Written by Akhter Syed in Taxation Commissioner empowered to determine taxable income and tax liability using available information and sectoral benchmark ratios The Federal Board of Revenue (FBR) has set out the rules governing best-judgement assessment for Tax Year 2027, giving tax authorities the power to determine a taxpayer’s taxable income and tax liability where required returns, statements, accounts or supporting records are not furnished. Under Section 121 of the Income Tax Ordinance, 2001, updated up to June 30, 2026, the Commissioner may make a best-judgement assessment where a person fails to comply with specified filing or documentation requirements. For Tax Year 2027, which runs from July 1, 2026 to June 30, 2027, the provision applies where a taxpayer fails to furnish an income tax return in response to notices issued under Section 114 or Section 117, or fails to submit a return required under Sections 143 or 144. The provision also covers failure to furnish a statement required under Section 116. In addition, the Commissioner may proceed with a best-judgement assessment if the taxpayer does not produce accounts, documents, records or other relevant evidence required for determining taxable income and tax payable. FBR can use available information Under Section 121, the Commissioner can determine taxable income and tax due on the basis of any available information or material and to the best of his judgement. Any assessment purported to have been made on the basis of a return or revised return filed by the taxpayer would have no legal effect where the requirements for a best-judgement assessment have been triggered. Sectoral benchmarks introduced A significant feature of Section 121 is the authority given to the Commissioner to determine taxable income using sectoral benchmark ratios prescribed by the FBR. The Ordinance defines these as standard business-sector ratios notified by the Board on the basis of comparative…