Time limitation for Best Judgement assessments under section 121 of the Ordinance to be extended Section 121(3)
Time limitation for Best Judgement assessments: In terms of proviso to sub-section (5) of section 114 of the Ordinance, notice for furnishing of a return of income under section 114(4) of the Income Tax Ordinance, 2001 can be issued for one or more of the last ten completed tax years to a person who has not filed return of income for any of the last five tax years.
However, prior to the Finance Act, 2018, in case of failure to file return in response to notice issued in such a case, best judgment assessment could only be issued within five years of the end of tax year to which it related.
In this way, though notice for filing of return could be issued for the last ten completed years, in case of non-filing of returns, best judgment assessment could only be made for the last five completed tax years due to the time limitation stipulated in sub-section (3) of section 121 of the Ordinance.
In order to remove this anomaly, a proviso has been added in sub-section (3) of section 121 whereby a best judgement assessment can be made within two years from the end of the tax year in instances where notice calling for furnishing of return of income is issued in respect of one or more of the last ten completed tax years in terms of proviso to sub-section (5) of section 114 of the Ordinance.