FBR gives tax officials new powers to order taxpayer re-audits under Section 177, subject to a hearing and prior approval from the Chief Commissioner.
ISLAMABAD: The Federal Board of Revenue (FBR) has clarified that tax officials may order the re-audit of taxpayers’ accounts during Tax Year 2027 under amendments introduced through the Finance Act, 2026.
The FBR explained the new provision in Income Tax Circular No. 2 of 2026-27, which sets out major amendments made to the Income Tax Ordinance, 2001.
According to the FBR, a new sub-section (68) has been inserted into Section 177 of the Income Tax Ordinance, empowering the Commissioner to order a re-audit in specified circumstances.
FBR sets conditions for re-audit
Under the amended provision, the Commissioner may consider several factors when deciding whether a re-audit is required.
These include the nature and complexity of the taxpayer’s accounts, the volume of accounts, doubts regarding their correctness, the multiplicity of transactions and the specialised nature of the taxpayer’s business.
However, the Commissioner cannot order a re-audit without following specified procedural requirements.
The taxpayer must first be provided with a reasonable opportunity of being heard. The Commissioner must also obtain prior approval from the Chief Commissioner before directing a re-audit.
Re-audit may involve specialist professionals
Once the required approval has been obtained, the Commissioner may direct that the taxpayer’s accounts be examined again by an accountant.
The amended provision also allows inventory to be re-valued by a cost accountant, while actuarial values contained in the accounts may be determined by an actuary.
The professionals appointed for these purposes must be selected from a panel nominated by the FBR.
This provision gives tax authorities access to specialised expertise when dealing with complex accounts, inventory valuations or actuarial calculations.
Taxpayers can object to nominated professionals
The amendment also introduces a mechanism through which a registered person may object to the nomination of a particular accountant or cost accountant.
This provides taxpayers with an avenue to raise concerns about the professional selected for the re-audit or valuation process.
The mechanism forms part of the procedural safeguards accompanying the FBR’s expanded re-audit powers.
New re-audit powers strengthen tax scrutiny
The new provision is intended to provide tax authorities with additional tools to examine complex or questionable accounts while maintaining procedural safeguards for taxpayers.
The requirement to provide a reasonable opportunity of being heard, together with the need for prior approval from the Chief Commissioner, creates an additional layer of oversight before a re-audit can be ordered.
The changes form part of the wider reforms introduced through the Finance Act, 2026 to strengthen tax administration, improve scrutiny of taxpayer declarations and enhance the FBR’s audit and assessment framework for Tax Year 2027.