The Federal Board of Revenue (FBR) has announced that the audit cases would be selected through random computer balloting to the extent of 12 percent of total returns of taxpayers filed for the Tax Year 2013 (Income Tax)/Tax Period July 1, 2012 to June 30, 2013 (Sales Tax/FED).
According to the Audit Policy 2014, duly approved by the Board-in-Council, issued here on Monday by the FBR, taxpayers'' audit for the Tax Year 2012 (income tax)/tax period July 1, 2011 to June 30, 2012 (sales tax /FED) was undertaken on the basis of random computer ballot and certain categories were excluded particularly keeping in view that no purpose of audit could be served through audit of fixed income groups such as salary cases, cases of exclusively share income from AOPs and the cases that fell under the final tax regime (FTR) and Presumptive Tax Regime (PTR) as the receipts in such cases were verifiable and the tax payable thereon had been fully withheld/ deducted/paid in advance.
This policy document takes into consideration all guidelines, constraints and restrictions, legal or otherwise and ensures that a transparent and judicious Audit system for tax year 2013 (Income Tax)/ tax period July 1, 2012 to June 30, 2013 (Sales Tax/ FED) is implemented. While the focus remains on facilitation of Taxpayers and Registered Persons, the policy ensures presence of an effective deterrent through Audit for curbing the menace of evasion of tax. Audit cannot be applied indiscriminately to such taxpayers whose incomes are exempt or who earn only fixed income such as Salary (only) cases. Auditing fixed income cases would negate the spirit of facilitation envisaged in the USAS. Taxpayers who availed immunity from Audit under the Prime Minister''s Incentives Scheme also cannot be subjected to Audit for the tax years including tax year 2013, for which such immunity from Audit shall be available to them as provided in S.R.O. 1040(I)/2013 read with Circular Number 15 of 2013 (Income Tax), FBR said.
The FBR said that every taxpayer/registered person cannot be audited due to time and resource constraints. Selection of cases for audit is a significant feature of any Audit Policy as segregation process needs logical grounds in the form of identification of risk areas and determination of the basis for audit through a transparent and fair process
For the purposes of audit for tax year 2013, the Federal Board of Revenue (FBR) has adopted a policy of selection of cases for audit through random ballot. Certain cases of taxpayers falling under Final Tax Regime eg fixed incomes, incomes subjected to advance withholding of tax and where such tax is deemed to be full and final discharge of tax liability, deriving only share income from an AOP and those already selected for audit by FBR through random computer Ballot for tax year 2012 (income tax)/ tax period July 1, 2011 to June 30, 2012 (Sales Tax/FED), have been excluded. In addition to the above cases of taxpayers deriving only salary income under section 12 and only income from house property u/s 15 have also been excluded. Audit Policy 2014, for selection of cases by FBR for audit of Tax year 2013 (Income Tax) / Tax Period July 1, 2012 to June 30, 2013 (Sales Tax/FED) is without prejudice to the proceedings initiated for Audit u/s 177 of Income Tax Ordinance, 2001, section 25 of the Sales Tax Act, 1990 and section 46 of the Federal Excise Act 2005 by Commissioners of Inland Revenue for Tax year 2013 (Income Tax) / Tax Period July 1, 2012 to June 30, 2013 (Sales Tax/FED), FBR said.
The FBR said that audit policy for tax year 2013 (Income Tax)/ Tax Period July 1, 2012 to June 30, 2013 (Sales Tax/ FED) and its aims and objectives as defined, has become effective after approval by the Board in Council. Identification of exclusion cases for segregation purpose shall be followed by random computer ballot in liaison with PRAL, dissemination of cases selected for audit to field offices, keeping an audit trail through the Taxpayers'' Audit Monitoring System (TAMS) and other measures related to audit, FBR added.
A Taxpayer or a Registered Person voluntarily declares his tax liability and declares his return to be correct and that he has maintained supporting books and records under the existing provisions of Sales Tax Act 1990, Income Tax Ordinance 2001 and Federal Excise Act 2005. Audit is an internationally accepted mechanism by which tax authorities can determine the veracity and correctness or otherwise of a declaration.