Income Tax Bar Association Karachi
WORKSHOP ON INCOME TAX
Hotel Sheraton, Karachi
29 - 30 August, 2005
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
RETURNS, AUDIT,
ASSESSMENT &
APPEALS
By:
ALI A. RAHIM
Director
Mehmood Idrees Masood & Co.
Hotel Sheraton
29-30 August 2005
2
CONTENTS
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Returns, Audit, Assessment & Appeals






Returns
Statements
Assessments & Amendments
Appeals
ADR
Audit
Hotel Sheraton
29-30 August 2005
3
RETURNS
Income Tax Bar
Association
Karachi
Ordinary Returns (Section-114)
1. Every company
2. Other than a company
Workshop
on Income Tax
Hotel Sheraton
29-30 August 2005
 Charged to tax in previous two years
 Claims loss brought forward
 Owns immovable property
 With land area of 250 Sq. Yds. or more; or a
flat within Municipal areas Cantonment or
Islamabad Capital Territory (not applicable
to widows, orphans below the age of 25, a
disable person of non-residents)
4
RETURNS
(Contd…)
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Hotel Sheraton
29-30 August 2005
Persons not Required to File Returns (Section 115)
1. Salary - employer’s certificate will suffice
2. Others - falling under Presumptive Tax Regime
(a)
Section-5
Tax on dividends
(b)
Section-6
Tax on certain payment to non-residents
(c)
Section-7
Tax on shipping and air transport income of non-residents
(d)
Section-113A
Tax on retailers (individuals/AOP’s) having turnover upto
Rs. 5 Million
(e)
Section-113B
Tax on retailers (turnover exceeding Rs. 5 Million) of textile
fabrics, articles of apparel ready made garments or fashionwear, articles of leather including footwear, carpets, surgical
goods or sports goods (individuals/AOPs)
(f)
Section-148
Imports (except for manufacturers, other than edible oil,
importing raw materials and also for plant, machinery and
equipment by an industrial undertaking).
(g)
Section-153
Payment for goods & services (goods supplied and
execution of contracts other than service contracts)
(h)
Section-154
Exports
(i)
Section-156
Prize & winnings
(j)
Section-156A
Petroleum products (commission to petrol pump operators)
(k)
Section-233(3)
Brokerage and commission
(l)
Section-233A(a)&(b)
Purchase and sale of shares in lieu of commission earned by
members of stock exchanges
(m)
Section-234(5)
Owner of goods transport vehicles
5
RETURNS
(Contd…)
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Returns for Tax Year 2005
R-1
Return of total income (for companies)
R-2
Return of total income (non-salaried individual & AOP’s)
R-3
Employers certificate in lieu of returns (salary)
R-4
Attachment to R-3
R-5
Statement of final taxation
R-6
Statement of final taxation for retailers (turnover upto Rs. 5 Million)
W-1
Wealth statement
Annexure-I
Hotel Sheraton
29-30 August 2005
Particulars of directors of companies or members of AOP’s
Annexure-II-A
Income/(Loss) from business for individuals & AOP’s
Annexure-II-B
Income/(Loss) from business for companies
Annexure-II-C
Adjustment of book profits for companies
Annexure-II-D
Carry forward and brought forward of unabsorbed depreciation,
initial allowance, amortization and business losses
Annexure-II-E
Depreciation, initial allowance and amortization
6
RETURNS
(Contd…)
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Hotel Sheraton
29-30 August 2005
Returns for Tax Year 2005
Annexure-II-F
Gain/(Loss) on disposal of depreciable assets and intangibles
Annexure-II-G
Bifurcation of income/(loss) attributable to sales/receipts etc.,
subject to financial taxation.
Annexure-III
Share of income/(loss) from business of AOP’s
Annexure-IV
Income/(Loss) from property
Annexure-V
Capital gain/Capital loss
Annexure-VI
Income/(Loss) from other sources
Annexure-VII
Foreign income
Annexure-VIII
Tax reduction, credits and averaging
Annexure-IX
Tax on retirement benefits, arrears of salary and prior years profit
and debt
Annexure-X
Tax already paid including adjustments
Annexure-XI
Statement of final taxation
Annexure-XII
Key information for companies
7
STATEMENTS
Income Tax Bar
Association
Karachi
Quarterly Statements
Salaries/non-salaries (Rule 44(2)
Annual Statements
Salaries [Rule, 44(1)]
Other than salary [Rule, 44(1)]
Workshop
on Income Tax
Hotel Sheraton
29-30 August 2005
8
ASSESSMENTS
(Section 120 to 126)
Income Tax Bar
Association
Karachi
Normal Assessment
All returns other than revised returns are deemed to be
assessed on the day it is filed/received by the
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on Income Tax
Commissioner (for complete returns only)
Incomplete returns - commissioner to send notice for
short documents/information (other than short payment
of tax) within due date
Hotel Sheraton
29-30 August 2005
Time limit - one year
9
ASSESSMENTS
(Contd…)
Income Tax Bar
Association
Karachi
Section 121 - Best Judgment Assessment
 Failure to comply with notice for filing return under
section 114 (normal returns etc.)
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on Income Tax
 Failure to furnish return under section 143 or 144
(non-resident ship owners or aircraft charters)
 Failure to file wealth statement under section 116
 Failure to produce books/documents required to be
maintained under section 174 (refer Rules, 28 to
Hotel Sheraton
29-30 August 2005
Rule, 33)
10
ASSESSMENTS
(Contd…)
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Section 122 - Amendment of Assessment
1. Assessments completed under section 120 or 121 of
the Income Tax Ordinance, 2001 (or issued under
section 59, 59A, 62, 63 or 65 of the Income Tax
Ordinance, 1979) - after providing hearing opportunity
to the taxpayer.
2. Time period - 5 years from original filing - no limit on
number of times assessments can be amended.
3. Revised returns filed [under section 114(6)] also
treated as amended assessment when received by
commissioner.
Hotel Sheraton
29-30 August 2005
4. Time limit for orders under section 65 of the Income
Tax Ordinance, 1979 can not be extended or curtailed. 11
ASSESSMENTS
(Contd…)
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Section 122 - Amendment of Assessment
5. Basis of amendment - definite information.




Income has escaped assessment.
Income has been under assessed.
Income has been charged to lower rate of tax.
Any income has been misclassified.
6. Definite information – defined
Hotel Sheraton
29-30 August 2005
 Sale or purchase of goods
 Receipts from services or other receipts
 Acquisition, possession or disposal of money, asset,
valuable article or investment
 Expenditure
12
ASSESSMENTS
(Contd…)
Income Tax Bar
Association
Karachi
Section 122A - Revision By Commissioner
1. Commissioner - SUO MOTU can call for records of
orders passed by taxation officer
2. Make inquiries
3. Pass order - not prejudicial to the interest of the
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on Income Tax
taxpayer
4. Restriction
 Time for appeal before Commissioner of Income
Tax (Appeals)/Income Tax Appellate Tribunal has
not expired
 Appeal is not pending before Commissioner of
Hotel Sheraton
29-30 August 2005
Income Tax (Appeals)/Income Tax Appellate
Tribunal
13
ASSESSMENTS
(Contd…)
Income Tax Bar
Association
Karachi
Section 123 - Provisional Assessment
 Concealed assets impounded by any department or
agency
Section 124 – Assessment Giving Effect to
 Order (other than direct relief) of Commissioner of
Income Tax (Appeals)/Income Tax Appellate Tribunal
Workshop
on Income Tax
 Set aside order within one year from the end of
financial year in which such order is received unless an
appeal or reference is preferred to the Higher Authority.
 Direct relief is allowed by Commissioner of Income Tax
(Appeals) or Income Tax Appellate Tribunal within two
months of such order.
Hotel Sheraton
29-30 August 2005
 Order where income is not taxable in one year or relate
to another person, but taxable in another year or
another taxpayer, such order shall be passed by the
Commissioner.
14
ASSESSMENTS
(Contd…)
Income Tax Bar
Association
Karachi
Section 124A – Power to Modify Assessment
 Question of law to be followed by Commissioner
compulsorily
unless
reversed
by
Higher
Appeal
Authority.
Workshop
on Income Tax
 Limitation of time not applicable.
Section 125 - Assessment of Disputed Property
 Assessment order to be passed within one year from
the end of the financial year of any order passed by any
Hotel Sheraton
29-30 August 2005
Civil Court.
15
APPEALS
(Section 127 to 132)
Income Tax Bar
Association
Karachi
SR.
NO.
1.
Workshop
on Income Tax
COMMISSIONER OF
INCOME TAX (APPEALS)
INCOME TAX APPELLATE
TRIBUNAL

Against Commissioner
of Income Tax
(Appeals) order
Tax as per return
Not applicable
Rules, 76
Rules, 77


Lesser of 10% of tax or
Rs. 1,000
Lesser of 10% of tax or
Rs. 2,500
Company
Rs. 1,000
Rs. 2,000
Others
Rs.
Rs.
Appeal against orders passed
under section 121, 122, 143, 144,
162, 170 182 to 189, 161(1),
172(3)(f) or 221
2.
Tax to be paid
3.
Prescribed form verified
4.
Verified in the prescribed manner
5.
Fee
Where Assessment framed
Other cases
6.
Time limit
200
30 Days
500
60 Days
Hotel Sheraton
29-30 August 2005
16
APPEALS
(Contd…)
Income Tax Bar
Association
Karachi
New Changes [Commissioner of Income Tax
(Appeals)] Financial Year 2005
 Commissioner of Income Tax (Appeals) can only
confirm, modify or annual the assessment order
Workshop
on Income Tax
(not set aside)
 Can now examine evidence.
New Changes (Income Tax Appellate
Tribunal) Financial Year 2005
Hotel Sheraton
29-30 August 2005
 Decide appeals within six months
17
ALTERNATE DISPUTE RESOLUTION
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Section 134A
1. Person aggrieved with the order of Commissioner of
Income Tax/Income Tax Appellate Tribunal/Court may
file application to Central Board of Revenue.
2. Central Board of Revenue after review shall forward
application to ADR Committee.
3. ADR Committee to comprise of three person.
 One person from department.
Hotel Sheraton
29-30 August 2005
 Two persons being Chartered Accountant or Cost
and Management Accountants, Advocates,
Income Tax Practitioner or Reputable Taxpayers.
18
ALTERNATE DISPUTE RESOLUTION
(Contd…)
Income Tax Bar
Association
Karachi
4. ADR will examine issue, conduct inquiry, seek expert
opinion, conduct audit and make recommendation.
5. Central Board of Revenue, based on committee’s
recommendations may pass such orders.
Workshop
on Income Tax
6. Order of Central Board of Revenue, if acceptable to
the applicant is binding on department and taxpayer.
7. If, the order is not acceptable, applicant can continue
to persue his legal remedies (if not time barred).
Hotel Sheraton
29-30 August 2005
Important:
Time period for filing an appeal cannot be extended even if taxpayer
has approached Central Board of Revenue for ADR.
19
AUDIT
(Section 177)
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Hotel Sheraton
29-30 August 2005
1. Central Board of Revenue to lay down criteria for
selection.
2. Commissioner to select cases based on the criteria.
3. Central Board of Revenue will keep criteria
confidential.
4. Besides the Central Board of Revenue’s criteria, the
Commissioner may also select cases for audit based
on the following:
 The person’s history of compliance or noncompliance.
 The amount of tax payable by the person.
 Class of business conducted by the person.
 Any other matter, which the commissioner
considers material to determine the correct
income or tax.
20
Income Tax Bar
Association
Karachi
Workshop
on Income Tax
Hotel Sheraton
29-30 August 2005
21