Draft rules would allow taxpayers to receive electronic notices identifying factual, legal or other discrepancies before formal action is initiated.
The Federal Board of Revenue (FBR) has proposed introducing an automated electronic scrutiny system for income tax returns, allowing taxpayers to address discrepancies identified by the system before any legal or penal action is initiated.
The proposal has been issued through SRO 1690(I)/2026, which seeks to amend the Income Tax Rules, 2002 by inserting a new Rule 38B on the electronic scrutiny and intimation of issues detected by an automated system.
The draft has been published for public feedback, with objections or suggestions required to be submitted within three days of its publication in the official Gazette.
Automated System to Identify Tax Return Issues
Under the proposed Rule 38B, an automated system, including CRM, would process income tax returns furnished by taxpayers under Section 120(2A) of the Income Tax Ordinance, 2001.
The system may issue an online advice or advance intimation through IRIS, identifying factual or legal mistakes and discrepancies in a taxpayer’s return.
The proposed mechanism is intended to give taxpayers an opportunity to clarify an issue, correct errors or take other corrective action before formal legal or penal proceedings are considered.
The same system-generated advance intimation could also be issued by the Inland Revenue officer having jurisdiction over the taxpayer.
Taxpayers to Get at Least Seven Days
The proposed rules would require the electronic intimation to specify a response period of at least seven days.
During this period, taxpayers would be able to provide clarification, rectify identified errors or take other corrective measures to address the discrepancy or discrepancies highlighted by the system.
If no response is received within the stipulated period, the taxpayer would be sent a reminder, which would also provide a period of at least seven days.
The proposal therefore creates an electronic process through which taxpayers would have an opportunity to respond before the matter moves towards further action.
Responses to Be Recorded on FBR Dashboard
The draft rules also propose maintaining an electronic record of discrepancies detected, notices issued to taxpayers and responses received.
This information would be communicated to the relevant Inland Revenue officer and recorded on a dashboard designed under the automated system.
The proposed system would also use a Change Request Form (CRF) for the implementation of automated scrutiny, data analysis and cross-matching of available information.
The officer having jurisdiction over the taxpayer would then analyse the taxpayer’s response, or the absence of a response, and take appropriate action where required under the Income Tax Ordinance, 2001 and related rules.
The proposal remains a draft at this stage, with the FBR inviting objections and suggestions within the specified three-day period.