The Federal Board of Revenue (FBR) has introduced an automated procedure to scrutinise income tax returns and notify taxpayers about factual or legal errors and discrepancies before initiating legal or penalty proceedings. The mechanism, established through SRO 2098(I)/2026 issued on November 10, 2026, inserts a new Rule 38B into the Income Tax Rules, 2002, providing a formal process for electronic scrutiny and communication with taxpayers. Under the new arrangement, an automated system, including Computerised Risk Management (CRM), will process income tax returns and identify potential inconsistencies requiring clarification or correction. Taxpayers will receive advance notifications through the FBR’s IRIS portal, informing them about issues detected in their submitted returns and providing an opportunity to explain the discrepancies, rectify errors or take other corrective measures. The introduction of the procedure adds an automated review mechanism to the tax administration process, allowing potential problems to be brought to taxpayers’ attention before enforcement action is considered. It also formalises the use of electronic communication between the tax authority and taxpayers, with the aim of improving the handling of return-related discrepancies and creating a documented process for subsequent review.
Under Rule 38B, the automated system will examine returns submitted under Section 120(2A) of the Income Tax Ordinance, 2001. Its scrutiny process can include analysing and cross-matching information available to the tax authorities to identify factual mistakes, legal issues or inconsistencies in the information declared by taxpayers. Once an issue is identified, the system may issue an online advice or advance intimation through IRIS, specifying the discrepancy and allowing the taxpayer to respond. The relevant Officer of Inland Revenue having jurisdiction over the taxpayer may also issue the same system-generated advance intimation. This means that the electronic notification process will operate alongside the existing role of tax officials, who remain responsible for reviewing cases and determining whether further action is required. The new procedure does not mean that every discrepancy automatically results in a penalty or legal proceeding. Instead, it establishes an opportunity for taxpayers to clarify information or make corrections before the matter proceeds to possible enforcement under the applicable tax laws. The system is intended to identify issues through automated analysis while retaining human oversight in the assessment of taxpayer responses and subsequent decisions.
The new rules prescribe a minimum response period of seven days for taxpayers who receive an electronic intimation. During this period, individuals and other relevant taxpayers can provide explanations, correct identified errors or take other appropriate steps to address the discrepancies highlighted by the system. If a taxpayer does not respond within the specified period, a reminder will be issued, providing an additional response period of at least seven days. The procedure therefore establishes a minimum opportunity for taxpayers to address the identified issues at both the initial notification and reminder stages. Information about detected discrepancies, notices issued and responses received will be communicated to the Officer of Inland Revenue responsible for the relevant taxpayer. The system will also maintain records of all intimations, replies and actions taken through a dedicated dashboard, creating an electronic record of the scrutiny process. This documentation is intended to support monitoring and allow the relevant authorities to review how discrepancies were identified and handled. Following the response period, the concerned Inland Revenue officer will examine the taxpayer’s explanation or the absence of a reply and determine whether further action is necessary under the Income Tax Ordinance, 2001, and its associated rules. The decision will therefore remain subject to the applicable legal provisions rather than being determined solely by an automated notification.
FBR will implement the automated scrutiny, analysis, data cross-matching, discrepancy identification and electronic communication procedures through a Change Request Form (CRF). This mechanism will support the technical implementation of the new process and its integration with the authority’s existing digital tax administration infrastructure. The introduction of Rule 38B follows an earlier draft proposal published in October 2026, when the government sought to establish a framework for electronic scrutiny of income tax returns and give taxpayers an opportunity to address issues before enforcement proceedings. The final notification formalises the procedure and sets out the responsibilities of the automated system, the taxpayer and the relevant Inland Revenue officer. The development also reflects FBR’s wider use of technology and data analysis in tax administration, particularly for identifying inconsistencies between declared income and information available to the authority. For taxpayers, the change makes it important to monitor their IRIS accounts and respond to official notifications within the prescribed timelines. Maintaining accurate records and reviewing information submitted in income tax returns will also be important when addressing any discrepancies identified by the system. By combining automated analysis, electronic notices and officer-led review, the new procedure introduces a more structured digital process for handling tax return scrutiny in Pakistan.
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