The Federal Board of Revenue (FBR) has proposed rules allowing an automated system to scrutinise individual income tax returns and flag factual and legal errors before any legal or penal action is taken.
The draft rules, titled “38-B Procedure for electronic scrutiny and intimation of issues detected by the automated system,” amend the Income Tax Rules 2002. They will be finalised after three days, following feedback from stakeholders.
The system will cross-match information declared in tax returns with other data available to tax authorities. Any potential discrepancies will be flagged for clarification by taxpayers.
Taxpayers will receive an online advance intimation through the IRIS portal, identifying the factual or legal mistakes detected. The officer of Inland Revenue having jurisdiction over the taxpayer may also send the intimation.
Taxpayers will be given the opportunity to clarify the issues, correct errors or take corrective action before any proceedings begin. Detection of a discrepancy by the system will not by itself result in enforcement action.
Each intimation will specify a response period of at least seven days. If the taxpayer does not respond within that period, a reminder will be issued allowing a further period of at least seven days.
The jurisdictional officer will review the taxpayer’s response, or the lack of one, before taking action under the Income Tax Ordinance and rules.
The arrangement adds an automated scrutiny layer immediately after the processing of returns, while the tax officer retains the authority to decide whether a discrepancy warrants action under the law.
