‘Seeking record after selecting group of taxpayers for audit unlawful’

LAHORE: Seeking record after selecting a group of taxpayers for audit is unlawful, said tax practitioners. They said the practice of doing so was rampant during the time of former Chairman FBR Dr Mohammed Ashfaq Ahmed when tax authorities were involved in selecting taxpayers for audit for various tax periods and calling upon them to produce record and documents for the purpose of audit.

According to them, not only the assessing officers but the competent authorities were also found issuing follow up notices, listing the record and documents required for the audit.

They said most of the notices were issued under sales tax and federal excise act without mentioning any scrutiny of tax returns. Rather, taxpayers were simply informed that they have been selected for audit in exercise of powers under the relevant laws. However, none of the notices has ever assigned reasons for selecting the taxpayers for audit.

According to these circles, most of such notices were challenged in the courts of law on the ground that issuance of notices calling upon to produce record and selecting them for audit at the same time was against the spirit of the law, as no reason was ever assigned to the action by the department.

They further pointed out that issuing notices without giving reasons for audit was arbitrary and amounts to mala fide as well as roving and fishing inquiry into their tax affairs. They said the department was issuing notices mechanically on or about the same time, which meant they were under pressure to do so.

According to the tax experts, the tax laws provide a safeguard to them when it stipulates that the tax authorities would have to give reasons for audit selection. Especially, when this selection was not through computer ballot but carried out manually by the competent authorities.

It may be noted that the authorities of the Inland Revenue Service were found sharing with media the kind of pressure they were facing at the hands of the FBR high-ups. They were also found suggesting the ill-fated taxpayers to approach the courts of law for a remedy against the audit notices.

Copyright Business Recorder, 2024