New framework enables digital audits, assessments and appeals while keeping tax officers’ identities confidential
The Federal Board of Revenue (FBR) has issued an explanation of the Finance Act 2026, outlining the comprehensive faceless regime introduced for tax audits, assessments, appeals and jurisdiction under the Income Tax Ordinance.
The reforms expand the definition of “assessment” under section 2(5) to include faceless assessment and introduce a new definition of the “National Faceless Centre” under section 2(35)(1A).
Under the amended section 227D, the FBR has been empowered to establish a National Faceless Centre for conducting proceedings under the Ordinance through digital means. The centre will operate under a Director General and include Chief Commissioners, Commissioners, other income tax authorities and support staff, organised into wings and units as prescribed by the Board.
The FBR explained that audit, assessment and quality control functions for a specific case and tax year must be performed by separate officers. All communication between units, taxpayers and their authorised representatives will take place electronically.
A new section 122E allows specified audits under sections 177 and 214C, orders under section 111, assessments under Part II of Chapter X and rectification proceedings under section 221 to be conducted through the faceless system.
Where taxpayers are required to be heard or provide statements under oath, proceedings will be conducted through e-hearings under section 227E. The identity of the relevant officer, including facial and voice identity, will remain confidential.
The Finance Act 2026 has also introduced section 129A, allowing appeals filed under section 127 to be processed through the National Faceless Centre, with relevant provisions of sections 127, 128 and 129 continuing to apply.
Meanwhile, section 209B provides for faceless jurisdiction for Inland Revenue authorities appointed to the National Faceless Centre. Such jurisdiction may be exclusive or concurrent, while the identity of the authority will remain confidential.
The FBR further clarified that notices, orders, demands or assessments issued by such authorities cannot be challenged merely on the basis of lack of jurisdiction under section 209 or because the authority’s identity has been kept confidential.