Karachi, January 29, 2025 – The Federal Board of Revenue (FBR) has formally explained the procedural framework for conducting electronic audits (e-audits) of taxpayers under the Sales Tax Act, 1990. This initiative aims to streamline the audit process, enhance transparency, and minimize physical interaction between taxpayers and tax authorities.
According to the FBR, the e-audit procedure is governed by Rule 44AC of the Sales Tax Rules, 2006. It applies to cases selected for audit under Section 25 or Section 72B of the Sales Tax Act, 1990. Once a case is selected, and the competent authority directs an e-audit, the following structured procedure is followed:
Step-by-Step E-Audit Process
1. Issuance of Audit Notice:
o The Commissioner Inland Revenue notifies the taxpayer under Section 25(1) of the Act, specifying the reasons for selecting their case for audit.
2. Assignment of Case to Audit Officer:
o The Commissioner Inland Revenue assigns the case to an Audit Officer, who is responsible for conducting the e-audit in accordance with the prescribed guidelines.
3. Submission of Electronic Records:
o The registered taxpayer is required to submit all statutory records maintained under Section 22 of the Act. These records must be uploaded through IRIS, the FBR’s online tax management system, or through an electronic data carrier specified by the Board.
4. No Physical Appearance Required:
o A key advantage of the e-audit system is that taxpayers are not required to appear in person or through an authorized representative.
o However, if a taxpayer requests a personal hearing, the proceedings will be conducted exclusively via video conferencing through a personal computer system or at the nearest Tax Facilitation Centre established within FBR’s regional offices.
5. Audit Officer’s Review and Conclusion:
o If, after examining all submitted documents, the Audit Officer finds no discrepancies, the case is closed in IRIS, with formal intimation to the Commissioner Inland Revenue.
6. Audit Report and Further Examination:
o If discrepancies are identified, the Audit Officer compiles a detailed audit report, documenting observations and findings. This report is submitted to the Commissioner Inland Revenue and shared with the taxpayer via IRIS.
7. Assessment and Adjudication:
o The Commissioner Inland Revenue assigns the case to an Adjudicating Officer to determine tax liability under Section 11 of the Sales Tax Act, 1990. The officer may also impose penalties and default surcharges under Sections 33 and 34 of the Act.
8. Issuance of Show Cause Notice:
o Based on the audit findings, the Adjudicating Officer issues a show cause notice through IRIS, notifying the taxpayer of any outstanding liabilities.
9. Final Order on Tax Assessment:
o After considering the taxpayer’s explanation, the Adjudicating Officer issues a final order under Section 11 of the Act.
FBR’s Commitment to Digital Transformation
The FBR has emphasized that this digital audit mechanism is designed to reduce procedural delays, enhance efficiency, and minimize compliance burdens on taxpayers. By leveraging technology, the FBR aims to foster a transparent and taxpayer-friendly environment, ultimately improving tax collection and enforcement.