What to do when FBR sends you a notice

The first thing to understand is that an FBR notice is a procedural step with a clock attached, not a verdict. The second is that the clock is short, and letting it run down is the most damaging thing you can do.

Read what it actually says

Notices are issued under specific provisions of the Income Tax Ordinance, and the provision determines what is being asked and what follows if you do not reply. Before anything else, identify three things:

• The section under which it has been issued
• The tax year or period in question
• The date by which a response is due

Some notices are routine requests for information. Others precede an amended assessment. They look similar on the page and carry very different consequences.

What happens if you ignore it

Non-response does not make the matter go away. It typically leads to a best-judgement assessment — one made on the department's own estimate, without your input — followed by penalties and recovery proceedings that can reach your bank accounts. Reversing that afterwards is far more expensive and far less certain than replying on time.

Being selected for audit is not an accusation

Returns are selected for audit both by computer ballot and on specific risk parameters. Selection does not mean the department believes you have done something wrong. It means your return will be examined in detail and you will need to substantiate what you declared.

This is where good bookkeeping pays for itself. Audits are won on documentation, not on argument.

What to gather

1. 1The notice itself, with its reference number and date
2. 2The return and computation for the year in question
3. 3Bank statements covering the period
4. 4Invoices, contracts or receipts supporting the items queried
5. 5Any prior correspondence with FBR on the same matter
6. 6Any assessment order already issued

The most common underlying causes

In practice, most notices trace back to a small number of things:

• A wealth statement that does not reconcile with declared income
• Bank deposits materially exceeding declared receipts
• Property or vehicle transactions that do not appear in the return
• Input tax claimed against suppliers who did not declare the corresponding output
• Years where no return was filed at all

Each usually has a legitimate explanation. The problem is rarely the transaction itself — it is that the documentation supporting it was never assembled.

If an adverse order has already been passed

You retain a right of appeal, first to the Commissioner (Appeals) and beyond that to the Appellate Tribunal. Appeals have their own strict time limits running from the date of the order. Get an honest assessment of the merits before filing — a weak appeal costs time and money without improving your position.