New audit policy: notices sans specific bar codes to be considered invalid: FBR

The Federal Board of Revenue (FBR) has conveyed to the field formations that the audit notices, letters and order memos issued to taxpayers without specific bar codes would be considered as invalid. The new audit policy issued by the FBR here on Saturday revealed that each and every case will be entered into Tax Audit Management System (TAMS) or Integrated Risk Information System (IRIS) whichever is applicable.
All notices, letters and orders issued to the taxpayers should contain specific bar codes, it said, adding that any notice issued or communication made otherwise will not be construed as valid.
As per policy, the income tax audits pertaining to tax year 2014 and subsequent tax years shall be processed through "IRIS", whereas cases of sales tax and federal excise shall continue to be processed and routed through TAMS until launching of other alternate IT system. The Commissioner shall assign the audit cases to the relevant team to be headed by an officer of appropriate level. Competence level and Sector expertise of team members may also be kept in view.
Income Tax Manual Part-V and the Sales Tax Audit Hand Book may also be considered while conducting audit. After consultation with the Commissioner, the head of the audit team must communicate to the taxpayer the discrepancies found in the audit for his explanation before finalizing the audit. The Commissioners may assign audit cases to the audit team on rational and equitable basis depending upon nature and complexity of the cases. The procedures and guidelines mentioned in the check-lists and Board's earlier letters should be followed strictly, it said. The FBR said that the audits are to be conducted fairly and with integrity within the given legal framework without creating unnecessary harassment to the taxpayer.
It said that the selection of cases for audit shall be through random computer ballots conducted by the Board under section 214C of the Income Tax Ordinance, 2001, 72B of the Sales Tax Act, 1990, and 42B of the Federal Excise Act, 2005. The balloting shall be carried out on data separately for each tax type after exclusion of the cases mentioned in Part 6 of this policy. The selection of persons or class(s) of persons for audit through computer ballots is normally done once a year by the Board. However, more than one ballot may be held by the Board as and when required.
Apart from persons or class(s) of persons selected for audit by the Board for Tax Year, 2014 and corresponding Tax Periods, ie, 01-07-2013 to 30-06-2014, the Commissioners Inland Revenue may also select cases for audit for any tax year or tax periods under the relevant statutory provisions.
For a particular Tax Year or and corresponding Tax Periods, the Commissioner Inland Revenue shall select a minimum of 5 percent and up to a maximum of 10% of the cases falling under his jurisdiction, it said. The Commissioners Inland Revenue shall select a case on the basis of desk audits or risk profiling or both. If the Commissioner Inland Revenue selects a case for audit, he shall communicate the reasons for initiation of audit proceedings to the taxpayer through a letter under his signature.
The FBR said that the sector studies may be carried out on a continuous basis to determine risk factors and benchmarks. Based on sector risk analysis and benchmarking studies, a class or classes of persons shall also be selected for audit on random basis through computer ballots by the Board.
The FBR said that the Board may prescribe a time frame for disposal of cases through administrative instructions from time to time. It is, however, expected that the cases selected during a financial year would be disposed of during the same year. In order to complete the audit successfully the role of Chief Commissioner, Commissioners, and Additional Commissioners is of paramount importance. They are not only expected to ensure quick disposal of audits but also maintain a reasonable and respectable level of audit quality by providing suitable guidance and mentoring to the audit teams, the FBR added.