The Federal Board of Revenue (FBR) in Pakistan has been granted extensive audit powers under Section 177 of the Income Tax Ordinance, 2001, updated for tax year 2026. Taxpayers must understand these powers to ensure compliance and avoid disputes.
🔍 What Are the Audit Powers of the FBR Commissioner?
Under Section 177, the FBR Commissioner can:
• Request any records, documents, or books of accounts maintained by the taxpayer.
• Access electronic data and require the use of machines and software for verification.
• Obtain hard copies or extracts of data for audit and investigation purposes.
• Call for records up to six years from the end of the relevant tax year, unless proceedings are ongoing.
🧾 Conducting the Audit
Once records are obtained:
• The Commissioner may examine accounts, expenditure, assets, and liabilities.
• Audit proceedings can be conducted electronically via video links.
• If records are incomplete, missing, or inadequate, the Commissioner may use sectoral benchmark ratios to determine taxable income.
(Sectoral benchmark ratios include financial ratios, production ratios, gross profit ratios, etc.)
📄 Audit Report and Assessment
After the audit:
• The taxpayer is given an opportunity to explain all issues.
• An audit report is issued containing observations and findings.
• The Commissioner may amend the assessment based on audit findings.
• A taxpayer audited in one year can be audited again in subsequent years if reasonable grounds exist.
👥 Special Audit Panels
The FBR may appoint special audit panels comprising:
• Inland Revenue officers
• Chartered Accountants or Cost & Management Accountants
• Foreign experts or specialists, if confidentiality agreements are in place
• International tax experts
Key points:
• Panels may conduct audits, including forensic audits.
• Missing members do not invalidate the audit.
• Failure to provide records may lead to best judgment assessment under Section 121.
💡 Why This Matters for Taxpayers
• Ensures accurate reporting and compliance.
• Helps the FBR identify discrepancies, under-reported income, and tax evasion.
• Encourages taxpayers to maintain complete and accurate records under Section 174.
✅ Takeaways
• FBR has broad audit powers in 2026.
• Compliance with record-keeping is essential.
• Non-cooperation may result in best judgment assessments.
• Special audit panels can include domestic and international experts.
• Electronic audits and real-time data access are now common practice.
Understanding these powers helps taxpayers stay compliant, avoid penalties, and respond appropriately to FBR audits in 2026.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Taxpayers should consult the Federal Board of Revenue (FBR) or a qualified tax professional for guidance on individual circumstances.