FBR Reviewing Your Tax Return? Understanding the Section 121 Notice and Your Options

A notice under Section 121 of the Income Tax Ordinance, 2001, issued by the FBR in Pakistan, signifies a potential change to your tax assessment for a specific year. It’s not necessarily bad news, but it’s important to understand what it means and how to respond.

Here’s what you need to know about Section 121 notices:

Purpose:

• Inform you that the FBR is proposing an adjustment to your previously filed tax return.
• This adjustment could be an increase or decrease in your tax liability.
• The notice will specify the reason for the proposed change and the revised tax amount.

Reasons for receiving a Section 121 notice:

• Discrepancies in your return: The FBR might identify inconsistencies or missing information in your return, leading to a proposed adjustment.
• Additional information received: The FBR might have received new information about your income or expenses that wasn’t included in your return, prompting a reassessment.
• Random selection for audit: In some cases, the FBR might randomly select your return for further scrutiny, potentially leading to a Section 121 notice.

What you should do:

• Review the notice carefully: Understand the reason for the proposed change and the revised tax amount.
• Gather relevant documents: Compile any documents or evidence that support your original return or explain the discrepancy.
• Respond to the notice within the specified timeframe: You typically have 30 days to respond to the notice. You can accept the proposed change, disagree and provide justification, or request a hearing with the FBR.
• Seek professional advice: If unsure, consult a tax professional for guidance on understanding the notice and preparing your response.

Important points to remember:

• Receiving a Section 121 notice doesn’t automatically mean you’ve committed tax evasion. It’s simply an opportunity for the FBR to clarify any discrepancies or ensure accuracy.
• Cooperating with the FBR and providing clear explanations is crucial.
• If you disagree with the proposed change, you have the right to appeal to the FBR.