Ch 14 Returns

Question 1

What is tax return?

Answer 1

A tax return is the prescribed document made for a tax year which is prepared by the taxpayer in
order to declare his taxable income and tax liability thereon to the FBR. Income tax rules, 2002
prescribe the forms to be used for returns of income.
Tax return allows a taxpayer to calculate his tax liability, schedule tax payments or request refund
for the overpayment of taxes. In Pakistan, tax returns must be filed annually with reportable income,
including salary, income from property, business income, dividends, capital gains and income from
other sources.

Question 2

What is iris?

Answer 2

“Iris” means a web-based computer programme for operation and management of
Inland Revenue taxes and laws administered by the Board

Question 3

Which persons are required to file tax return?

Answer 3

The following persons are required to furnish a return of income for a tax year
(i) Every company
(ii) Every person (other than a company) whose taxable income for the year exceeds the
maximum amount that is not chargeable to tax; or
(iii) Any non-profit organisation
(iv) Every person whose income for the year is subject to final taxation under any provision of
the Ordinance;
(v) persons or classes of persons notified by the Board with the approval of the Minister in
charge

Question 4

Which additional persons are required to furnish tax return?

Answer 4

return is also required to be filed by the person who,-
(i)
has been charged to tax in respect of any of the two preceding tax years;
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
claims a loss carried forward for a tax year;
owns immovable property with a land area of 500 square yards or more or owns any flat
located in areas falling within the municipal limits existing immediately before the
commencement of local government laws in the provinces; or areas in a cantonment; or the
Islamabad capital territory.
owns immoveable property with a land area of five hundred square yards or more located in
a rating area;
owns a flat having covered area of two thousand square feet or more located in a rating
area;
owns a motor vehicle having engine capacity above 1000 CC;
has obtained National Tax Number or
(viii) is the holder of commercial or industrial connection of electricity where the amount of annual
bill exceeds Rs.500,000
(ix)Is a resident person registered with any chamber of commerce and industry or any trade or
(x)business association or any market committee or any professional body

Question 5

What is meant by business bank account?

Answer 5

❑ Business bank account” means a bank account utilized by the taxpayer for business
transaction declared to the Commissioner through original or modified registration form
prescribed under section 181.
❑ Only businesses i.e. sole proprietor, AOP or companies are required to declare through FBR
e-portal.
❑ Every taxpayer shall declare to the Commissioner the bank account utilized by the taxpayer
for business transactions.

Question 6

What are legal implications for not declaring business bank account?

Answer 6

An expense incurred for business purpose shall be inadmissible while computing income from
business under section 21.

Question 7

Which persons are granted immunity from filing tax return?

Answer 7

Under section 115, the following persons are granted immunity from the aforesaid provision of filing
of tax return:
❑ Following persons:
− a widow;
− an orphan below the age of twenty-five years;
− a disabled person; or
− a non-resident person.
Shall not be required to furnish a return of income for a tax year solely by reason of:
1) owning immovable property with a land area of 500 square yards or more or any flat located in
areas falling within the municipal limits, existing immediately before the commencement of local
government laws in the provinces; or areas in a cantonment; or the Islamabad capital territory.
2) owns immoveable property with a land area of five hundred square yards or more located in a
rating area;
3) owns a flat having covered area of two thousand square feet or more located in a rating area;
4) owns a motor vehicle having engine capacity above 1000 CC.

Question 8

Under which cases commissioner may call for return from any person or person’s representative?

Answer 8

Section 114 empowers the Commissioner of income tax to call for return, the Commissioner may,
by notice in writing, require a person, or a person’s representative, as the case may be, to furnish
a return of income by the date specified in the notice for a period of less than twelve months, where:
* the person has died;
* the person has become bankrupt or gone into liquidation;
* the person is about to leave Pakistan permanently;
* the Commissioner otherwise considers it appropriate to require such a return to be furnished.

Question 9

Within how many days person is required to furnish return on call of commissioner?

Answer 9

The Commissioner may, by notice in writing, require any person who, in the Commissioner’s
opinion, is required to file a return of income for a tax year or assessment year but who has failed
to do so to furnish a return of income for that year within thirty days from the date of service of such
notice or such longer or shorter period as may be specified in such notice or as the Commissioner
may allow.

Question 10

Commissioner can issue notice of return of how much period?

Answer 10

Any such notice may be issued in respect of one or more of the last five completed tax
years or assessment years.

Question 11

If the person has not filed the return for last 5 years of how much period a commissioner can issue a notice?

Answer 11

Provided that in case of a person who has not filed return for any of the last five completed tax
years, notice may be issued in respect of one or more of the last ten completed tax years.

Question 12

In which case time limitation not applies on filing return?

Answer 12

The above time-limitation shall not apply if the Commissioner is satisfied on
the basis of reasons to be recorded in writing that a person who failed to furnish his return has
foreign income or owns foreign assets.

Question 13

What are consequences of income tax order issued in respect of persons who are not appearing on ATL but are liable to file return?

Answer 13

The income tax general order issued may entail any or all of the following consequences for
the persons mentioned therein, namely:
* disabling of mobile phones or mobile phone Sims
* discontinuance of electricity and gas connection
* restriction on foreign travel from the country for a citizen of Pakistan, excluding persons
holding National Identity Card for Overseas Pakistanis (NICOP), minors, students,
persons proceeding abroad for Hajj or Umrah and such other classes of persons as
notified by the Board.

Question 14

In which case consequences as mentioned to be faced by person are releived?

Answer 14

The Board or the Commissioner having jurisdiction over the person mentioned in the income
tax general order may order restoration of mobile phones, mobile phone sims and
connections of electricity and gas, in cases where he is satisfied that the return has been
filed or person was not liable to file return.

Question 15

Under what conditions a person shall be included in general order issued by commissioner?

Answer 15

No person shall be included in the general order unless following conditions have been met
with, namely:
* notice under section 114(4) has been issued by Commissioner demanding return of
income
* date of compliance of the notice under sub-section (4) of section 114 has elapsed and
* the person has not filed the return.

Question 16

Discuss the method of filing of tax return?

Answer 16

A return of income shall be in the prescribed form and shall be accompanied by such annexure,
statements or documents as may be prescribed;
a. shall fully state all the relevant particulars or information as specified in the form of return,
including a declaration of the records kept by the taxpayer; and
b. shall be signed by the person, being an individual, or the person’s representative where
section 172 applies.
c. shall be accompanied with due payment of tax as per return of income;
d. shall be accompanied with a wealth statement as required under section 116 and
e. shall be accompanied with a foreign income and assets statement as required under section
116A.

Question 17

Can tax return be filed electronically?

Answer 17

A return of income filed electronically on the web or any magnetic media or any other computer
readable media as may be specified by the Board shall also be deemed to be a return and the
Board may, by notification in the official Gazette, make rules for determining eligibility of the data
of such returns and e-intermediaries who will digitise the data of such returns and transmit the
same electronically to the Income Tax Department under their digital signatures and other matters
relating to electronic filing of returns, statements or documents etc..

Question 18

How revised return or statement is filed?

Answer 18

Any person who, having furnished a return, discovers any omission or wrong statement therein,
may file revised return subject to the following conditions, namely:
a.
b.
c.
d.
it is accompanied by the revised accounts or revised audited accounts, as the case may be;
Provided that Commissioner may waive this condition if Commissioner is satisfied that filing
of revised accounts or audited accounts is not necessary.
the reasons for revision of return, in writing, duly signed, by the taxpayers are filed with the
return;
it is accompanied by approval of the Commissioner in writing for revision of return. However,
this condition shall not apply if revised return is filed within sixty (60) days of filing of return.
Further, where the Commissioner has not made an order or approval in writing, for revision
of return, before the expiration of sixty days from the date when the revision of return of
sought, the approval so required shall be deemed to have been granted by the
Commissioner, and the specified condition shall not apply. The mode and manner for
seeking the permission for revision shall be prescribed by the Board; and
taxable income declared is not less than and loss declared is not more than income or loss,
as the case may be, determined by an order issued under Best Judgement assessment,
Amendment of assessment, Revision by the Commissioner, Decision in appeal, Disposal of
appeals by the Appellate Tribunal

Question 19

When commissioner’s approval for revision of return has deemed to be granted?

Answer 19

Provided also that condition specified in clause (c) shall not apply and the approval required
thereunder shall be deemed to have been granted by the Commissioner, if-
a. the Commissioner has not made an order of approval in writing, for revision of return, before
the expiration of sixty days from the date when the revision of return was sought; or
b. taxable income declared is more than or the loss declared is less than the income or loss,
as the case may be, determined under Assessments (section 120).

Question 20

What is procedure for filing revised return and statement?

Answer 20

If a taxpayer files a revised return voluntarily along with deposit of the amount of tax short paid or
amount of tax sought to be evaded along with the default surcharge, whenever it comes to his
notice, before receipt of notice under sections 177 (Audit) or section 122(9) (Amendment of
Assessments, no penalty shall be recovered from him

Question 21

In which case 25% penalty is required to be paid along with revised return?

Answer 21

In case the taxpayer deposits the amount of tax as pointed out by the Commissioner during the
audit or before the issuance of notice under the provisions of Amendment of Assessments (sub
section (9) of section 122), he shall deposit the amount of tax sought to be evaded, the default
surcharge and twenty-five per cent of the penalties leviable under the ordinance along with the
revised return.

Question 22

In which case 50% penalty is required to be paid along with revised return?

Answer 22

In case the taxpayer revises the return after the issuance of a show cause notice under sub-section
(9) of section 122, he shall deposit the amount of tax sought to be evaded, default surcharge and
fifty per cent of the leviable penalties under the ordinance along with the revised return and
thereafter, the show cause notice shall stand abated.

Question 23

The due date for filing of taxreturn for a company having tax year ending
between 1st January to
30 June is _______________

Answer 23

On or before 31
December next following
the end of the tax year

Question 24

In case of all year ending except ending on 30th June what is the due date of filing of return?

Answer 24

On or before 30
September next following
the end of tax year

Question 25

What is wealth statement for a tax return and what are its particulars?

Answer 25

Wealth statement is a statement of assets and liabilities, for any year, which a person is required to file, in the prescribed form and verified in prescribed manner giving particulars of ❑ the person’s total assets including foreign assets and liabilities including foreign liabilities as on the date or dates specified in such notice; ❑ the total assets including foreign assets and liabilities including foreign liabilities of the person’s spouse, minor children, and other dependents as on the date or dates specified in such notice; Explanation: For removal of doubt, it is clarified that assets of spouse shall only be included in the wealth statement of the person if the spouse is dependent. ❑ any assets including foreign assets transferred by the person to any other person during the period or periods specified in such notice and the consideration for the transfer; and ❑ the total expenditures incurred by the person, and the person’s spouse, minor children, and other dependents during the period or periods specified in the notice and the details of such expenditures; and ❑ the reconciliation statement of wealth.

Question 26

When wealth statemnt and wealth reconciliation statemnt is required to be filed?

Answer 26

Every resident taxpayer being an individual, filing a return of income for any tax year shall furnish a wealth statement and wealth reconciliation statement for that year along with such return. Further, every member of an association of persons shall also furnish wealth statement and wealth reconciliation statement for the year along with return of income of the association.

Question 27

Can wealth statement be revised and how?

Answer 27

Where a person, who has furnished a wealth statement, discovers any omission or wrong statement therein, he may, without prejudice to any liability incurred by him under any provision of this ordinance, furnish a revised wealth statement along with the revised wealth reconciliation and the reasons for filing revised wealth statement, under intimation to the commissioner in the prescribed form and manner, at any time before the receipt of notice for amendment in assessment, for the tax year to which it relates, is made.

Question 28

Can revision of wealth statement be considered void?

Answer 28

Provided that where the Commissioner is of the opinion that the revision under this sub section is not for the purpose of correcting a bona fide omission or wrong statement, he may de

Question 29

What is the maximum period under which wealth statement can be revised?

Answer 29

For the removal of doubt it is clarified that wealth statement cannot be revised after the expiry of five years from the due date of filing of return of income for that tax year.

Question 30

Under what conditions foreign income and asset statement is required to be furnished?

Answer 30

Every resident taxpayer being an individual having foreign income of not less than ten thousand United States dollars or having foreign assets with a value of not less than one hundred thousand United States dollars shall furnish a statement, hereinafter referred to as the foreign income and assets statement.

Question 31

Describe the particulars of foreign income and asset statement?

Answer 31

particulars of — a) the person’s total foreign assets and liabilities as on the last day of the tax year; b) any foreign assets transferred by the person to any other person during the tax year and the consideration for the said transfer; and c) Complete particulars of foreign income, the expenditure derived during the tax year and the expenditure wholly and necessarily for the purposes of deriving the said income. ❑ The Commissioner may by a notice in writing require any person being an individual who, in the opinion of the Commissioner on the basis of reasons to be recorded in writing, was required to furnish a foreign income and assets statement but who has failed to do so to furnish the foreign income and assets statement on the date specified in the notice.

Question 32

Within how many days of discontinuance notice of discontinued business is given to commissioner?

Answer 32

Any person discontinuing a business shall give the Commissioner a notice in writing to that effect within fifteen days of the discontinuance.

Question 33

What is the period of discontinuance of business?

Answer 33

The person discontinuing a business shall, under the provisions of the Ordinance or on being required by the Commissioner by notice, in writing, furnish a return of income for the period commencing on the first day of the tax year in which the discontinuance occurred and ending on the date of discontinuance and this period shall be treated as a separate tax year for the purposes of this Ordinance.

Question 34

When notice can be furnished by commissioner for return of discontinued business?

Answer 34

Where no notice has been given by taxpayer but the Commissioner has reasonable grounds to believe that a business has discontinued or is likely to discontinue, the Commissioner may serve a notice on the person who has discontinued the business or is likely to discontinue the business to furnish to the Commissioner within the time specified in the notice a return of income for the period specified in the notice. A return furnished under this case shall be treated for all purposes of the Ordinance as a return of income, including the application of Section 120.

Question 35

Can extention of time be granted to furnish return or wealth statement?

Answer 35

A person required to furnish return or wealth statement may apply, in writing, to the Commissioner for an extension of time to furnish the return or wealth statement, as the case may be. The application for extension must be made by the due date of filing of the return or wealth statement, as the case may be.

Question 36

What matters shall be considered by commissioner while granting the extention of due date of furnishing the return or wealth statement ?

Answer 36

Extension in due date may be granted if the Commissioner is satisfied that the taxpayer was unable to furnish return, or statement due to (a) absence from Pakistan; (b) sickness or other misadventure; or (c) any other reasonable cause

Question 37

How much period shall be extended by commissioner of furnishing the return or wealth statement?

Answer 37

An extension of time as discussed above should not exceed fifteen days from the due date for furnishing the return of income or statement, as the case may be, unless there are exceptional circumstances justifying a longer extension of time.

Question 38

If commissioner has not granted permission for extention of time can taxpayer apply to anyone else ?

Answer 38

Provided that where the Commissioner has not granted extension for furnishing return under sub section (3) or sub-section (4), the Chief Commissioner may on an application made by the taxpayer for extension or further extension, as the case may be, grant extension or further extension for a period not exceeding fifteen days unless there are exceptional circumstances justifying a longer extension of time.”