The Commissioners of Income Tax (CITs) are empowered to select any case for audit, keeping in view CBR's case selection criteria. Sources told Business Recorder on Wednesday that section 177 of Income Tax Ordinance 2001 provides for selection of cases for audit. The Board has rightly selected cases of the large taxpayer units for this purpose.
They said that there are many areas, which need to be probed in the tax matters of registered units. For example, there are cases where heavy investments have been made along with additions in assets, while there has been no increase in the declared profit of the unit, which had prompted the department to check the tax records of such units.
Similarly, there has been a large increase in the assets of a company, but the data shows that there is no increase in sale and production. This needs verification through checking of tax records. The company can claim initial depreciation, but there should be reasonable increase in the turnover of the company.
Sources said that the huge claims of exempt income also need to be scrutinised, with reference to its nature, source and legality of claim. Quoting another example, they said that if production of manufactured yarn/fibre is much less than the actual capacity of a plant, it needs to be investigated. The capacity of production is doubled as compared to the finished product produced.
Sources said that the audit program would not be rolled back under the self-assessment regime. As far as assessment audit is concerned, the detection would automatically convert it into an assessment order, sources added.
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