2013

Superior university
Lahore

Arsalan Haider
Mc(12163)
Afzal Ahmed
Mc(12162)
Shahid Iqbal
Mc(12143)
Amir Shahzad
Mc(12147)
M.Tayyab
Mc(12156)

FINAL PROJECT OF
TAXATION

Taxation:
A fee charged by a government on a product, income, or activity. If tax is charged directly on personal or
corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called
an indirect tax. The purpose of taxation is to finance government expenditure. One of the most important
uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since
public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer,
there cannot be a market in the good or service, and so they need to be provided by the government, which
tend to finance themselves largely through taxes. Tax rates and method of calculating taxable income
varies with fiscal status of the tax payer. Following are the broad categories of taxpayers:
o
o
o
o

Companies
Association of Persons (AOP)
Non Salaried Individuals
Salaried individuals

Introduction:
Over the years, the taxation system has undergone major changes both in policy and procedures. The
resource mobilization feature of the system was substantially weak through the pursuit of secondary
objectives of promoting industrialization, savings, exports, welfare and charities, and other key economic
activities. Various tax measures including tax exemptions, investment and tax credits, tax rebates,
accelerated depreciation of capital assets, lower tax rates and higher exemption limits were used as the
medium for achieving the desired objectives. Exemption of agricultural income was extended to the agrobased industries and agricultural services. Operation of tax on capital gains was suspended to promote the
capital market. Tax rates for public limited companies were reduced as an incentive for private companies
going public
In June 1979, the Income Tax Act of 1922 was repealed by the Income Tax Ordinance, 1979. It made no
fundamental changes in the system of income taxation. Instead as announced by the Government, the
reasons for enforcing the new enactment were to arrange the provisions in more systematic and logical
form, simplify the law, plug the loopholes, remove lacunae and ambiguities, and to evolve a tax system
which is fair, equitable and capable of voluntary compliance leading to effective administration
[Government of Pakistan (1979)]. Thus, the fundamental concepts of fiscal policy as well as the basic
features of the tax laws remained unchanged.

In November 1990, the Government constituted a Committee on Tax Reforms "to review the existing
taxation structure and recommend a system that will substantially increase government revenues". While
making its recommendations in February 1991, the Committee observed that "there is a need to take up
and attempt the task of restructuring the entire taxation system taking into account the revenue generation
aspects, economic growth potential, removal of inconsistency" A wide range of recommendations on
policy, procedures and administrative aspects of taxation were made.

Strategic Framework:
A workshop of top management of FBR (30 persons) was held on October 26-28, 2001. The management
team developed the Vision, Mission, Values, Goals and Strategy of the future organization as follows:

Vision:
To be modern, Progressive, Effective, autonomous and credible organization for optimizing revenue by
providing quality service and promoting compliance with tax and related laws.

Mission Statement:
Enhance the capability of the tax system to collect due taxes through application of modern techniques,
providing taxpayer assistance and by creating a motivated, dedicated, professional work force.

Goals:
o To improve compliance with the tax and customs law.
o To develop and manage efficient revenue administration by developing a well trained and
motivated workforce.
o To design and deliver fair, responsible and effective enforcement mechanisms in a way that
directly responds to change in the environment.
o To make the taxpayer service taxpayer friendly.
The FBR contains a greater responsibility. Therefore, Supervisory Council will be constituted to monitor
its working. The Council will have following structure and role.

Supervisory Council:
The Council headed by Minister for Finance will consist of Secretary General Finance, Deputy Chairman
Planning Commission, Secretary Establishment and Chairman FBR as Member/Secretary. Beside these

above mentioned Members, the Council may appoints Minister for Commerce, Minister for Science &
Technology, Secretary Law and private sector representative according to the need.
The role of Supervisory Council is to examine the omissions or errors of the reform process of FBR. The
Council will approve revenue targets, FBR budget, and human resource policy and compensation package.
The Council will generally exercise federal government powers pertaining to issues concerning FBR. The
Council will have the status of a committee of the Cabinet.

Structure of the Tax Administration:

Different tax systems require different types of administrative arrangements. Tax policy not only has an impact on
the costs of administration, but also on the organization of the administration. Tax administration is structured on

type of tax basis. The vision for the FBR is to establish a functionally integrated tax administration;
however, recognizing the challenges during the period, separation of functions by tax type will be
required, but gradually reduced over time.
As a result, initially FBR would continue to be structured on a type of tax basis, with a more clear and
independent role for new functional departments. This would require major improvement at FBR
Headquarter and its operational organization. Within this, the FBR would continue to move towards
integration of various taxes (e.g.) Income Tax, Sales Tax & Central Excise. Initially a model Large
Taxpayer Unit (LTU) would be established in July 2002 at Karachi. This Unit will be fully tested for
integration of taxes over medium term.

Functions of revenue division FBR:

o Formulation and administration of fiscal policies.
o Levy and collection of federal taxes.
o Quasi-judicial function of hearing of appeals.
His responsibilities also involve interaction with the offices of the President, the Prime Minister, all
economic Ministries as well as trade and industry.

The Federal Board of Revenue (FBR) is responsible for the collection of federal tax revenues in the
country. It collects both direct and indirect tax revenues.
The direct taxes include Income Tax (IT), Workers Welfare Fund (WWF), Workers Profit Participation
Fund (WPPF) and Capital Value Tax (CVT). On the other hand, Indirect Taxes collected by FBR include
Sales Tax, Customs Duties and Federal Excise Duty.

Structure of Tax System

Sale Tax
Previous structure:
Officers of sale tax:
1)
2)
3)
4)

Collector
Additional collector
Deputy collector
assistant collector

5)
6)
7)
8)

Superintendent
Deputy Superintendent
Auditor
Lower staff

Controller General (Valuation) is responsible for over viewing the implementation of article VII of the
WTO agreement on trade and tariff, 1994 which is known as the GATT Valuation Code. He is assisted by
one Controller of Customs Valuation (BPS-20) at Karachi and one Additional Controller of Customs
Valuation (BPS-19) at Lahore.
Director General (Inspection and Audit) Direct Taxes based at Islamabad operate directly under the
Secretary, Revenue Division. He carries out inspections, audits and investigations of taxes/offices
involving evasion of taxes and malpractices by the functionaries of the Income Tax Department. He
submits recommendations to the Board regarding tax policy, tax administration and tax operations. The
Director General is assisted by three Regional Directors (BPS-20), each posted at Karachi, Lahore and
Islamabad.
Director General (Inspection and Audit) Indirect Taxes based at Karachi carries out inspection and
audit of the Indirect Taxes. The Director General is assisted by four Directors (BPS-20), two at Karachi
and one each at Lahore and Islamabad.

Director General (Training and Research), Direct Taxes based at Lahore (with regional offices at
Karachi and Islamabad) is responsible for imparting training to the freshly recruited officers in the Income
Tax Department. He is also responsible for imparting in-service training to the incumbent officers /
officials through refresher courses, workshops and seminars.

Director General (Training and Research) Indirect Taxes, based at Karachi with offices at Islamabad,
Lahore and Karachi is responsible for imparting training to the personnel of Customs, Central Excise and
Sales Tax Departments, respectively.
Director General (Intelligence and Investigation) Customs and Excise based at Islamabad collects,
processes, disseminates information and enforces prevention of tax evasion. He also enforces measures to
prevent smuggling of contrabands, including drugs. The Director General is assisted by three Directors
(BPS-20), one each stationed at Karachi, Lahore and Islamabad.
Director General (Large Taxpayers Unit, Karachi/Lahore) LTUs were established with the objectives
to reduce contact between the taxpayers and Collectors by providing friendly and better model office
environment, integration of Income and Sales Tax, structuring of tax administration on functional line and
focus on all the affairs of the large taxpayers.
Directorate of Research and Statistics assists the Board in fiscal policy analysis, compilation of federal
tax receipts, statistical data on national level and reconciliation of revenue receipts with the AGPR and
SBP. The Director (R&S) represents CBR in meetings of Fiscal Monitoring Committee of the Finance
Division and National Accounts Committee of the Statistics Division pertaining to revenue statistics. The
Directorate compiles and publishes the annual CBR Year Book. The DR&S perform its function under the
supervision of Member (FR&S).
Departments in collectrates
LRO (Local registration office)
Audit:-

The inspection functions of income tax and sales tax will be jointly carried out by internal audit wings of
income tax and sales tax at early stages of the reform program. These functions, however, will also be
integrated gradually on lines of future integration of the two taxes. The regional internal audit heads would
report directly to Chairman FBR. The unit-wise audit shall be conducted by the LTU. While there would
be no mandatory audit, case selection for audit would be based on risk assessment and attempt would

be made to ensure that audit schedules are made in consultation with the taxpayers so as to cause
minimum inconvenience.
Adjudication:In respect of central excise/service tax matters, in cases where show cause/demand notices have been
issued by the erstwhile jurisdictional officers, but not adjudicated, would stand transferred to LTU and the
same would be adjudicated by officers posted at LTU. The process of adjudication would be completed
within 3 months of the issuance of the notice, wherever possible. The erstwhile jurisdictional
Commissioner (Appeals) would adjudicate the appeals pending with them. However, all future appeals
would be filed with Commissioner (Appeals), LTU. In case any duty/tax has been short paid and a notice
has to be issued for its recovery, the LTU would first inform the tax payer about his liability before
issuance of any demand notice. In case the taxpayer pays up the duty/tax/interest within a period of 15
days from such intimation, no notice would be issued.
Refund:The rebate / refund claims would be disposed off within 30 days of their filing, if the claims filed are in
order. In respect of income-tax, facility for direct credit of refunds to the bank account of taxpayers would
be made available.

Income Tax
Previous structure:
Income Tax Structure:The structure of income tax is operated through 5 regions, 32 Zones, and 757 Circles and Deputy
Commissioners. In phase 1 of the reform, the income tax structure will be transformed on functional
basis.. The sales tax will also have Regional Collectors initially at three-five locations. Keeping in view
the plan for the future integration of sales tax and income tax, effort will be made to co-locate the offices
of sales tax and income tax at close proximity.

Organizational Set-up:In the setup, the Chairman, FBR is assisted by the three support Members (Strategic Planning and
Research & statistics, Legal and Administration), three Functional Members (Facilitation & Taxpayers
Education, Enforcement and Accounting, Audit) three operational Members (Customs Operations),
Domestic Operations (North), Domestic Operations (South) and three Policy Members (Direct Taxes,

Indirect Taxes and Customs). Besides this top tier, senior management also includes various Director
Generals and Chief Collectors positions.
Income tax region:Northern

(Islamabad)

Eastern (Lahore)
Central (Multan)
Southern

(Karachi)

Corporate

(Karachi)

Officers of income tax:1)

2)
3)
4)

Commissioner
Additional commissioner
Deputy commissioner
assistant commissioner

5)
6)
7)
8)

Income tax officer

special officer
Inspector
Lower staff

Offices of Income Tax:1) Regional commissioner office

2) Zonal Office

3) Range
4) Circle

At the operational level, for administrative purpose, the country is divided into three regions - each
divided into Income Tax Zones, Ranges and Circles. Separate Wealth Tax zones exist for each of the
Region. For collection, collation and dissemination of economic information relevant to assessment of
income and capital, Commissioners of Survey and Registration have also been appointed on a regional
basis. Separate company zones exclusively deal with the corporate taxpayers. For assessment purposes,
several hundred tax circles exist. Functional distribution of work entails tax assessment and collection
vested in the Income Tax Officer incharge of a tax circle. The Assistant Commissioner and
Commissioners exercise supervision, guidance and control of their work.

The overall management and implementation of the taxation laws at operational level is the responsibility
of the Regional Commissioners of Income Tax.

Income Tax
Current structure:
Todays four layer structure will be reduced to 2 layers of management (i.e.) headquarters and 7-15
regions, that will be operated on a functional basis managed by a Regional Commissioner. The circles and
zones will disappear.

FBR

FBR:The Federal Board of Revenue (FBR) is responsible for the collection of federal tax revenues in the
country. It collects both direct and indirect tax revenues. The direct taxes include Income Tax (IT),
Workers Welfare Fund (WWF), Workers Profit Participation Fund (WPPF) and Capital Value Tax
(CVT). On the other hand, Indirect Taxes collected by FBR include Sales Tax, Customs Duties and
Federal Excise Duty. The FBR collection from these taxes contributes around 95% of total federal taxes
while remaining relates to surcharges which are too collected by FBR.

Customs:Goods imported and exported from Pakistan are liable to rates of Customs duties as prescribed in
Pakistan Customs Tariff. Customs duties in the form of import duties and export duties constitute about
37% of the total tax receipts. The rate structure of customs duty is determined by a large number of
socio-economic factors. However, the general scheme envisages higher rates on luxury items as well as
on less essential goods. The import tariff has been given an industrial bias by keeping the duties on
industrial plants and machinery and raw material lower than those on consumer goods.

Inland Revenue services:-

INLAND REVENUE SERVICES

Income tax:Income Tax is levied on incomes of individuals, association of persons, registered firms, and corporate
entities. The three main components of income tax are voluntary payments (VP), collection on demand
(COD), and withholding taxes (WHT). The collection is dominated by WHT. The collection is made
through the withholding agents who are responsible for deducting the due amount from the taxpayers.
WHT as a mechanism of tax collection was first introduced in the late 1960s but later on its scope was
enhanced to a number of additional activities. Presently, there are 19 activities subjected to WHT.
Sale tax:Sales tax is liable on sales of taxable goods and services produced in the country excluding those
exempted in the sixth schedule of Sales Tax Act 1990. It has been the leading source of federal tax
revenue and has gained importance over time. Its contribution in federal tax revenues has been at the top
with 39.1% share in collection during FY: 2008-09.
Federal Excise Duty (FED):Federal Excise Duties are levied on domestic production, imports and services rendered in the country.
The FED is an important component of indirect taxes. It is aimed not only to generate revenues but also to
regulate the consumption of certain commodities and services. The major excisable commodities include
cigarettes, cement, beverages, natural gas and POL products, whereas excisable services are; Air Travel,
Insurance, Non-Fund Services provided by banking or non-bank financial companies and Franchise
services.

List of focal persons in Federal Board of Revenue field offices (Inland Revenue)
S. No.
1

Station
LTU Islamabad

LTU Lahore

LTU Karachi

RTO Peshawar

RTO Islamabad

Designated Officer
Chief Commissioner IR, LTU
Islamabad
Chief Commissioner IR, LTU
Lahore
Chief Commissioner IR, LTU
Karachi.
Chief Commissioner IR
Peshawar
Chief Commissioner IR
Islamabad

User name
fto.ltu.ibd@fbr.gov.pk
Fto.ltu.lhr@fbr.gov.pk

fto.ltu.khi@fbr.gov.pk
fto.rto.pwr@fbr.gov.pk
fto.rto.ibd@fbr.gov.pk

RTO Rawalpindi

RTO Abbott bad

RTO Faisalabad

RTO Lahore-I

10

RTO Lahore-II

11

RTO Gujranwala

12

RTO Sialkot

Chief Commissioner IR
fto.rto.rwp@fbr.gov.pk
Rawalpindi
Chief Commissioner IR
fto.rto.abt@fbr.gov.pk
Abbot bad
Chief Commissioner IR
fto.rto.fsd@fbr.gov.pk
Faisalabad
Chief Commissioner IR,
fto.rto.lhr@fbr.gov.pk
Lahore-I
Chief Commissioner IR,
fto.rtoII.lhr@fbr.gov.pk
Lahore-II
Chief Commissioner IR,
fto.rto.guj@fbr.gov.pk
Gujranwala
Chief Commissioner IR, Sialkot fto.rto.skt@fbr.gov.pk

13

RTO Multan

Chief Commissioner IR, Multan

fto.rto.mtn@fbr.gov.pk

14

RTO Sargodha

fto.rto.sgd@fbr.gov.pk

15

RTO Sukkur

16

RTO Hyderabad

17

RTO Karachi-I

18

RTO Karachi-II

19

RTO Karachi-III

20
21.

RTO Quetta
RTO Bahawalpur

Chief Commissioner IR,

Sargodha
Chief Commissioner IR,
Sukkur.
Chief Commissioner IR,
Hyderabad
Chief Commissioner IR,
Karachi-I
Chief Commissioner IR,
Karachi-II
Chief Commissioner IR,
Karachi-III
Chief Commissioner IR, Quetta
Chief Commissioner IR,
Bahawalpur.

fto.rto.skr@fbr.gov.pk
fto.rto.hyd@fbr.gov.pk
fto.rto.khi@fbr.gov.pk
fto.rtoII.khi@fbr.gov.p
k
fto.rtoIII.khi@fbr.gov.p
k
fto.rto.qta@fbr.gov.pk
fto.rto.bwp@fbr.gov.pk

LTU:This Unit will be fully tested for integration of taxes over medium term. A similar model unit of
small/medium taxpayers will be established in July 2003 and fully tested for all functional purposes
particularly with reference to integration. There are three large taxpayer units.
1) Karachi
2) Lahore
3) Islamabad

RTU:There are 16 Regional Tax Offices (RTOs)/ three Large Taxpayer

Units (LTUs) established for the domestic taxes i.e., direct taxes, federal excise and sales tax domestic.
The Direct Taxes are collected by the Commissioner of income tax.
1) Peshawar
10) Faisalabad
2) Abbotabad
11) Multan
3) Rawalpindi
12) Bahawalpur
4) Sialkot
13) Karachi-i
5) Islamabad
14) Karachi-ii
6) Gujranwala
15) Karachi-iii
7) RTO-i Lahore
16) Hyderabad
8) RTO-ii Lahore
17) Sakkhar
9) Sargodha
18) Quetta

Chief Commissioner inland revenue

Chief Commissioner Inland Revenue possess or transfer the jurisdiction in respect of cases and persons
from one commissioner subordinate to him to another
Revise certain orders passed by his subordinates
Appoint any of his subordinate authority
Director General
Director General is responsible for development of system specification for future FBR Needs, operates
directly under secretary, possess disseminates information.
Inspection and Audit
Inspection and audit functions perform in an independent office of the Director General (Audit &
Inspection). The purpose of creating this outfit was to arrest the declining standards of administrative
efficiency, honesty and work quality through enforcing accountability of the tax officials. The primary
functions of the Directorate General of Inspection and Audit are inspection of tax assessment and
collection work, audit of tax computations and look after the officers, conduct

Personnel Training:A full-fledged Directorate of Training, headed by full-time senior officers of the Income Tax Department
exists at Lahore. Training facilities have also been expanded to the regional level. While the Directorate
was essentially established for in-service training of newly-inducted officers and staff, it now offers
refreshers and specialized courses for officers of various levels as well.

Appellate Tribunal
Previous structure:
Sales tax
Collector appeals:
All cases of custom, federal excise and sales tax
Any person aggrieved by any decision or order passed under this Act by an officer of customs lower in
rank than a Collector of Customs , other than a notice of demand served under section 202, may appeal to
the Collector (Appeals) within thirty days of the date of the communication to him of such decision or
order:
Appellate tribunal:
It means customs, excise and sales tax appellate tribunal constituted u/s194 of custom act.
Meaning of an appeal:
Appeal" is "the removal of a cause or a suit from an inferior to a superior judge or court for re-examination or
review".
"Order" or "decision":
An appeal under this section lies only against an "order" or "decision" passed by an officer of customs under the
Customs Act.
Date of filing the appeal:
The date of receipt by the Appellate Authority of the memorandum of appeal is the date of filing the appeal and not
the date of posting the memorandum of appeal

Particulars to be given in the statement of appeal:

In general the appeal must provide all available information likely to assist in settling the dispute. This will usually
include the following particulars:
(a) Every appeal shall be accompanied by a copy of the decision or order by which the appellant is aggrieved;
(b) The grounds of appeal;
(c) Prayer for requesting the amendment or action;
(d) Any other evidence which the appellant considers necessary.
Place of filing appeals and revision:
The Central Board of Revenue have ruled that with a view to facilitate the filing of customs appeals and revision
petitions to the Central Board of Revenue and the Federal Government of Pakistan respectively within the time
allowed under the Customs Act, it has been decided by the Government to introduce the following procedure with
immediate effect. The appellants and petitioners who wish to send their appeals and petitions directly to the Central
Board of Revenue's office in Islamabad.

Procedure in appeal:
(1)The Collector (Appeals) shall give an opportunity to the appellant to be heard if he so desires.
(2) The Collector (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not
specified in the grounds of appeal, if the Collector (Appeals) is satisfied that the omission of that ground from the
grounds of appeal was not willful or unreasonable.
(3) The Collector (Appeals) may, after making such further inquiry as may be necessary, pass such order as he
thinks fit confirming, modifying or annulling the decision or order appealed against, or may refer the case back to
the adjudicating authority with such direction as he may think fit for a fresh adjudication or decision, as the case
may be, after taking additional evidence.

Appointing authority:
The federal government has the appointing authority of the appellate tribunal.

Members
Appellate tribunal consists of two types of members.
1) Judicial member
2) Technical member
The Federal Government shall constitute an Appellate Tribunal to be called the Customs, Excise and Sales
Tax Appellate Tribunal consisting of as many judicial and technical members as it thinks fit to exercise
the powers and discharge the functions conferred on the Appellate Tribunal by this Act.
(2) A judicial member shall be a person who is a Judge of a High Court or who has for a period of not less
than five years exercised the powers of a District Judge and it qualified to be a Judge of a High Court or
who is or has been an Advocate of a High Court and is qualified to be a Judge of High Court.
(3) A technical member shall be an officer of Customs and Excise Group equivalent in rank to that of a
Member, Central Board of Revenue.
(4) The Federal Government shall appoint one of the members of the Appellate Tribunal to be the
Chairman thereof.
(5) The terms and conditions of appointment of the Chairman and judicial and technical members shall be
such as the Federal Government may determine; provided that where a Judge of High Court is appointed
as the Chairman of the Appellate Tribunal his terms and conditions shall be the same as those of a Judge
of the High Court.
Benches of the Tribunal:The Appellate Tribunal has three Benches at Lahore, Islamabad and Karachi. Headquarter of the Tribunal
is at Lahore.
The Appellate Tribunal may after giving the parties to the appeal an opportunity of being heard pass such
orders "thereon" as it think fit, confirming, modifying or annulling the decision or order appealed against.

The word "thereon" confines the power of the Tribunal to the subject-matter of the appeal. The Tribunal
cannot travel beyond the scope of the appeal or pass an order or give a direction which would work
adversely to the appellant. It is well-settled principle in law that an appellant on his appeal cannot be put
in a worse position than what he was in earlier.
Power to Grant Stay:It is firmly established rule that an express grant of statutory power carries with it by necessary
implication the authority to use all reasonable means to make such grant effective. Therefore, when the
statute confers appellate jurisdiction on the Tribunal, it impliedly grants the power of doing all such acts,
or employing such means as are essentially necessary to its execution and the statutory power carries with
it duty in proper case to make such orders for staying proceedings as will prevent the appeal, if successful,
from being rendered nugatory.
The interim directions or orders are passed so as to ensure that ultimate relief available to the party is not
affected and the delay in deciding the case should not adversely affect the party.

Procedure of Appellate Tribunal:(1) The powers and functions of the Appellate Tribunal may be exercised and discharged by Benches
constituted by the Chairman from amongst the members thereof.
(2) Subject to the provisions contained in sub-sections (3) and (4), a Bench shall consist of one judicial
member and one technical member.
(3) Every appeal against a decision or order relating, among other things, to the determination of any
question having a relation to the rate of duty of customs or to the value of goods for purposes of
assessment, shall be heard by a Special Bench constituted by the Chairman for hearing such appeals and
such Bench shall consist of not less than two members and shall include at least one judicial member and
one technical member.
(4) The Chairman or any other member of the Appellate Tribunal authorized, in this behalf by the
Chairman may, Sitting singly, dispose of any case which has been allotted to the bench of which he is a
member where
(a) the value of the goods confiscated without option having been given to the owner of the goods to pay a
fine in lieu of confiscation under section 181; or

(b) in any disputed case, other than a case where the determination of any question having a relation to the
rate of duty of customs or to the value of goods for purposes of assessment is in issue or is one of the
points in issue, the difference in duty involved or the duty involved; or
(c) The amount of fine or penalty involved; does not exceed one hundred thousand rupees.
(5) If the members of a Bench differ in opinion on any point, the point shall be decided according to the
opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the
point or points on which they differ and the case shall be referred by the Chairman for hearing on such
point or points by one or more of the other members of the Appellate Tribunal, and such point or points
shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who
have heard the case including those who first heard it:
Provided that, where the members of a Special Bench are equally divided, the points on which they differ
shall be decided by the Chairman.
(6) Subject to the provisions of this Act, the Appellate Tribunal shall have power to regulate its own
procedure and the procedure of the Benches thereof in all matters arising out of the exercise of its powers
or of the discharge of its functions, including the places at which the Benches shall hold their sittings.
(7) The Appellate Tribunal shall, for the purposes of discharging its functions, have the same powers as
are vested in a court under the Code of Civil Procedure, 1908 (V of 1908), when trying a suit in respect of
the following matters, namely:-(a) Discovery and inspection;
(b) Enforcing the attendance of any person and examining him on oath;
(c) Compelling the production of books of account and other documents; and
(d) Issuing commissions.

Advantages and disadvantages of new system and suggest the best administrative
system Pakistan:
Advantages:
1. There is more communication between tax payers and tax authorities

2. The new system in tax brought electronic into being which is increasing the efficiency.
3. Member facilitation and taxpayer education is also a project of this new system which is helping in
tax generation.
4. The administrative structure is help full with a crystal clear hierarchy this has made clear
communications.
5. RTOs are working much better than the previous system and RTOs are also improving their area
tax collection.
6. Under one commissioner appeals have become easy.
7. Under this new system direct tax and indirect calculation and filling has made easy for the payers.
8. If an organization is paying more indirect tax the more direct tax the owner will pay so under this
new system it is made easy to calculate the calculate the direct tax of a company.
Disadvantage:
1. A person who has been working under the sale tax department now working under sales tax
department or excises this is not good.
2. Under a roof system is failed to work on this tax policy widening the base by reducing exemptions
incentive and concessions.
3. Only few peoples are enjoying the ultimate authorities there negligence can cause this tax system
suffer loss.
4. Pakistan tribal areas have not traditionally come under more than nominal control of the central
government, so the control of newer tax system is pretty poor at those areas.

Appeal to the Commissioner (Appeals):Any person dissatisfied with any order passed by a Commissioner or an officer of Inland Revenue under
section 121, 122, 143, 144, 162, 170, 182, or 205, or an order under sub-section (1) of section 161 holding
a person to be personally liable to pay an amount of tax, or an order under clause (f) of sub-section (3) of
section 172 declaring] a person to be the representative of a non-resident person or an order giving effect
to any finding or directions in any order made under this Part by the Commissioner (Appeals), Appellate
Tribunal, High Court or Supreme Court, or an order under section 221 refusing to rectify the mistake,
either in full or in part, as claimed by the taxpayer or an order having the effect of enhancing the
assessment or reducing a refund or otherwise increasing the liability of the person except a provisional
assessment order under section 122C, may prefer an appeal to the Commissioner (Appeals) against the
order.

(1)
No appeal under sub-section (1) shall be made by a taxpayer against an order of assessment unless
the taxpayer has paid the amount of tax due under sub-section (1) of section 137.
(2)

An appeal under sub-section (1) shall

i.
Be in the prescribed form;
ii.
Be verified in the prescribed manner;
iii.
State precisely the grounds upon which the appeal is made;
iv.
Be accompanied by the prescribed fee specified in sub-section (4); and
v.
Be lodged with the Commissioner (Appeals) within the time set out in sub-section (5).

(3)

The prescribed fee shall be

a.
b.

(4)

in the case of an appeal against an assessment, one thousand rupees or

in any other case
Where the appellant is a company, one thousand rupees; or
Where the appellant is not a company, two hundred rupees.

An appeal shall be preferred to the Commissioner (Appeals) within thirty days of the following
(a) where the appeal relates to any assessment or penalty, the date of service of the notice of
demand relating to the said assessment or penalty, as the case may be; and

(6)

(b) In any other case, the date on which the order to be appealed against is served.
The Commissioner (Appeals) may, upon application in writing by the appellant, admit an
appeal after the expiration of the period specified in sub-section (5) if the Commissioner

(Appeals) is satisfied that the appellant was prevented by sufficient cause from lodging the appeal
Within that period.

Procedure in appeal:
(1)
(2)
(3)

(4)

The Commissioner (Appeals) shall give notice of the day fixed for the hearing of the appeal to the
appellant and to the Commissioner against whose order the appeal has been made.
The Commissioner (Appeals) may adjourn the hearing of the appeal from time to time.
The Commissioner (Appeals) may, before the hearing of an appeal, allow an appellant to file any
new ground of appeal not specified in the grounds of appeal already filed by the appellant where
the Commissioner (Appeals) is satisfied that the omission of the ground from the form of the
appeal was not willful or unreasonable.
The Commissioner (Appeals) may, before disposing of an appeal, call for such particulars as the
Commissioner (Appeals) may require respecting the matters arising in the appeal or cause further
enquiry to be made by the Commissioner.

(5)

The Commissioner (Appeals) shall not admit any documentary material or evidence which was not
produced before the Commissioner unless the Commissioner (Appeals) is satisfied that the
appellant was prevented by sufficient cause from producing such material or evidence before the
Commissioner.

Decision in appeal:
(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

In disposing of an appeal lodged under section 127, the Commissioner (Appeals) may;
I.
Make an order to confirm, modify or annul the assessment order after examining such
evidence as required by him respecting the matters arising in appeal or causing such
further enquires to be made as he deems fit; or
II.
In any other case, make such order as the Commissioner (Appeals) thinks fit.
The Commissioner (Appeals) shall not increase the amount of any assessment order or decrease
the amount of any refund unless the appellant has been given a reasonable opportunity of showing
cause against such increase or decrease, as the case may be.
Where, as the result of an appeal, any change is made in the assessment of an association of
persons or a new assessment of an association of persons is ordered to be made, the Commissioner
(Appeals) may authorize the Commissioner to amend accordingly any assessment order made on a
member of the association and the time limit in sub-section (2) of section 122 shall not apply to the
making such amended assessment.
As soon as practicable after deciding an appeal, the Commissioner (Appeals) shall serve his order
on the appellant and the Commissioner.

Provided that such order shall be passed not later than one hundred and twenty days from the date
of filing of appeal or within an extended period of sixty days, for reasons to be recorded in writing
by the Commissioner (Appeals):
Provided further that any period during which the hearing of an appeal is adjourned at the request
of the appellant or is postponed due to any appeal or proceedings or stay order, remand or
alternative dispute resolution proceedings or for any other reason, shall be excluded in the
computation of the aforementioned periods.
Where the Commissioner (Appeals) has not made an order on an appeal before the expiration of
4[four] months from the end of the month in which the appeal was lodged, the relief sought by the
appellant in the appeal shall be treated as having been given and all the provisions of this
Ordinance shall have effect accordingly.
For the purposes of sub-section (5), any period during which the hearing of an appeal is adjourned
on the request of the appellant shall be excluded in the computation of the period of 5[four] months
referred to in that sub-section.

Appointment of the Appellate Tribunal:

There shall be established an Appellate Tribunal to exercise the functions conferred on the
Tribunal by this Ordinance.
(1)
(2)

(3)

(4)

(5)
(6)

(7)

(8)

(9)

The Appellate Tribunal shall consist of a chairperson and such other judicial and accountant
members as are appointed by the Federal Government having regard to the needs of the Tribunal.
A person may be appointed as a judicial member of the Appellate Tribunal if the person
i. Has exercised the powers of a District Judge and is qualified to be a Judge of a High Court;
or
ii. Is or has been an advocate of a High Court and is qualified to be a Judge of the High Court.
A person may be appointed as an accountant member of an appellate tribunal if,
i. He is an officer of Inland Revenue equivalent to the rank of Regional Commissioner; or
ii. A Commissioner Inland Revenue or Commissioner Inland Revenue (Appeals) having at
least five years experience as Commissioner or Collector.
The Federal Government shall appoint a member of the Appellate Tribunal as Chairperson of the
Tribunal and, except in special circumstances, the person appointed should be a judicial member.

The powers and functions of the Appellate Tribunal shall be exercised and discharged by Benches
constituted from members of the Tribunal by the Chairperson of the Tribunal.
Subject to sub-section (8), a Bench shall consist of not less than two members of the Appellate
Tribunal and shall be constituted so as to contain an equal number of judicial and accountant
members, or so that the number of members of one class does not exceed the number of members
of the other class by more than one.
The Federal Government may direct that all or any of the powers of the Appellate Tribunal shall be
exercised by
i. Any one member; or
ii. More members than one, jointly or severally.
Notwithstanding anything contained in sub-sections (7) and (8), the 2[Chairperson] may constitute
as many benches consisting of a single member as he may deem necessary to hear such cases or
class of cases as the Federal Government may by order in writing, specify
The Chairperson or other member of the Appellate Tribunal authorized, in this behalf by the
Chairperson may, sitting singly, dispose of any case where the amount of tax or penalty involved
does not exceed 6[one] million rupees.

10)

Subject to sub-section (10), if the members of a Bench differ in opinion on any point, the point
shall be decided according to the opinion of the majority.

11)

If the members of a 7[Bench] are equally divided on a point, they shall state the point on which
they differ and the case shall be referred by the Chairperson for hearing on that point by one or
more other members of the Appellate Tribunal, and the point shall be decided according to the
opinion of the majority of the members of the Tribunal who have heard the case including those
who first heard it.

12)

If there are an equal number of members of the Appellate Tribunal, the Federal Government may
appoint an additional member for the purpose of deciding the case on which there is a difference of
opinion.

13)

Subject to this Ordinance, the Appellate Tribunal shall have the power to regulate its own
procedure, and the procedure of Benches of the Tribunal in all matters arising out of the discharge
of its functions including the places at which the Benches shall hold their sittings.

Appeal to the Appellate Tribunal:

(1)
(2)

Where the taxpayer or Commissioner objects to an order passed by the Commissioner (Appeals),
the taxpayer or Commissioner may appeal to the Appellate Tribunal against such order.
An appeal under sub-section (1) shall be
(a) In the prescribed form;
(b) Verified in the prescribed manner;
(c) Accompanied 3 except in case of an appeal preferred by the Commissioner by the
prescribed fee specified in sub-section (3);
And preferred to the Appellate Tribunal within sixty days of the date of service of order of the
Commissioner (Appeals) on the taxpayer.
The prescribed fee shall be two thousand rupees.

(3)

The Appellate Tribunal may, upon application in writing, admit an appeal after the expiration of
the period specified in clause (d) of sub-section (2) if it is satisfied that the person appealing was
prevented by sufficient cause from filing the appeal within that period.

(4)

(5)

(6)
(7)

Notwithstanding that an appeal has been filed under this section, tax shall, unless recovery thereof
has been stayed by the Appellate Tribunal, be payable in accordance with the assessment made in
the case:
Provided that where recovery of tax has been stayed by the Appellate Tribunal by an order, such
order shall cease to have effect on the expiration of a period of three months following the date on
which it is made, unless the appeal is decided, or such order be withdrawn by the Appellate
Tribunal earlier:
Provided further that the Appellate Tribunal shall not make an order which has the effect of
staying the recovery of tax beyond the period of six months in aggregate.
Provided further that the Appellate Tribunal may stay the recovery of the tax on filing the appeal
which order will remain operative for thirty days and during which period a notice shall be issued
to the respondent and after hearing the parties, order may be confirmed or varied as the Tribunal
deems fit but stay order shall in no case remain operative for more than one hundred and eighty
days.

Disposal of appeals by the Appellate Tribunal:

(1)

(2)

(3)
(4)

(5)
(6)

The Appellate Tribunal may, before disposing of an appeal, call for such particulars as it may
require in respect of the matters arising on the appeal or cause further enquiry to be made by the
Commissioner.
The Appellate Tribunal shall afford an opportunity of being heard to the parties to the appeal and,
in case of default by any of the party on the date of hearing, the Tribunal may proceed ex party to
decide the appeal on the basis of the available record.
The Appellate Tribunal shall decide the appeal within six months of its filing.
Where the appeal relates to an assessment order, the Appellate Tribunal may, 6[without prejudice
to the powers specified in sub-section (2), make an order to (a) affirm, modify or annul the
assessment order; or
Remand the case to the Commissioner or the Commissioner (Appeals) for making such enquiry or
taking such action as the Tribunal may direct.
The Appellate Tribunal shall not increase the amount of any assessment 3[or penalty] or decrease
the amount of any refund unless the taxpayer has been given a reasonable opportunity of showing
cause against such increase or decrease, as the case may be.

(7)

(8)

(9)
(10)

Where, as the result of an appeal, any change is made in the assessment of an association of
persons or a new assessment of an association of persons is ordered to be made, the Appellate
Tribunal may authorize the Commissioner to amend accordingly any assessment order made on a
member of the association and the time limit in sub-section (2) of section 122 shall not apply to the
making of such amended assessment.
Where the appeal relates to a decision other than in respect of an assessment, the Appellate
Tribunal may make an order to affirm, vary or annul the decision, and issue such consequential
directions as the case may require.
The Appellate Tribunal shall communicate its order to the taxpayer and the Commissioner.
Save as provided in section 133, the decision of the Appellate Tribunal on an appeal shall be final.

The practical problem and hurdles discussed with tax authorities and tax advisors:
1. Tax fraud is one of the biggest problems mentioned by the tax authorities. Currently according to
news paper Nawa-i-waqt 19 September 2010. There are 750 billion rupees of tax fraud in Pakistan.

2. Everybody in the country is raising the roof about his patriotic credentials but hardly anybody is
prepared to pay his taxes, tax culture in the country obviously needs to be overhauled in a big way
to get way out of the present morass.

3. The types of issues that have arisen during the cause of tax policy formulation and administration
generally include insufficient revenues and fiscal imbalances distortions in resource allocation
inadequate equity features of tax system and the administrative constraints

4. Tax administration is doing frauds

5. Tax consultants are helping companies to prevent their taxes and corporations are also doing tax
frauds.

Suggestion given by the tax authorities and other persons to improve this system:
1. A simple measure that could boost direct tax collection would be to link it to assets and
expenditures. If businessmen X is taking his family on a European vacation audit the family. If
mill owner Y sending his children to expensive private schools and tutors audit his income. If
industrialist Z hosts an extravagant wedding ceremony audit him. Its been done elsewhere and
there no reason it can t be done here. Enough with the sacred cows and narrow reforms.

2. This tax system lacks policy generation. There should be new polices to increase direct taxes.

3. The major problem is the abysmally low rate of direct taxes collected as compared to indirect
taxes such as GST customs duties excise etc. indirect taxes are a burden on the less well off
they harm business and competitiveness and are disliked almost universally by economists.
And yet no policymaker will talk about direct taxes so there should be new polices and
measures.

4. Control over corruption can also boost up tax collections.