The Federal Board of Revenue (FBR) is in the process of drafting Audit Selection and Conduct Rules, 2016 to specify procedure for selection of cases for audit through a computer ballot on random basis.
Sources told Business Recorder here on Saturday that the FBR will propose amendments in the Income Tax Rules, 2002, the Sales Tax Rules, 2006 and Federal Excise Act, 2005. Once final, the draft rules would be published for the information of all persons likely to be affected. The notice will be given that the draft will be taken into consideration by the FBR after fifteen days of its publication in the official Gazette.
The rules shall apply to selection of cases for audit by the FBR under section 214C of the Income Tax Ordinance, 2001, section 72B of the Sales Tax Act, 1990 and section 42B of the Federal Excise Act, 2005.
The draft procedure of parametric and random selection of cases for audit would be given under the Audit Selection and Conduct Rules, 2016, if finalised.
The draft procedure of random selection: The FBR will adopt mode and manner for selection of cases for audit through a computer ballot on random basis for a tax year/ tax periods:-
Firstly, the data of all returns (e-filed and manually filed) shall be utilised as a basic data. Secondly, the board shall decide the case of persons or classes of persons which are to be excluded from audit selection and such exclusions shall be publicised each year through FBR's web portal for information, prior to the process of balloting/ selection. Thirdly, cases falling under exclusion(s) shall be identified, and such cases shall be excluded from the data to be used for balloting.
In order to ensure transparency and objectivity, balloting shall be held in the presence of representatives from Chambers of Commerce and Industries, and representatives of Tax Bar Association, sources said.
As per draft rules, immediately after computer ballot, the lists of selected case shall be generated and placed on FBR's web-portal.
The whole balloting system for audit selection shall be based on NTNs/ CNICs of the filers. Any of the particulars of taxpayers other than NTNs/ CNICs shall not be utilised for the purpose of computer ballot, sources said.
The NTN's and CNIC's of the cases selected for audit shall be communicated to concerned RTOs/ LTUs as per their respective jurisdictions.
The draft procedure of parametric selection: Following mode and manner shall be followed for selection of or audit through a computer ballot on parametric basis for a tax year/ tax period(s):-
Data of all returns (e-filed and manually filed) shall be utilised as a basic data.
The board shall decide exclusion(s) of persons or classes of persons which are to be excluded from audit selection and such exclusions shall be publicised through FBR's web portal for information, prior to the process of balloting/ selection each year, sources said. The cases falling under exclusion(s) shall be identified, and such cases shall be excluded from the data to be used for balloting.
Similarly, the data of the remaining cases shall be used for computer ballot for audit selection.
Moreover, risk parameters for persons or classes of persons to be used for balloting shall be determined by the board.
Audit selection parameters may be based upon the following: Financial ratios for the year viz a viz the history of the case; financial ratios viz a viz industrial/ sectoral/ national ratios; industrial comparisons/ benchmarks; quantum of losses/ refunds beyond certain thresholds; compliance history and other audit selection parameters, sources added.