The Federal Board of Revenue has empowered sales tax officials to conduct audit of tax records of registered persons in cases where Auditor-General of Pakistan had completed audit within the same year.
The FBR has amended section 25 of the Sales Tax Act, 1990 through Finance Bill (2008-09) to give legal backing to the audit of Directorate General of Revenue Receipt Audit (DRRA), a subsidiary of the AG office.
Under revised sub-section (2) of section 25 of the Sales Tax Act, the sales tax officer, on the basis of the record, may, once in a year, conduct audit. Provided further that nothing in this sub-section shall bar the sales tax officer from conducting audit of the records of the registered person if the same were earlier audited by the office of the Auditor-General of Pakistan.
When contacted, sources opined that the board has started a new controversy by amending section 25 due to permission of several audits in a year. The amendment has been made in this section without consulting the relevant FBR Wing. Without realising the serious implications of the amendment, the board has allowed sales tax officials to conduct audit even in cases where the DRRA has already completed audit.
It is yet not clear that why the board had introduced this amendment in circumstances where the FBR has challenged the authority of DRRA for accessing taxpayer's record. The FBR does not accept the DRRA powers to directly access taxpayers' record. This amendment might also give legal backing to the DRRA sketchy audit notices issued through the collectorates of sales tax.
There were cases where taxpayers were reluctant to provide record to the FBR auditors in cases where DRRA has completed the audit. On the other hand, it seemed that now the taxpayers would face two audits in one year. The FBR auditors could conduct audit in cases where DRRA has done the job. It would also be resulted in double audit of the taxpayers in one year, reflecting towards harassment to the taxpayers.