The Federal Board of Revenue (FBR) has sent a list of some 231 companies to Karachi Regional Tax Office (RTO) for composite audit of sales tax and income tax, which is expected to start in about two weeks. Sources told Business Recorder on Monday that these selected units came under prescribed criteria, which included 16 parameters for selecting cases for joint audit.
The companies have been picked through cross matching of data or analysing of income tax and sales tax returns. They said the parameters mainly focused on variation between sales and profits. For instant, if a unit was constantly showing loss in its financial ledger for past three years, it had been pulled out for combined audit of sales tax and income tax besides the companies which showed decline of over 10 percent in sales on income tax side as compared to past year, they added.
Sources said that cases pertaining to cross matching of trading/profit and loss account expenses as per return/financial statements with the annual statements filed under section 165 of the Income Tax Ordinance, 2001 have been chosen for combined audit. Interestingly, the criteria had not focused on cases where there was some kind of substantial increase in sales or profits.
Most of the criteria deal with declining trends in sales or profits. When contacted, Aijaz Ali Jafferi, Collector, Audit Collectorate for Sales Tax and federal excise, said that the department has received a list of some 231 units where millions of rupees discrepancies were detected by FBR.
Following the directives issued by the FBR, the department would initially send letters to all selected units, asking them to clarify their position. He said that if these companies failed to provide justifiable reasons in this regard, the department would have right to initiate audit against them.
He said that ambiguities are still there in some criteria modalities laid down by FBR, which have yet to be resolved. Therefore, meetings are being convened where the commissioners and collectors would join heads to handle the cases for composite audit of sales tax and income tax.
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