According to the PTBA, FBR has once again selected the cases for audit pertaining to income tax, sales tax and Federal Excise affairs of the tax payers vide parametric computer balloting held at the FBR (HQs) Islamabad on November 13, 2012. The mode, manner and procedure adopted for this purpose is again not in accordance with true spirit of law.
Firstly, the balloting has been made on NTN basis whereby through single balloting Income Tax, Sales Tax and Federal Excise affairs of 1,217 corporate taxpayers and 8,523 non corporate tax payers have been selected. Admittedly vide section 214C of the Income Tax Ordinance, 2001, section 72B of the Sales Tax Act, 1990 and vide section 42B of the Federal Excise Act, 2005, the FBR is empowered to select tax matters of any tax payer/registered person for audit in a specific tax year or period. The Law provides two mode of selection of cases for audit through computer ballot by FBR; one is random and the other is parametric basis of selection. However, the sequence of the words used in the statue is of immense importance. The lawmaker has used the words random or parametric and not parametric or random.
From the sequence of words it can easily be understood that priority is to be given to random balloting and only under special circumstances parametric selection is to be made, association said. The words "random" and "parametric" as used in the above said provisions have not been defined in the said statues and as such in accordance with the settled principles of law the normal dictionary meanings would be applied in respect thereof. Under various dictionaries the word "random" has been defined as chance, accidental, casual, haphazard, unsystematic etc. On the other hand the word "parametric" has been taken from the word "parameter" which as per dictionary means "coefficients". The term "coefficients" has been defined as "the percentage of variation in the return of an asset explained by the market portfolio return" and "A measure of investment risk that defines risk as the standard deviation per unit of expected return".
In case of selection to be made through computer on random basis the FBR is free to do it as and when required after submission of return within a reasonable period of time and there is no obligation or formality to be fulfilled. However, if, FBR has to make selection through computer on parametric basis, then the universally accepted principle of natural justice require certain obligations to be met by the FBR well before certain stages, it said.
For tax year-2011, the selection has been made for audit on parametric basis backed by consolidated risk factor criteria fixed by the FBR which was published in the Daily Business Recorder in September, 2012 as stated by the FBR's Member Audit. It would not be out of place to mention here that the risk factor criteria fixed for selection of cases for audit regarding period from 01.07.2010 to 30.06.2011 relevant to tax year-2011 have admittedly been prepared, issued and publicised in September, 2012 whereas the same should have been issued before 01.07.2010 for Sales Tax & FED affairs and before submission of Income Tax Returns for tax year-2011 separately.
The consolidated criteria fixed by the FBR for parametric selection of cases for audit consist of near about sixteen clauses which were not in the knowledge of the taxpayer/registered person while submission of returns under relevant law at material time. Mere publication of the criteria in a newspaper is also not sufficient, rather it should have published in the Gazette and made available to the taxpayers/registered persons, association said.
The action on the part of the FBR is not only against the fundamental rights provided under Article 10A of the Constitution but also clear cut violation of the law laid down by the Higher Courts of the country that any statutory criteria for selection of cases for audit should have been in the knowledge of the taxpayer before submission of return.
The parametric selection of cases for audit is also not justified from the angle that for parametric selection by the FBR was required to first make a complete list of those cases which falls in any of the clause of parameters fixed by the FBR and then out of all those cases the selection could have been made. As against it, the FBR itself has admitted that total 21,710 corporate cases returns were filed and out of those 1,217 cases have been selected. In non corporate cases total 426,602 returns were filed and out of which 8,523 cases have been selected.
It is important to note that salary income cases & PTR cases are not included for selection. The action of not selecting salary income & PTR cases may be justified in the eye of FBR officials but it is against the fundamental right of equality of citizen as provided vide Article 25 of the Constitution, sources added.