How to Respond to an FBR Show-Cause Notice under Section 122 of Income Tax Ordinance

Understanding FBR Section 122 Notices

A notice under Section 122 of the Income Tax Ordinance 2001 is an intention by the Inland Revenue department to amend your original deemed assessment under Section 120. When an assessing officer issues a Section 122 notice, they intend to add back deductions, treat bank deposits as unexplained income, or increase your tax liability.

Key Subsections: Section 122(1) vs Section 122(5A)

• Section 122(1): Issued when the officer has definite information acquired through audit or inquiry that income has escaped assessment.
• Section 122(5A): Issued directly by the Commissioner where the original assessment order is considered to be "erroneous in so far as it is prejudicial to the interest of revenue".

Statutory Limitation: The 5-Year Rule

Under Section 122(2), an assessment can only be amended within 5 years from the end of the financial year in which the Commissioner issued or is treated as having issued the initial assessment order. Any notice issued beyond this limitation period is void ab initio for want of lawful authority.

Steps to Formulating a Watertight Rebuttal

1. Examine Officer Jurisdiction: Verify whether the issuing officer has lawful territorial or sectoral jurisdiction assigned via valid FBR jurisdiction orders.
2. Reconcile Paragraph-by-Paragraph: Never issue a generic denial. Every figure cited by the officer must be reconciled with bank statements, audited accounts, and invoices.
3. Cite Settled Judicial Precedents: Quote binding High Court and Supreme Court judgments holding that additions cannot be made based on mere suspicion or conjecture.
4. Attend the Personal Hearing: Ensure an enrolled High Court tax advocate represents your case before the assessing officer to tender written arguments and request notice closure.