Completion ST, income tax composite audit: FBR displeased with CA firms' failure

The Federal Board of Revenue (FBR) has expressed displeasure over the failure of chartered accountant firms in completing composite audit of sales tax and income tax registered persons by August 31, 2010, and directed the CA firms to take strict penal action against companies which have not submitted tax record for audit.
In this connection, the FBR on Monday issued instructions to the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to recommend penal action against the non-compliant companies based on observations of the chartered accountant firms. The FBR issued instructions in view of decisions taken by the FBR Member Audit Muhammad Anees during a series of meetings with the Chief Commissioners of LTUs/RTOs and chartered accountant firms.
According to FBR instructions, the board has expressed serious concern over the prolonged delay by the chartered accountant firms. Despite payment of handsome amount to the CA firms, they were unable to complete the audit of the assigned units by the deadline of August 31, 2010.
The FBR directive said that a meeting of FBR and Institute of Chartered Accountant of Pakistan (ICAP) was held in RTO, Lahore, to review the progress of the tax audits outsourced to chartered accountants. The meeting was presided over by Muhammad Anees, Member (Taxpayers Audit) FBR. FBR Member (Taxpayers Audit) drew attention of the ICAP towards the fact that since outsourcing of audit of corporate sector, four meetings had been held in which it was unanimously resolved to conclude the audit process for the tax year 2008 by August 31, 2010.
However, tax officials regretted that no concrete efforts had been made to complete the audit by the due date. Sources said that FBR Member (Taxpayers Audit) expressed dissatisfaction over the slow pace of audit. In a series of meetings held on the subject, it was agreed with consensus that the audit process would be completed by August 31, 2010. He added that the government had allocated a handsome amount for payment to the chartered accountant firms and the Board had always played a proactive role for successful culmination of audit exercise.
He, however, expressed displeasure that despite repeated commitments by the field formations, they had failed to accelerate the pace of audit. He directed all Chief Commissioners to look into the affairs personally and ensure that the audit process for the tax year 2008 is completed without any further loss of time.
After detailed deliberations, the FBR took a number of decisions to expedite the audit process by the chartered accountant firms. First, the Commissioners Audit/Chief Commissioners will personally monitor the audit by holding daily meetings with the chartered accountant firms to hammer out any operational issues and to speed up the pace of audit.
Second, the chartered accountant firms will recommend penal action to RTO/LTU in all those cases where the taxpayers had failed to provide the requisite record. The ICAP will forward to the Board a consolidated list of cases where penal action had been recommended but the concerned RTO/LTU had failed to initiate action.
Third, the ICAP will also send letters to all CA firms to impress upon them the need for early completion of audits. Fourth, the chartered accountant firms will discuss audit observations and findings with the Chief Commissioner/ Commissioner Audit before submission of audit report. The report will be finalised only after a meaningful discussion between the tax functionaries and the auditors. Commissioner (Audit) will inform the firm about the infirmities and weaknesses in the report, if any.
Fifth, all writ petitions filed at the principal seat of Lahore High Court Lahore regarding selection of audit will be handled by RTO-I, Lahore irrespective of the jurisdiction of the taxpayer. Chief Commissioner, RTO, Lahore will engage lawyers and personally liaise with them to take concrete steps for early hearing/decision of all pending cases.
Sixth, it will be ensured that the draft audit reports in respect of all pending audits are submitted. All RTOs/LTUs will inform the Board in the first week of September regarding the number of draft audit reports received by them and the case-wise reasons for pendency, if any, sources said.
The FBR has asked the Chief Commissioners to brief about the latest position of cases in their RTO/LTO. Accordingly the Chief Commissioners presented the summary of audit in respect of their RTO/LTO. In case of RTO, Lahore, the number of total cases selected for audit was 109; cases stayed by High Court were 48; balance number of cases were 60; number of audit reports received were four; number of cases in which payment made were 51 and reports expected by August 31, 2010 were four.
In case of LTU Lahore, number of cases selected for audit were nine; cases stayed by High Court were 5; balance number of cases total 4; number of audit reports received were zero; number of cases in which payment were made nine; reports expected by August 31, 2010 were zero.
In case of RTO, Gujranwala, number of cases selected for audit were 5; cases stayed by High Court total 3; balance number of cases were zero; number of audit reports received were 2; number of cases in which payment were made total at 2 and reports were expected by August 31, 2010 was zero.
In case of RTO, Sialkot, number of cases selected for audit were 14; cases stayed by High Court total 3; balance number of cases total 11; number of audit reports received were zero; number of cases in which payment made were zero and reports expected by August 31, 2010 were zero, FBR instructions added.