CBR selects only 4 percent cases for audit under USAS

The Central Board of Revenue (CBR) has selected only 4 percent cases for audit under Universal Self-Assessment Scheme (USAS), giving taxpayers the facility to approach zonal commissioners of Income Tax for deletion if their cases were wrongly picked.
The CBR has also issued instructions to the commissioners of income tax to set aside cases, which does not fall under the purview of any one of the laid down audit parameters collectively prepared by the regional commissioners to maintain uniformity in selection.
Member Direct Taxes Vakeel Ahmed Khan said here on Thursday that the parameters for selection of corporate returns for audit included cases where GP rate has declined by 20 percent or more as compared to higher GP rate declared in the past two assessment years; cases of exempt units, filing returns for the first time (tax year 2003) after expiry of tax holiday/exemption; cases where bad debts or provisions have been claimed at Rs 10 million or more and cases claiming refund of Rs 20 million or more in Large Taxpayer Unit (LTU), Karachi and Rs 5 million or more in other regions for the tax year 2003.
The parameters for selection of non-corporate returns for audit encompass cases claiming refund of Rs 100,000 or more for the tax year 2003 and cases declaring income of Rs 150,000 and above for the tax year 2003 where assessment in the last four years have been completed under the USAS.
Vakeel said that since the government has fulfilled its promise of parametric selection of cases for audit and the number of cases so selected did not exceed even 4 percent of the total number of business returns, the board still, as a matter of facilitation, provides an opportunity to the taxpayers, whose cases, in their opinion, have not been selected on the basis of these parameters.
These taxpayers might contact their respective zonal commissioners to whom instructions have been issued that selected returns not falling under any of the above parameters be deleted from the list of audit cases.
He said that the CBR did not select the required percentage of cases for audit to promote voluntary compliance and instill confidence in the business community. This year a total number of 547,613 business returns were filed by the corporate and non-corporate taxpayers and only 24,020 cases were selected for audit. The cases selected constitute only 4 percent of the total number of business returns.
Moreover, the number of business returns did not include salary returns and statements filed under (Section 115 (4) of the Income Tax Ordinance 2001) under presumptive tax regime.
The Member Direct Taxes explained that one of the important aspects of the Universal Self-Assessment Implementation Plan (USAIP) for the tax year 2003 was the selection of cases for audit on certain parameters. Recently, this obligation has been fulfilled by selecting corporate and non-corporate cases for audit.
However, certain quarters of business community created an impression that audit selection was done without considering any parameters and much in access of 20 percent of the total number of returns as promised by the finance minister in his budget speech last year.
Vakeel said that the factual status was that the impression created by these quarters was not correct. As per the Income Tax Ordinance 2001, the powers to evolve parameters for selection of cases for audit and thereafter making such selection on those parameters vests with the commissioners of income tax (CITs).
There was an apprehension at the board's level that the tax year 2003 being first year of USAS, the commissioners might not be clear in developing parameters and adopting the modes of selection for audit.
Moreover, it would have created a heterogeneous situation by each CIT adopting his own parameters. To remove these apprehensions, the CBR arranged a conference of commissioners of income tax (CITs) in Islamabad in March to analyse and discuss the matter and evolve uniformity on selection process.
It was in that conference that the commissioners developed consensus on the four parameters for selection of corporate and two for non-corporate cases for audit.