Draft rules propose a National Faceless Centre, algorithm-based case allocation and separate audit, assessment and quality-control functions.
ISLAMABAD: The Federal Board of Revenue (FBR) has proposed a major restructuring of Pakistan’s income-tax administration by introducing a centralised, technology-driven and officer-segregated system for specified audits and assessments.
Through SRO 1651(I)/2026 dated September 25, 2026, the FBR has proposed a new Chapter XX — Faceless Audit and Assessment in the Income Tax Rules, 2002.
The proposed framework would shift taxpayer interaction largely to electronic channels while separating audit, assessment and quality-control functions among different officers or units.
The proposal follows the FBR’s establishment of the National Faceless Centre (NFC) in Islamabad. The FBR said the new centre is intended to change how tax audits and assessments are conducted, with cases selected through a computerised, risk-based system and allocated automatically.
The draft rules are not immediately effective. They would come into force from a date subsequently notified by the FBR, with separate commencement dates possible for different classes of cases or proceedings.
National Faceless Centre to oversee selected cases
Under the proposed framework, the National Faceless Centre (NFC) would conduct proceedings under Section 122E for taxpayers, income, cases or classes of cases specifically assigned to it by the FBR.
The Centre would operate through four specialised wings:
• Audit Wing;
• Assessment Wing;
• Quality Control Wing; and
• Field Operations Wing.
The NFC would be headed by a Director General and could include Chief Commissioners, Commissioners, Additional Commissioners, Deputy Commissioners, Assistant Commissioners and other income-tax authorities and support staff designated by the FBR.
The proposed structure would create a distinction between officers responsible for investigating a case, determining the assessment and undertaking quality control.
Algorithm to allocate audit and assessment functions
A central feature of the proposed system is the use of an allocation algorithm.
Once a case is assigned to the National Faceless Centre, the algorithm would allocate audit, assessment and quality-control functions to separate officers or units.
An officer would not be permitted to perform more than one of these functions in respect of the same case and tax year.
The FBR has separately stated that under the faceless system, one officer would conduct the audit, another would make the assessment and a third would review the work for quality before an order is issued.
The identity of the relevant officer or unit would remain electronically recorded in the FBR system, while disclosure would be subject to restrictions under Section 209B.
Broad range of tax proceedings covered
The proposed Rule 236 provides for a wide range of proceedings to be conducted through the Centre.
These would include audits under Sections 177 and 214C, as well as proceedings concerning unexplained income, assets and other matters under Section 111.
The framework would also cover assessment, amendment of assessment, best-judgement assessment and provisional assessment under Part II of Chapter X, including proceedings under Sections 120, 121 and 122.
Related proceedings could also be brought within the system, including notices, information gathering, evidence collection, penalties and default surcharge arising from the relevant proceedings.
The FBR’s wider 2026 tax reforms have already provided for a legal framework for faceless audit and assessment and the establishment of the National Faceless Centre.
IRIS to become principal communication channel
For cases assigned to the NFC, taxpayers and their authorised representatives would be required to communicate electronically through their designated IRIS accounts.
Replies, applications, submissions, documents and evidence would have to be submitted through the designated account. Where prescribed by the FBR, documents would also have to be furnished electronically in specified formats through IRIS.
The FBR has said that notices, replies and hearings under the new system will take place electronically through IRIS.
Digital Identification Number mandatory for notices
Every notice, order, requisition, audit report, intimation or other communication issued by the Centre would have to be generated through the FBR’s computerised system and carry a Digital Identification Number (DIN).
Service of such communications would be governed by the procedure prescribed under Section 218 of the Income Tax Ordinance, 2001.
Audit units retain investigative powers
Despite the proposed faceless mechanism, audit units would retain substantial investigative powers.
An audit unit officer could issue further notices seeking information or explanations under Sections 176 and 177, obtain information from other persons and request physical verification through the Field Operations Wing.
The officer could also seek technical assistance, including valuation, forensic and sector-specific expertise.
Statements on oath could also be obtained through an e-hearing under Section 176.
After considering the taxpayer’s explanations and any e-hearing record, the audit unit officer would prepare an audit report setting out observations and findings, including reasons for rejecting explanations submitted by the taxpayer.
Section 111 action may emerge during audit
The proposed framework also establishes a link between audit proceedings and Section 111.
Where an issue requiring a Section 111 notice arises during an audit, the audit unit officer could issue the notice, obtain the taxpayer’s response and record findings for onward transmission to the assessment unit.
Once the audit report is issued, the audit function would be regarded as complete and the electronic case record would automatically become available to the officer or unit responsible for assessment.
Physical verification remains part of framework
The proposed faceless system would not eliminate physical intervention altogether.
Where an audit or assessment officer considers physical verification necessary, the reasons and specific matters requiring verification would have to be recorded.
Such verification could relate to the nature or size of a business, assets, investments, expenditure or other relevant matters.
The request would be submitted to the Chief Commissioner of the National Faceless Centre. If satisfied with the requirement, the Chief Commissioner could direct the Commissioner of the Field Operations Wing to conduct the verification.
The FBR could also assign the verification to an officer outside the Centre.
The verifying officer would exercise powers under Sections 175 and 176 and would be required to upload the verification report to the electronic case record.
The FBR has confirmed that physical verification or recovery, where required by law, would be carried out by a separate field team.
Separate quality-control mechanism proposed
The proposed Quality Control Wing would provide another layer of review.
It would examine audit reports, adjudication notices and assessment orders in light of the applicable law and facts of each case.
The Quality Control Wing could provide observations to the relevant unit officer for quality assurance.
Consequently, quality control would function separately from the audit and assessment processes rather than being carried out by the same officer responsible for either function.
Penalties and default surcharge included
The proposed Chapter XX would also cover penalties and default surcharge arising during relevant proceedings.
Where a penalty under Section 182 or default surcharge under Section 205 becomes leviable, the relevant notice and order would be issued through the Centre.
The electronic procedures governing notices, taxpayer responses and e-hearings would apply to these proceedings as well.
Cases may return to field jurisdiction
The proposed system would not permanently remove cases from conventional tax offices.
Where jurisdiction is concurrent, functions not assigned to the National Faceless Centre would remain with the Commissioner having jurisdiction under Section 209.
The Chief Commissioner could also recommend transferring a case back to the jurisdictional Commissioner where the proceedings could not effectively be conducted through the faceless mechanism.
The proposed grounds include the volume or nature of physical records, repeated requirements for physical verification, search, seizure or prosecution requirements, a connection with another proceeding pending before the jurisdictional Commissioner, or another reason considered appropriate by the Chief Commissioner.
The FBR could ultimately transfer a case to another authority either on its own initiative or on the recommendation of the Chief Commissioner.
Draft rules not yet effective
The proposed Chapter XX remains at the draft stage and does not immediately establish the full operational regime described in the rules.
The FBR has invited objections and suggestions from affected persons within three days of publication of the draft in the official Gazette.
The proposed rules would take effect only from a date subsequently notified by the FBR. Different commencement dates could also be prescribed for different classes of cases or proceedings.
Shift towards technology-led tax administration
At its core, the proposed Chapter XX would create a centralised architecture for faceless audit and assessment, combining algorithm-based allocation with the separation of audit, assessment and quality-control functions.
The framework would increase the role of IRIS and electronic records in tax proceedings, covering notices, submissions, evidence, communications, e-hearings, verification reports and decisions.
At the same time, the draft preserves physical verification and provides a mechanism for transferring cases back to field jurisdictions where the nature or complexity of proceedings makes a fully faceless process impractical.
The FBR has said the National Faceless Centre is intended to remove direct taxpayer-officer contact, with cases allocated through a computerised, risk-based system and separate officers handling audit, assessment and quality review.