FBR Notice on Bank Statement? The Supreme Court Ruling Every Taxpayer Should Know

Introduction: The Fear of a Tax Notice

Receiving a tax notice from the Federal Board of Revenue (FBR) can be stressful for anyone — especially when it questions the transactions in your bank account. A common concern is whether tax authorities can reopen a settled tax assessment merely based on bank statement entries. A recent landmark decision by the Supreme Court of Pakistan has provided much-needed clarity on this issue, marking a major milestone for taxpayers’ rights.

Your Bank Statement Alone Is Not “Definite Information”

The Supreme Court made it clear that the tax department cannot reopen a finalized tax assessment solely on the basis of a taxpayer’s bank statement. The Court held that every credit entry or deposit in a bank account cannot automatically be treated as taxable income.

All transactions reflected in a bank statement do not necessarily represent the taxpayer’s income. Unless it is established that such entries disclose income information that is “definite,” the document cannot be considered as containing “definite information” under tax law.

Strict Legal Standard for Reopening Assessments

Under Section 122 of the Income Tax Ordinance, 2001, a very strict legal standard known as “Definite Information” is required before any assessment can be amended. In the case of M/s Khudadad Heights, the Supreme Court explained this concept by comparing it with an earlier case, Khan CNG Filling Station.

• In Khan CNG’s case: The information (volume of natural gas consumed) was considered “definite” because it was mathematically ascertainable — a clear, fixed quantity that required no further investigation.
• In the current case: The bank statement was not considered “definite” since determining whether the deposits represented income or something else required further inquiry and interpretation.

This distinction shows that the law does not allow tax authorities to act merely on assumptions or vague indicators.

Context Matters in Every Case

The Court emphasized that what qualifies as “definite information” depends on the context of each case. There is no universal rule — it must be determined on a case-to-case basis.

The source of the information is also crucial in deciding whether it is truly “definite.” This reinforces the idea that the legal system treats each matter individually, based on its unique facts and evidence.

Conclusion: A Shield for Taxpayers

This Supreme Court decision serves as a vital safeguard for taxpayers. It prevents tax authorities from launching “fishing expeditions” based on ambiguous data such as bank statements and ensures that citizens are not unnecessarily harassed.

The ruling clearly protects taxpayers from arbitrary reassessments, but it also raises an important question: how can the FBR identify undeclared income effectively while respecting this high legal standard?