FBR withdraws tax audit notices sent more than once in four years

KARACHI: Federal Board of Revenue (FBR) has withdrawn tax audit notices to taxpayers, who were selected for audit once in last four years.

Hyder Ali Dharejo, Chief Commissioner, Regional Tax Office – I, Karachi, informed this at a recent meeting with members of All Pakistan Textile Mills Association (APTMA).

Dharejo informed that the tax notices are issued only once in four years and the notices issued to individuals or companies more than one time in four years are withdrawn.

Recently, Karachi Tax Bar Association (KTBA) protested strongly on the issuance of audit notices.

The tax bar informed Afaque Ahmed Qureshi, Member of Inland Revenue (IR) – Policy, in a letter that certain Commissioners in Karachi jurisdiction were engaging in an unlawful practice by sending audit notices, despite the fact that the law states that an income tax audit cannot be conducted if one has already been conducted within the previous four years.

The provisions are contained under clause 105A, Part-IV, Second Schedule of the Income Tax Ordinance 2001, wherein the taxpayer has been made eligible to claim exemption from Income Tax Audit both under Sections 177 and 214C of the Ordinance.

The tax bar further stated that Clause 105A, Part-IV, Second Schedule to the Ordinance was inserted through the latest Finance Act, 2022 and provides for restriction on frequent audit proceedings undertaken by the department.

The clause 105A of the Ordinance is read as: “The provisions of section 177 and 214C shall not apply to a person whose income tax affairs have been audited in any of the preceding four tax years:

“Provided that the Commissioner may select a person under section 177 for audit with approval of the Board.” A bare reading of the above plainly suggests that Income Tax Audit under the Ordinance shall be conducted only for once in five (5) years. This has been provided for in very clear words completely unconditionally without and any exception.