As a Pakistani taxpayer, it is important to be aware of the income tax audit procedure. The Federal Board of Revenue has the power to select cases for audit, and this can be a daunting process for many taxpayers. In this article, we will discuss the audit procedure, including the selection criteria, time limits, and audit policy. We will also provide some tips to help you prepare for an audit if your case is selected.
Selection Criteria and Time Limits
Under section 177 of the Income Tax Ordinance, the Commissioner Inland Revenue can call upon any records, documents, or books of accounts maintained under Income Tax laws to conduct an audit. The time limit for calling records is set as the past six years from the current tax year. The Commissioner is required to provide written reasons for the audit to the taxpayer. There are no other limitations for the selection of an audit.
In addition to section 177, a new section 214c was inserted in the Income Tax Ordinance in 2010. This section empowers the Federal Board of Revenue to select any case for audit. The selection can be random, via computer balloting, or under certain parameters. The Board issues an Audit Policy each year, which gives or excludes specific cases from the selection of audit. However, the parameters for exclusion are kept confidential by the Board, and the taxpayers are not entitled to know them. If a taxpayer’s case is selected for audit, they can request the Board to disclose the reasons for selection, and the Board is obligated to provide this information to that specific taxpayer.
Tips to Prepare for an Audit
If your case is selected for an audit, here are some tips to help you prepare:
- Gather all relevant documents: Make sure to collect all relevant records, documents, and books of accounts for the past six years. These may include bank statements, invoices, receipts, and tax returns.
- Verify the accuracy of your records: Review your records to ensure that they are accurate and up-to-date. Check for any discrepancies or errors that may raise red flags during the audit.
- Consult with a tax professional: Consider consulting with a tax professional to help you prepare for the audit. They can provide valuable advice and guidance to ensure that you are fully prepared.
- Be cooperative and responsive: During the audit, it is important to be cooperative and responsive to the auditor’s requests. Provide all the information they need in a timely and efficient manner.
- Keep detailed records of the audit: Keep detailed records of the audit process, including all correspondence and documents exchanged with the auditor. This can be helpful in case of any disputes or appeals.
Conclusion
The income tax audit procedure can be a daunting process for many taxpayers in Pakistan. However, by understanding the selection criteria, time limits, and audit policy, you can be better prepared if your case is selected for an audit. Make sure to gather all relevant documents, verify the accuracy of your records, and consult with a tax professional if necessary. During the audit, be cooperative and responsive, and keep detailed records of the process. By following these tips, you can ensure a smooth and successful audit process.
