Complete mismatch in e-audit results and manual data: FBR taxes database full of distortions

The results of income tax and sales tax audit data of registered persons, maintained electronically, are entirely different from information compiled manually, which reflects serious distortions in the Federal Board of Revenue (FBR) audit database. The FBR has decided to take strict action against the tax officials who would be responsible for discrepancies in audit data compiled electronically when compared with the manual files.
Sources told Business Recorder that the electronic data of different categories of the taxpayers, particularly associations of persons (AoPs), did not match with the information maintained in the manual format. If audit information about registered taxpayers has been compiled in the electronic format, the same data has distortions in the manual format, reflecting serious problems in the ongoing audit of the FBR. Taking exceptional notice of the situation, the FBR observed, "It results in data distortion and delay in timely action on the burning issues".
The FBR on Friday issued instructions to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to immediately address the issue of distortions in the audit database. According to the FBR directive, the LTU/RTOs should feed all audit related information on the Taxpayer Audit Monitoring System (TAMS) as soon as possible. However, it has been observed that the actual information widely differs from the information available on TAMS. It is against the automation of the tax procedures and time availability of requisite information. A latest report regarding audit activities of AoP cases and other related to the LTUs/RTOs has been obtained from TAMS which does not match any way with the information sent by field formations on different occasions on hard copies, the FBR said.
The FBR further stated that the Chief Commissioners of the LTUs/RTOs should look into the matter on urgent basis and ask the officer/official concerned to update information on TAMS, a reconciled hard copy of the audit activities as mentioned may also be sent to the board. The FBR instructions further said that the Chief Commissioners of LTUs/RTOs should take to task the delinquent officers/officials, who failed to timely feed information on the TAMS and also communicate their names to the Board.
The FBR has further directed the field formations that in spite of heavy correspondence on the issue of feeding information on TAMS as and when it is generated the hard copy results of audit activities widely differ from soft copy results available on TAMS. It results in data distortion and delay in timely action on the burning issues. Feeding of information on TAMS is not a difficult process. The Pakistan Revenue Automation Limited (PRAL) has already imparted training to the trainers of all field formations. Therefore, it is directed that the entire audit related activities including demand crated and recovery made thereof may be fed on TAMS by January 25, 2011. After this cut-off date any discrepancy in the hard copy and the soft data available on TAMS will be viewed seriously, FBR instructions added.
It is worth mentioning that the Board had directed the field formations in September 2010 to conduct audit of all domestic taxes as well as audit of taxpayers paying income tax keeping in view the risk areas/the local knowledge available with the department. The targets for audit coverage as percentage of the income tax returns received for the Tax Year 2009 and corresponding tax periods for sales tax and federal excise were also communicated to the field formations.
The Board had set target of 30 percent for audit of taxpayers including withholding agents registered with the LTUs whereas 5-10 percent of the total registered companies including withholding agents were required to be selected for audit. The audits of the relevant taxpayers were to be made only for the tax year 2009 for income tax and corresponding tax periods for sales tax and federal excise. However, if during audit proceedings for the said year, it is concluded that audit is required for the previous years as well, then after recording reasons for this conclusion, the trail of audit may be extended with the permission of the Chief Commissioner, to such period which is admissible under the law. The reasons for issuance of notice for audit may be duly communicated to the taxpayers as provided in the respective statutes. In addition to the risk areas identified by the commissioner based on local knowledge, the risk factors developed by the Board may also be considered while initiating audit.
In case audit of the taxpayer has already been conducted for the period under reference or for the tax year 2008 for income tax and corresponding tax periods for sales tax and federal excise, the audit of the said taxpayer may not generally be conducted again. However, if in the opinion of the Commissioner, audit for the tax year 2009 and corresponding tax periods is required, the matter be reported to the Board along with a copy of the pervious audit report and full justification for re-audit.
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 be kept in mind while assigning the cases. The discrepancies found as a result of audit of taxpayers are to be communicated, with the approval of the relevant Commissioner, to the concerned taxpayer for his feedback/comments before finalisation of the audit report.