Amendment to Section 122(9) – Time Limitation for Amended Assessments (Finance Act 2025)

The Finance Act 2025 brings clarity and procedural certainty to assessment amendments under Section 122(9) of the Income Tax Ordinance, 2001. This amendment replaces the previous provisos and sets out a stricter timeline for completing amended assessments, while also defining specific exclusions from the limitation period.

This article explains the revised provisos, their implications for taxpayers and tax authorities, and practical scenarios where they apply.

Revised Provisos to Section 122(9)

Text of the Amendment

“Provided that order under this section shall be made within one year of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, so however, such extended period shall in no case exceed ninety days. This proviso shall be applicable to a show cause notice issued on or after the first day of July, 2021.”

“Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or agreed assessment proceedings under section 122D or the time taken through adjournment by the taxpayer not exceeding sixty days shall be excluded from the computation of the period specified in the first proviso.”

Key Features of the Amendment

One-Year Limitation for Passing Order

The Commissioner must finalize the amended assessment order within one year from the date of issuance of the show cause notice.

🔍 Example: If a show cause notice is issued on 15th August 2025, the assessment order must be passed by 14th August 2026.

Extension of Time – Maximum 90 Days

An extension of up to 90 additional days is allowed only if:

• The Commissioner records reasons in writing; and

• The extension does not exceed 90 days under any circumstances.

Note: This flexibility ensures due process but prevents indefinite delays.

Exclusions from Time Calculation

Certain delays will not count toward the 1-year or extended period, including:

• Stay orders from court

• Alternative Dispute Resolution (ADR) proceedings

• Agreed assessments under Section 122D

• Taxpayer-requested adjournments (up to 60 days)

Case Study: If a taxpayer obtains a 30-day stay order and takes two adjournments totaling 50 days, these 80 days will be excluded from the time computation.

Impact and Implications

For Taxpayers:

• Provides certainty and finality in assessment proceedings.

• Prevents indefinite reassessments due to administrative delays.

• Offers a fair window to conclude ADR or settle through agreed assessments.

For the Tax Department:

• Imposes discipline and structure in assessment finalization.

• Encourages timely disposal of reassessment cases.

• Supports transparency and reduced litigation.

Practical Advice

• Monitor show cause notice dates and maintain a timeline for legal response.

• Record adjournments or stays diligently in case of a dispute on the exclusion period.

• Engage early in ADR or agreed assessment to benefit from exclusion rules without exceeding time bars.

FAQs on Section 122(9) Amendment (Finance Act 2025)

1. What is the new time limit for passing an amended assessment order?
   One year from the date of issuance of the show cause notice.

2. Can this time limit be extended?
   Yes, but only for a maximum of 90 days with written reasons by the Commissioner.

3. Are there any exclusions from this time calculation?
   Yes — periods due to stay orders, ADR proceedings, agreed assessments (u/s 122D), or taxpayer’s adjournments (max 60 days) are excluded.

4. Does the amendment apply retrospectively?
   No. It applies only to show cause notices issued on or after July 1, 2021.

5. What if the Commissioner takes longer than 1 year + 90 days?
   The reassessment order would be time-barred and legally void.

6. What if the taxpayer requests multiple adjournments?
   Only up to 60 days of taxpayer-induced delay can be excluded.

7. What happens if there’s an ADR in progress?
   The duration of ADR proceedings will be excluded from the limitation period.

8. Is the exclusion automatic or discretionary?
   The exclusions are automatic based on factual record (e.g., court orders, ADR timelines).

9. Can this amendment help avoid unnecessary litigation?
   Yes. It provides transparency and a fixed timeline, which reduces arbitrary or prolonged proceedings.

10. What documentation should taxpayers maintain?
    Copies of all adjournment requests, court orders, and notices to prove excluded periods.