Received an FBR Notice? How to Respond

When a notice arrives from the Federal Board of Revenue, read it properly, diary the compliance date and start collecting the records it mentions. A written reply, filed on time and backed by documents, is the best protection you have.

Notices are mostly issued and answered on IRIS. Log in regularly and keep an eye on the email address linked to your registration; a notice you never saw still has legal effect.

Two reactions cause most of the damage: ignoring the notice, and firing off an answer the same afternoon. Taking a few days to get the facts straight is usually wiser than a rushed reply you later have to correct, as long as you still file within time.

Notices issue under the Income Tax Ordinance 2001, the Sales Tax Act 1990 and the Federal Excise Act 2005. Some are generated automatically by the system. Others follow an officer's specific review of your affairs. The common ones are:

• Notices to file a return or wealth statement that has not been filed.
• Requests for information or documents about a return.
• Audit selection notices and the information requests that follow.
• Show cause notices proposing to amend an assessment or recover tax.
• Notices about your duties as a withholding agent.
• Recovery notices after an assessment or order.

Each calls for a different answer. An information request may need nothing more than documents. A show cause notice, by contrast, sets out adverse action the officer proposes to take and needs a full legal and factual reply. With a recovery notice, speed matters: you may need to seek a stay before bank accounts are attached or other coercive steps are taken.

1. Find the statutory provision the notice is issued under.
2. Note the tax year or tax period it concerns.
3. List every question, allegation or document request.
4. Write down the compliance date and any hearing date.
5. Check that the officer issuing it is competent and that it falls within any time limit for that proceeding.

Knowing the legal basis tells you whether to answer on the merits alone or to raise jurisdictional and procedural objections as well.

See, too, whether the notice covers ground already settled, such as a tax year already assessed or documents you have already supplied. Saying so early, with references to the earlier correspondence, can cut the proceedings down considerably.

Answer each point in the order it is raised and attach documents for each. Typical records are bank statements, invoices, contracts, withholding certificates, ledgers and earlier returns. If an accountant, a bank or a former employee holds some of them, ask now; third parties are rarely quick.

• Stick to the facts and answer only what is asked.
• Explain any discrepancy yourself instead of leaving the officer to guess.
• Index the supporting documents and attach them.
• Put legal objections in writing, even while answering on the merits.
• Keep proof of submission, whether an IRIS acknowledgement or a receipt for delivery.

Some notices fix a hearing before the officer. You or an authorised representative can attend, produce documents and make submissions. A representative should carry a properly executed authority, copies of everything already filed and a short note of the points to be argued. Afterwards, confirm in writing any documents promised or points agreed, so the record matches what happened in the room.

Need more time? File a written adjournment request, with reasons, before the compliance date. Adjournments are discretionary, so make the request specific and reasonable. Officers grow less patient with repeated requests that show no progress, and filing part of the reply with the request demonstrates good faith.

Avoiding ex-parte orders

If a taxpayer neither replies nor attends, the officer may decide on whatever information is available and pass an ex-parte order. Such orders can be challenged, but taking part from the beginning is far better. Ex-parte orders tend to rest on assumptions the taxpayer could have answered, and undoing them on appeal takes longer and may mean paying or securing the demand in the meantime.

An adverse order is not the end of the matter. Several routes are open, each with its own conditions and prescribed period, and the right one depends on the complaint. Disputes about the amount of tax generally go up the appellate ladder. Complaints about delay, refusal to act or improper conduct may be better taken to the FTO.

• Appeal to the Commissioner Inland Revenue (Appeals).
• Further appeal to the Appellate Tribunal Inland Revenue (ATIR).
• A tax reference to the High Court on questions of law.
• A complaint to the Federal Tax Ombudsman (FTO) about maladministration, such as delay or improper conduct by tax officials.
• An application to stay recovery while an appeal is pending, where available.

Appeal periods run from the date you receive the order, and late appeals are admitted only in limited circumstances. Draft the grounds of appeal carefully, because new issues can be hard to raise later. For suitable disputes, the alternative dispute resolution mechanisms in the tax laws may also be worth considering.

Sutra Law represents individuals and businesses throughout Pakistan in FBR proceedings. We review notices, draft replies, attend hearings and take appeals before the Commissioner (Appeals), the ATIR, the High Court and the FTO.

When you contact us, send the notice itself, the return or filing it refers to, and any earlier correspondence with the department on the same tax year. Do this as soon as the notice arrives instead of a day or two before the compliance date, especially if it is a show cause or recovery notice.