Tax system operating in Pakistan on the basis of self assessment which provide freedom to taxpayer making voluntary compliances on the basis of their available information and documentation. Tax Audit is effective instrument of Federal Board of Revenue under which Department monitored all the compliances of Taxpayers which are made during the Financial Year.

Tax Audits are conducted to analyze the Taxpayer Compliances either Taxpayer has determined his Tax liability on the actual basis and deposit the same in Govt Treasury. In this connection Federal Board of Revenue has established a central risk based and automated “Tax Audit Management System“ (TAMS) which helps department to get the actual pictures of Tax Payer compliances and deposit of their Tax liability. Taxpayer’s selection for Audit is made through an automated balloted process under which multiple information and parameters are being used to take out the transparent picture of the Taxpayer.

Commissioner may call for books and records of Taxpayer under the Income Tax ordinance, 2001 within six years of the Tax Year under which Tax Return is filed. After gathering all the information during the audit and attaining taxpayer’s clarification on all the relevant issues raised during the Tax audit, issue an audit report containing audit observations and findings.If Commissioner is not satisfied with Books and records produced by the Taxpayer then Order is been issued against the Taxpayer under which specific time period is been granted to Taxpayer for filing Tax Appeal.