138(1) (Notice to pay overdue tax payable)

SHOW CAUSE 138(1) (Notice to pay overdue tax payable)

 Please refer to the above.

NOTICE UNDER SECTION 138(1) OF THE INCOME TAX ORDINANCE 2001.
CNIC/NTN: 341019xxx1579 Dated: 19-09-2022
To
NAME
Whereas it is established that the sum of Rs.12,xxx/- Which is due from you on account of advance tax
as per details given in the schedule below, is in arrear, you are, hereby, required to pay these arrears of
tax by 26.09.2022 and produce necessary evidence to that effect before me at my office on 26.09.2022
failing which proceedings may be initiated under these rules to recover the said amount by one or more
of the following modes, namely:-
a) attachment and sale of moveable or immovable property;
b) appointment of receiver for the management of your moveable or immovable property.
c) your arrest and detention in person for a period not exceeding six months.
I, in exercise of the powers vested in me under section 138 of the Income Tax Ordinance,
hereby further direct that you shall not sell, mortgage, charge, issue or otherwise deal with any property
belonging to except with my permission to that effect in writing.
SCHEDULE
DCR TAX YEAR Add Tax TOTAL
2023 12,xxx/- 12,xxx/-
Total 12,xxx/-

A 138(1) Notice from the Federal Board of Revenue (FBR) refers to Section 138(1) of the Income Tax Ordinance, 2001. This section allows FBR to issue a notice requesting a taxpayer to provide information or documents necessary for verifying or assessing their income, expenses, or other tax-related matters. The purpose of this notice is typically for audit or investigation into your tax affairs.

What You Should Do Upon Receiving a 138(1) Notice:

1. Understand the Purpose of the Notice

• Request for Information: Section 138(1) gives FBR the power to ask taxpayers to provide specific information or documents. This might include details about income, expenses, investments, assets, or any other financial records relevant to the taxpayer’s tax return.
• Verification and Assessment: The notice is typically issued as part of FBR’s process to verify the accuracy of the tax return filed or to assess the correct tax liability based on the taxpayer’s financial records.

2. Review the Notice Carefully

• Documents Requested: The notice will specify what information or documents you need to submit. This could include:
  • Bank statements
  • Proof of income
  • Invoices, receipts, or contracts
  • Tax deductions or exemptions claimed
  • Business or investment records
• Deadline for Submission: The notice will also specify a deadline by which you need to provide the requested information. It’s important to comply with this deadline to avoid penalties or further legal actions.

3. Gather the Required Documents

• Prepare Documentation: Start collecting all the documents mentioned in the notice. Common documents that may be requested include:
  • Financial statements (income and expenses).
  • Bank account details or statements.
  • Tax receipts and proof of deductions.
  • Contracts, invoices, or other evidence of income sources.
  • Investment records if applicable (e.g., stocks, real estate).
• Review the Information: Double-check the information for accuracy and completeness. Ensure that you provide the correct documents to avoid delays or further questions.

4. Respond to the Notice on Time

• Submit on Time: Make sure to respond within the given time frame specified in the notice. If the notice asks you to submit information by a certain date, failing to meet the deadline may result in penalties, interest, or other legal consequences.
• Use the Appropriate Submission Method: Follow the instructions in the notice for submitting the required information. This may be via the FBR e-filing portal, email, or directly to the tax office.

5. Seek Professional Help (if needed)

• If the request for information is complex or if you’re uncertain about how to gather or present the requested documents, you may want to consult a tax professional (such as a chartered accountant or tax lawyer).
• A tax professional can help ensure that you comply correctly with the notice and can advise you on how to present your financial information in the most accurate and effective way.

6. Request an Extension (if necessary)

• If you are unable to gather the required information or documents within the specified time, you may request an extension from FBR. However, this request must be made before the original deadline expires.
• To request an extension, you will need to provide a valid reason for the delay and ask for additional time to compile the required documents. Extensions are granted at FBR’s discretion.

7. Prepare for an Audit (if applicable)

• If the notice is part of an audit process, it means that FBR is reviewing your financial records in more detail to ensure that you are complying with tax laws.
• Cooperate fully with the auditors and provide all the requested documentation. Failure to cooperate or provide accurate information can lead to penalties or an increased level of scrutiny in the future.
• Be aware that if the audit reveals discrepancies or non-compliance, FBR may take further action, including imposing penalties or issuing additional tax demands.

8. Monitor and Follow Up

• Track the Submission: After submitting the required documents or information, keep track of your submission to ensure that FBR has received and processed everything.
• Follow Up: If you don’t hear from FBR after submitting the information, you may want to follow up to confirm that everything is in order and to avoid any misunderstandings.
• Keep Copies: Retain copies of all the documents you submit, as well as any communication with FBR, for your records.

Possible Outcomes:

• No Issues: If the provided documents and information are satisfactory to FBR, they may proceed with the regular processing of your tax return or other matters.
• Additional Tax Assessment: If discrepancies are found between the documents provided and your initial return, FBR may issue an additional tax demand or initiate further investigations into your tax affairs.
• Audit Findings: If the request for information is part of an audit, FBR may find errors or irregularities in your tax filings, which could lead to penalties, additional tax liabilities, or other legal consequences.
• Penalties: If you fail to comply with the notice or fail to provide the requested information, you may face penalties, including fines or further legal action.

Conclusion:

A 138(1) Notice from FBR is a request for documents or information that is part of FBR’s process of verifying or assessing your tax obligations. It is important to comply with the notice by providing the required documents within the specified timeframe. If you are unsure about the required documents or need assistance, consult a tax professional to ensure you meet FBR’s requirements. Timely compliance with the notice will help you avoid penalties, interest, or additional scrutiny from FBR.

You can also read about Got Notice under Rule 44(4) of the Income Tax Rules 2002 from FBR – What should you do?