What should I do after receiving an FBR tax notice?

A notice from the Federal Board of Revenue should be examined immediately, but its receipt does not mean that the tax demand is final or that every allegation in the notice is correct. The proper response depends on the statutory provision, tax year, nature of inquiry, time allowed and procedural stage. An information request, audit notice, show-cause notice and final assessment order are distinct instruments and should not be answered using one generic letter.

The Income Tax Ordinance, 2001 provides separate rules for returns, audits, assessment amendments and appeals, with particular importance attaching to section 122 where an assessment is proposed to be amended. The taxpayer should access the official Iris record, preserve deadlines and prepare a fact-specific reply supported by contemporaneous documents.

Identify the exact notice

Read the title, statutory section, tax year, NTN, alleged discrepancy and date for reply.

A notice requesting bank statements does not necessarily assert the same grounds as a notice proposing addition of unexplained income.

Use FBR's official notices or orders verification and the taxpayer's Iris account to confirm authenticity where appropriate.

Confirm proper service

Tax procedure can prescribe methods for electronic and other lawful communication. Check how and when the notice was served.

A person should not ignore an official Iris notice because no paper letter arrived.

The date of service may affect the response deadline. Preserve portal screenshots and acknowledgement records.

Requesting information

A notice may seek particulars of accounts, assets, business receipts or claimed deductions under an identified statutory power.

The response should give the specific records lawfully required and explain any unavailable material.

Do not submit fabricated documents or unrelated private information merely to overwhelm the authority.

Audit notices

An audit under the relevant Income Tax Ordinance provisions may involve examination of books, invoices and supporting material.

The taxpayer should identify the legal audit basis, year and scope. A completed return does not automatically prevent every lawful audit.

Maintain an index of documents supplied and communications received so later disputes can be assessed accurately.

Proposed amendment under section 122

Section 122 governs specified amendments of assessments. The operative grounds and procedure, including opportunity of being heard, must be applied to the actual proposed adjustment.

A proper show-cause response should address each proposed addition, not simply assert that the taxpayer previously filed a return.

Where FBR relies on information such as bank credits, the taxpayer should explain the nature of each disputed receipt using appropriate records.

Definite information

The statutory concept of definite information can be important to certain section 122 actions. The source and significance of information must be assessed under the applicable version of the provision.

A bank deposit is not automatically taxable income. It may represent a loan, transfer between accounts, capital contribution or other legally relevant receipt.

The Supreme Court's decision in Commissioner Inland Revenue v Khudadad Heights (reported PLJ 2025 SC 264) illustrates the need to examine whether bank entries truly constitute the kind of information relied upon for reassessment.

Prepare a transaction reconciliation

For disputed turnover, compare books, invoices, sales-tax returns, bank deposits and withholding certificates.

Identify differences arising from refunds, cancelled sales, related-party transfers, gross versus net receipts and timing.

A detailed reconciliation can be more persuasive than a general claim that FBR's figures are exaggerated.

Statutory deadlines

Respond within the period specified or obtain a lawful extension where available. The expiry of time can permit further proceedings under the statute.

An informal phone conversation with the officer may not constitute a recorded extension. Obtain written confirmation through an appropriate channel.

When an order has already been issued, the appeal limitation may be distinct from the earlier show-cause period.

Financial statement evidence

A business should preserve ledgers, bank statements, contracts, purchase records and proof of payments for the relevant period.

An accountant's adjusted schedule should reconcile to source documents. Unsupported summary figures may not adequately answer a particularised discrepancy.

Where historic documents are missing, explain the reason accurately and identify reliable alternatives.

Authority and jurisdiction

The notice should come from an officer acting within a legal power under the appropriate tax regime.

A taxpayer may identify a genuine jurisdictional or procedural defect, but should not assume that every clerical error invalidates the process.

The objection should specify the violated law and practical consequence, while also addressing the merits where appropriate.

Opportunity of hearing

Section 122(9) expressly concerns the taxpayer's opportunity of being heard in relevant assessment-amendment proceedings.

The taxpayer should use that opportunity to present documents and legal submissions rather than merely request indefinite postponement.

If a material document was not disclosed or a hearing was denied, preserve the correspondence for any appellate challenge.

Final assessment order

After considering the response, the officer may issue an order according to the statutory process. It should be examined for findings, computation, credits and appeal information.

Do not assume that a show-cause notice is already an enforceable final order.

The taxpayer should distinguish tax assessed, tax already deposited and amount actually remaining payable.

Statutory appeals

A taxpayer dissatisfied with the final order may have appellate remedies under the Income Tax Ordinance, subject to current forum, monetary jurisdiction and limitation provisions.

The correct route must be determined from the operative law; the appellate structure has undergone amendments.

A well-founded appeal identifies specific legal or factual errors and encloses the decision and material supporting documents.

Recovery and stay

An assessment appeal does not necessarily resolve every question about when or how FBR may recover money.

Sections 137, 138 and 140 address payment and recovery, and relevant provisos or orders may protect a qualifying taxpayer.

If bank recovery is threatened, seek the proper interim protection promptly while pursuing the merits.

Representation by advisers

A taxpayer may instruct a duly authorised tax practitioner or lawyer, subject to applicable representation rules.

The adviser should have an accurate mandate and access to the relevant records rather than relying on verbal recollections.

The taxpayer remains responsible for truthful information in filings made on its behalf.

Example: bank deposits

FBR sends a show-cause notice asserting that total bank credits exceeded declared business turnover. The taxpayer has transferred funds between its own accounts and received loans from shareholders.

The response should reconcile credits line by line, establish sources and explain why particular amounts are not taxable sales or income.

A general statement that every deposit is harmless would be inadequate; the tax character of each significant receipt matters.

Example: mismatch in purchases

A manufacturer receives a notice questioning expenses based on third-party supplier data. Some invoices were cancelled and others relate to a different period.

The taxpayer should reconcile invoice numbers, goods receipts, payments and accounting periods and challenge any unsupported factual assumption.

Where claims are genuine but documentation is imperfect, the legal effect should be analysed candidly.

Opinion and action plan

Treat every FBR notice as a distinct legal event. Verify authenticity, identify the exact provision, calculate the deadline and address proposed allegations with complete documentary reconciliations.

If an assessment follows, consider the correct statutory appeal and any necessary stay. Avoid assuming that the mere filing of a response or appeal automatically halts recovery.

Principal authorities: Income Tax Ordinance, 2001, sections 114, 120, 122, 127 and recovery provisions where applicable; FBR Iris and official notices-verification services; current Income Tax Rules; Commissioner Inland Revenue v Khudadad Heights (PLJ 2025 SC 264), subject to verification of the full judgment.