ISLAMABAD: The Federal Board of Revenue (FBR) is planning to conduct computerised balloting for selecting the cases of income tax, sales tax, and federal excise duty (FED) for audit for tax year 2019.
Interestingly, the tax returns are now being filed for the tax year 2022 whereas the FBR is still in the process of finalizing audit policy for tax year 2019, a tax expert said.
Sources told Business Recorder that the FBR’s Board-in-Council would be held under the chairmanship of FBR Chairman Asim Ahmad on coming Tuesday to approve the new audit policy for the tax year 2019. The 4th Board-in-Council meeting (2022-23) would be attended by the FBR Members.
According to the sources, the draft audit policy for the tax year 2019 would be presented by the FBR Member Audit before the Board-in-Council meeting on November 22. The fate of third-party audit may also be decided in the coming meeting.
Under the Finance Act 2022, the provisions of sections 177 and 214C shall not apply to a person whose income tax affairs have been audited in any of the preceding four tax years: Provided that the Commissioner may select a person under section 177 of the Income Tax Ordinance 2001 for audit with approval of the Board, it added.
In April, 2019, the FBR had selected 14,154 cases of income tax, sales tax, and FED for audit through an electronic balloting for tax year 2018. Under the risk-based selection of cases for audit, the FBR had selected 477,374 income tax payers for balloting out of which 10,982 or 2.3pc cases were selected whereas out of 124,004 or 2.5pc sales tax cases, 3,116 cases were selected through balloting whereas out of 725 cases of FED, the FBR selected 56 cases for audit.
The FBR selected only 2.3pc of total cases available for audit for income tax, sales tax, and FED through ballot for tax year 2017.
When contacted, a tax expert opined that it seems that the FBR has adopted the traditional approach for the selection of cases for audit. The FBR has yet to decide about the allocation of income tax cases for third-party audit of companies, the Association of Persons (AOPs), and individuals for the tax year 2019.
The idea of the third-party audit was floated by former finance minister Shaukat Tarin. During the tenure of Tarin, Board-in-Council of the FBR had proposed selection of total 22,458 income tax audit cases for third-party audit. At that time, it was also been decided that the process of the third-party auditors would be carried out under the Income Tax Ordinance, 2001 as per the PPRA Rules. Therefore, it was agreed that the procurement of services of third-party auditors would be done as per Public Procurement Rules, 2004.
Under the Income Tax Ordinance 2001, the board may appoint a firm of chartered accountants as defined under the Chartered Accountants Ordinance, 1961 or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 to conduct an audit of the income tax affairs of any person or classes of persons, and the scope of such audit shall be as determined by the board or the commissioner on a case to case basis.
Copyright Business Recorder, 2022