time taken for completion of proceedings across the formations,’ FBR notified in circular.

“This varied treatment has commutatively resulted in below par revenue outcomes for the exchequer and increased compliance costs for the taxpayers due to protracted delays in legal actions,” the FBR said.

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The Finance Act, 2021 has brought about a significant amendment in section 122 of the Ordinance, whereby, a limitation of 120 days has been imposed with regard to the period of time during which amendment of assessment under section 122 of the Ordinance must be completed subsequent to issuance of a show cause notice.

“The said amendment harmonises the procedure of amendment of assessment under the Income Tax Ordinance, 2001 with the procedure of assessment under section 11 the Sales Tax Act, 1990 and section 14 of the Federal Excise Act, 2005,” the FBR maintained.

The aforementioned amendment is also an effort to restore the true spirit of the Income Tax Ordinance, 2001, where amendment proceedings are entered into after carrying out inquiry or audit, if necessary, and do not remain pending for an indefinite period of time.

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“In case, the proceedings cannot be completed within the prescribed time period of 120 days, the Commissioner may extend the time limit for up to another 90 days for recorded reasons.” The new provision would apply to the show-cause notices issued after July 1, 2021.

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As per the FBR circular, the Commissioners are required to ensure that necessary guidance is provided to assessing officers in this regard, the FBR added.

Circular No. 04 of 2022 Dated: 16th August 2021 — Operations is reproduced here:

1- Historically, owing to availability of extended period of time, the completion of proceedings under section 122 of the Income Tax Ordinance, 2001 (hereinafter “the Ordinance”) within desired time has remained a challenge and diverse treatment was meted out viz-a-viz time taken for completion of proceedings across the formations. This varied treatment has commutatively resulted in below par revenue outcomes for the exchequer and increased compliance costs for the taxpayers due to protracted delays in legal actions.

2- The Finance Act, 2021 has brought about a significant amendment in section 122 of the Ordinance whereby a limitation of 120 days has been imposed with regard to the period of time during which amendment of assessment under section 122 of the
Ordinance must be completed subsequent to issuance of a show cause notice. The said amendment harmonizes the procedure of amendment of assessment under the Income Tax Ordinance, 2001 with the procedure of assessment under section 11 the Sales Tax Act, 1990 and section 14 of the Federal Excise Act, 2005. The aforementioned amendment is also an effort to restore the true spirit of the Income Tax Ordinance, 2001 where amendment proceedings are entered into after carrying out
inquiry or audit, if necessary, and do not remain pending for an indefinite period of time. In case the proceedings cannot be completed within the prescribed time period of 120 days, the Commissioner may extend the time limit for upto another ninety days for recorded reasons. The new provision would apply to the show cause notices issued after July 1, 2021.

3- Accordingly, formations are expected to be cognizant of this important amendment. The Commissioners are required to ensure that necessary guidance is provided to assessing officers in this regard.

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