Taxpayers who have filed returns for a tax year are eligible to be audited by the FBR based on certain criteria. Through computer balloting, cases are selected separately for income tax, sales tax, and federal excise duties (although a composite tax audit concept has also been introduced recently). Documents and information related to returns are being requisitioned by tax authorities. Upon receipt of taxpayer explanations, notices of show cause are subsequently issued, leading to an income or loss assessment. In the event that a taxpayer disagrees with an assessment, he has the right to appeal the decision. 

 The tax authorities have proposed to have their system automatically scrutinize a tax return within six months of filing so as to identify and correct (after providing taxpayers with a chance to be heard) any clerical or arithmetical errors, incorrect claims, or disallowance of tax credits/deductions and losses on the field version of the taxpayer’s return. For the purpose of determining taxable income, tax authorities can apply generic sectoral benchmarks and ratios, without regard to the results provided by taxpayers. The provision is only applicable in cases where an audit is selected and the taxpayer fails to provide the information/documents/explanations required.