Changes made in audit selection regime: Inland Revenue commissioners to examine taxpayer's records

The Federal Board of Revenue has empowered the commissioners of Inland Revenue to examine taxpayer's records, documents and books of accounts (including electronic records/data) pertaining to a tax year within six years period for income tax audit purposes.
Sources told Business Recorder on Tuesday the FBR has issued an explanatory circular to clarify the changes made in audit selection regime under section 177 of the Income Tax Ordinance 2001 through Finance Amendment Ordinance 2009. The revised section 177 of the Ordinance has been explained in detail through the circular 2 of 2010.
According to the circular, in line with the audit selection regime under the sales tax law, existing criteria based audit selection regime has been substituted with a simplified, streamlined and case specific audit selection procedure whereby a taxpayer is empowered to participate in the process of selection of his case for audit by producing records, documents and books of accounts/electronic records/data, at a stage even prior to the selection of the case for audit.
"The commissioner can call for and examine taxpayer's records, documents and books of accounts (including electronic records/ data) pertaining to a tax year within the limit of six years which start from the end of six years from the end of the tax year to which the they relate," it stated.
The board has substituted sub-section (1) of section 177 which empowers the commissioner to requisition taxpayer's records or documents including books of accounts (manual or electronic) required to be maintained under Income Tax Ordinance, 2001, as well as by any other law, for conducting audit of the income tax affairs of a person.
The FBR has substituted sub-section (2) of section 177, which requires the Commissioner to conduct audit after calling for any other information and documents pertaining to the taxpayer or to any other person.
The newly introduced sub-section (10) allows the commissioner or the firm of chartered accountants or management accountants (as the case may be), in case where accounts are not produced by the taxpayer on requisition, to finalise the case by making best judgement assessment, income tax circular added.