The Federal Board of Revenue (FBR) has selected certain cases for income tax and sales tax audit through computer balloting and the details of registered persons have been communicated to field formations.

Sources told Business Recorder here on Saturday that the selection of cases for income tax and sales tax audit through computerised balloting has been done at the level of the FBR and instructions have been issued to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) for initiation of audit of the selected persons.

According to the instructions issued by the FBR Taxpayer Audit Wing, the audit of certain taxpayers would be conducted for the tax year 2010, as selected through the computer balloting.

The FBR has also communicated to the field formations the names, national tax numbers (NTN) and sales tax registration numbers (STRN) of the units to be audited.

The FBR has issued instructions to the field formations on February 2, 2012, sources added.

Through computerised balloting, the LTU- and RTO-wise cases have been selected for audit for tax year 2010, sources said.

They said that the field formations have limited their selection of cases for audit for the tax year 2010 to 50 percent.

The remaining 50 percent cases have been selected directly by FBR through computerised system on the basis of approved risk criteria.

The selection of cases for audit has been done in cases where the Large Taxpayer Units and Regional Tax Offices (RTOs) had not picked corporate sector, associations of persons (AOPs), business individuals and withholding agents for tax year 2010 under the 'National Annual Audit Plan 2011-2012'.

Sources said that the Centralised Tax Audit Task Force has been given prime responsibility to monitor all stages of audit, starting from issuance of notices to completion of the audit exercise.

In this regard, the FBR will first select cases for audit on the basis of refined parameters for corporate sector and AOPs.

The data of the selected cases would be entered in the Tax Audit Management System (TAMS) for electronic transmission of information of cases to the relevant RTO.

In order to ensure transparency in audit process, the FBR has also decided that sample checking of cases would also be done to analyse the findings of the audit vis-à-vis parameters of selection of cases.

The sample checking of cases would result in keeping a close watch on the audit being conducted on the basis of parameters.

The Centralised Tax Audit Task Force will also provide opportunity to the registered units to file any complaints against the audit officials in cases of any harassment, if necessary.

In this way, Centralised Tax Audit Task Force would be able to ensure electronic monitoring of the audit exercise.

According to the audit policy guidelines (2011-2012), the audits of the taxpayers are to be made only for the tax year 2010 of income tax and corresponding tax periods of sales tax and federal excise.

If audit of preceding years is considered necessary, then after recording reasons in writing, the trail of audit may be extended with prior approval of the Chief Commissioner.

The reasons for initiation of audit and issuance of notice may be communicated to the taxpayers under the signatures of the Commissioners of Inland Revenue in the light of relevant statutes.

The FBR said that the cases for audits shall mainly be selected by the Commissioners based on the risk factors developed by FBR.

However, he may also select cases for audit on the basis of his local knowledge.

The number of such cases must not exceed 20% of the total cases selected for audit.

The FBR's audit policy guidelines further said that list of cases selected for audit for tax year 2010 and corresponding tax periods for ST & FED, may be sent to the Board for record immediately after issuance of notices.

The audits under the Annual Audit Plan (2011-20120 are to be finalised during the current financial year.

However, field formations may prioritise audit cases based on risk assessment and initiate cases simultaneously or stepwise, in view of the availability and capacity of audit officers.

The audit of withholding tax agents and sales tax refund shall continue as per existing instructions, the FBR maintained.

The audit policy guidelines further said that in case where audit of the taxpayer has already been conducted for the tax year 2009 in respect of income tax, sales tax and federal excise, the same may not generally be conducted again.

However, if in the opinion of the Commissioner, audit for the tax year 2010 and corresponding tax periods of sales tax/FED is still necessary, the Chief Commissioner may then ask for permission from the Board explaining the reasons along with copies of the pervious audit reports.

The audit policy guidelines stated that the commissioner shall assign cases for audit to the relevant audit teams to be headed by an officer of appropriate level.

Sectoral expertise of team members may also be kept in view.

Assessment in all cases selected for audit where tangible discrepancies have been found which remained unexplained or explanation offered by the taxpayers is not considered satisfactory, must be made under normal law and no agreement with the taxpayer is to be made in that respect, the FBR added.

Copyright Business Recorder, 2012

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