Audit cases - to select IT returns not filed within due date

The Federal Board of Revenue (FBR) will select those income tax returns for audit not filed within the specified time period/due date. The FBR has explained the automatic selection for audit [Relevant Sections: New Section 214D] through an income tax circular here on Saturday. Through Finance Act 2015, a new section 214D has been introduced which provides for automatic selection of cases for audit that do not fulfill certain conditions.
Under the provisions of Section 214D, any person falling under the following categories shall be automatically selected for audit for a taxpayer: Firstly, return is not filed within the time specified in section 118. This time shall include any extension in time by the Board or, up to thirty days, by the Commissioner. Secondly, the tax payable for the tax year is not paid by the due date for furnishing the return of income for that year.
The audit proceedings shall be conducted according to the procedure given in Section 177. The audit proceedings shall be initiated after the expiry of ninety days from the date as mentioned in sub-section. During this period of ninety days, a person can avoid automatic selection for audit by filing return and fulfilling the following requirements:
Firstly, if the taxpayer has declared taxable income in the immediately preceding tax year, then the tax paid on the basis of taxable income for the tax year is twenty five percent higher than the tax paid during immediately preceding tax year. Secondly, if the person has not filed return of income tax, then tax at the rate of two percent of the turnover or the tax payable under Part I of the First Schedule, whichever is higher, is to be paid along with the return. Thirdly, if the taxpayer has filed return and has declared income below taxable limit in the immediately preceding tax year, then turnover declared for the tax year is not less than the turnover declared for the immediate preceding tax year and tax at the rate of two percent of the turnover or the tax payable under Part I of the First Schedule, whichever is higher, has been paid along with the return.
However, fulfilling of these requirements shall only exempt the person from automatic selection of audit under section 214D. The case can still be selected for audit under section 214C. Similarly, the case shall still be liable to penalty under section 182 or default surcharge under section 205 for late filing of return or late payment of tax. A person who is registered as retailer under rule (4) of Sales Tax Special Procedure Rules, 2007 and remains on the sales tax active taxpayers' list throughout the tax year shall also be exempt from automatic selection under section 214D, from the date notified by the Board, the FBR added.