ISLAMABAD: The Federal Board of Revenue (FBR) follows a hectic and risk free mechanism in the selection of cases of withholding taxes for audit. The selection of cases for audit is done by both the concerned commissioner and Federal Board of Revenue (FBR) on the basis of based on risk parameters approved by the FBR.
The monthly withholding statements filed and tax deposited is reconciled in terms of applicable withholding income tax rates and the total revenue reflected in the audited accounts of the taxpayer, and if a discrepancy is found, the action is taken under relevant provision of the Income Tax Ordinance, 2001.
“Audit commences after the case is selected for audit under section 177/214C of the Income Tax Ordinance, 2001, section 7213/25 of the Sales Tax Act and section 46/42B of the FED Act, 2005” a well-placed official source at FBR told Customs Today while explaining the mechanism for selection of cases for audit.
“After selection of case for audit, the “Audit Manual” prescribes a pre-audit conference with the taxpayer in which scope of audit and time line for completion of audit is decided. Consequently Information Document Request (IDR) is issued for seeking relevant records and information from the tax payer” the source added.
The source told that after obtaining books of accounts and documents provided by the taxpayer, an audit report was prepared, and if required, a post audit conference is again conducted with the taxpayer to apprise the taxpayer of the legal and factual discrepancies. Thereafter, a statutory notice to amend the deemed assessment order (on the basis of return submitted by the taxpayer) is issued to provide a lawful opportunity of being heard to the taxpayer.
After affording such an opportunity to the taxpayer, the source said that an amended assessment order was passed containing discussion and findings on the outcome of audit including enhancement of income etc is served upon taxpayer along with tax demand notice.
“Moreover, a number of other aspects of tax affairs of a taxpayer including examination of genuineness of liabilities declared in the balance sheet, verification of the input tax claimed u/s 8 of STA, 1990 and verification of all taxable supplies whether the same have been charged to sales tax or not; transactions with associates are measured at Arm’s Length standard and others are also taken into consideration while auditing a case including” the source explained.
