The Central Board of Revenue (CBR) has decided to carry out audit of 10 percent of the total income tax returns filed up till September 30, 2003 under the Universal Self-Assessment Scheme (USAS).
Under the parameters for selection of cases for audit, it has been agreed in principle to focus on income tax returns filed by the corporate sector. However, only 1-2 percent audits would be conducted out of one million returns filed by the non-corporate sector. Thus, potential cases would be given preference under the new parameters.
A high-level meeting of the CBR on Thursday finalised parameters for the selection of audit cases under the USAS, which would be dispatched to the regional commissioners of income tax (RCITs) for compliance.
The tax policy pertaining to parameters was hammered out during a brain storming marathon session at the CBR, which also reviewed the progress of data entry exercise at the Data Entry Centre, Islamabad.
CBR Chairman Abdullah Yusuf chaired the meeting. Member Direct Taxes Vakeel Ahmed Khan, Member Tax Policy and Reforms M.S. Lal, Member Co-ordination Saeed Ahmed Zaidi, Member Taxpayer Education and Facilitation Fakhruddin Ibrahim, Member Audit Syed Pervez Amjad, Member Information Management System (IMS) Amir Z.A. Chaudhry and officials from Pakistan Revenue Automation Limited (PRAL) were also present on the occasion.
The meeting expressed satisfaction over speedy data entry at Islamabad. The data entry of one lakh and twenty thousand returns belonging to salaried class will be completed by March 31. However, the data entry of these returns would not have much affect on the audit selection as salaried class has less significant as far as the audit is concerned.
Sources said that commissioners were empowered to select any case falling within the parameters. The audit would not necessarily mean an amendment of the assessment of income and tax liability declared by the taxpayer, as per his return of income.
Now, all the commissioners have to follow a uniform policy regarding selection of cases for audit under the USAS.
In this connection, the commissioners could not simply issue income tax notices to any taxpayers who have filed the return. Under the policy, the commissioner will initially carry out test audit of selected cases. If the return is error-free, the tax official will not proceed further. However, if there is some shortcoming/violation, the taxpayer could be asked to submit the answers to the queries raised by the concerned officer.
For this purpose, the authority could issue polite letters to the taxpayers. On submission of satisfactory response, the department will not reopen the assessment. Therefore, the taxpayer's version will be deemed to be correct. However, in cases, where a taxpayer fails to submit proper answers then case could be reopened, if necessary.
Income Tax Ordinance 2001 has in-built concept of Universal Self-Assessment doing away with the powers of the CBR to announce SAS every year.
Previously, assessing officers used to amend assessments of audit cases selected through random ballot, while now concrete evidence of income concealment is necessary for amended assessment.
The sources said that the audit and amended assessment have been clearly separated. The audit would be on the basis of risk assessment, which would not affect the tax returns filed by majority of small taxpayers. However, potential taxpayers with definite information of concealment would be taken into account.
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