Taxpayers who have filed their income tax returns for tax year 2025 should be aware that submission does not mark the end of their tax obligations. Under Pakistan’s tax framework, filing a return is only the first step in the assessment process carried out by the Federal Board of Revenue (FBR).
According to Section 120 of the Income Tax Ordinance, 2001, a complete return of income is automatically treated as an assessment of taxable income and an assessment order issued by the Commissioner. The assessment is considered to have been made on the date the return is processed or adjusted through FBR’s automated system.
Once filed, returns are subjected to automated processing to identify arithmetical errors, incorrect or unverifiable claims, disallowed losses, allowances or tax credits, and invalid carry-forward of losses. However, the law provides a safeguard for taxpayers: no adjustment can be made unless a system-generated notice is first issued. Such a notice outlines the proposed adjustments and allows the taxpayer 30 days to respond. Any reply submitted within this period must be considered before final adjustments are made. In the absence of a response, FBR may proceed with the proposed changes.
The law also offers certainty to compliant taxpayers through a time-bound mechanism. If no adjustments are made within six months of filing the return, the income and tax declared by the taxpayer are deemed to have been accepted. Taxpayers are automatically intimated of this acceptance through the IRIS system.
Problems arise when a return is found to be incomplete. In such cases, the Commissioner may issue a notice of deficiencies, asking the taxpayer to provide missing information or documents by a specified date. Failure to comply fully can render the return invalid, effectively treating it as if no return was filed. However, the law allows relief: if the taxpayer complies with the notice within the given time and furnishes all required details, the return is treated as complete from the original filing date.
There is also a statutory limit on FBR’s authority to issue deficiency notices. Such notices cannot be issued after 180 days from the end of the financial year in which the return was filed. Once this period lapses, the return stands assessed under Section 120(1).
Importantly, acceptance of a return through automated processing does not shield it from scrutiny. Even after assessment, the Commissioner retains the power to select a return for audit under Section 177 of the Ordinance.
Tax experts advise taxpayers to ensure accuracy in calculations and claims, maintain proper documentation, and regularly monitor their IRIS accounts for system notices. Timely responses and complete disclosures can help avoid adjustments, invalidation of returns, or further proceedings, ensuring smoother compliance with FBR requirements.
