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Directorate of Directorate of Internal AuditInternal Audit

in the wake of changed in the wake of changed scenarioscenario

Shahid BashirShahid BashirDirector Internal Audit (Direct Taxes)Director Internal Audit (Direct Taxes)

Central Region, LahoreCentral Region, Lahore

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IntroductionIntroduction

Appointment of Directorate General of Appointment of Directorate General of Internal Audit (Direct Taxes) is made Internal Audit (Direct Taxes) is made under Section 228 of the Income Tax under Section 228 of the Income Tax Ordinance,2001Ordinance,2001

The role and functions of the The role and functions of the Directorate General are provided in Directorate General are provided in SRO No. 660 dated 30-06-2005 SRO No. 660 dated 30-06-2005

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The Directorate of Inspection & The Directorate of Inspection & Internal Audit (Direct Taxes), Internal Audit (Direct Taxes), Central Region, Lahore is headed by Central Region, Lahore is headed by Director who is assisted by 4 Director who is assisted by 4 Additional Directors stationed at:-Additional Directors stationed at:-

LahoreLahore MultanMultan Gujranwala.Gujranwala.

4 4

OrganogramOrganogram

DirectorDirector

AD-I,LhrAD-I,Lhr AD-II,LhrAD-II,Lhr AD-III,MnAD-III,Mn AD-IV GWlAD-IV GWl

Asstt:DirCircle-III

Asstt:DirCircle-III

Dy.DirCircle-IVDy.Dir

Circle-IVEAD,

Circle-IEAD,

Circle-IAsstt: Dir:Circle-II

Asstt: Dir:Circle-II

Asstt: DirCircle-V

Asstt: DirCircle-V

Asstt: DirCircle-VI

Asstt: DirCircle-VI

Asstt: DirCircle-VII

Asstt: DirCircle-VII

S.A.S.A. Admn OfficerAdmn Officer

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Broad FunctionsBroad Functions

Functions:Functions:

To carry out inspections of income tax To carry out inspections of income tax cases and offices.cases and offices.

To investigate or cause investigation to To investigate or cause investigation to be carried out in respect of cases be carried out in respect of cases involving leakage of revenue or evasion involving leakage of revenue or evasion of taxes.of taxes.

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To carry out internal audit of cases or To carry out internal audit of cases or offices involving income tax revenues offices involving income tax revenues and expenditureand expenditure

To furnish annual report about the To furnish annual report about the working of Income Tax Offices.working of Income Tax Offices.

To carry out any other work or To carry out any other work or function that may be assigned by the function that may be assigned by the Federal Government.Federal Government.

Contd…Contd…

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All cases falling under the All cases falling under the territorial jurisdiction of Large territorial jurisdiction of Large Taxpayers Unit, Lahore, Taxpayers Unit, Lahore, Regional Tax Offices, Lahore, Regional Tax Offices, Lahore, Multan, Gujranwala and SialkotMultan, Gujranwala and Sialkot

Jurisdiction

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InspectionInspection ObjectiveObjective

Watch, examine and report fairly and Watch, examine and report fairly and impartially the occurrence of leakage impartially the occurrence of leakage and loss of revenue.and loss of revenue.

Detect cases of incorrect Detect cases of incorrect determination of income and determination of income and imposition of taximposition of tax

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Contd…Contd…

Ensure correct application of law Ensure correct application of law and procedure.and procedure.

Guide/assist the field formations in Guide/assist the field formations in order to improve the overall quality order to improve the overall quality of work done by them and to build of work done by them and to build the image of FBR.the image of FBR.

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Areas of Inspection

AUDIT DIVISIONAUDIT DIVISION::

Desk AuditDesk Audit

Audit of cases and amendment of Audit of cases and amendment of assessmentassessment

Best judgment and provisional assessmentBest judgment and provisional assessment

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Contd… ENFORCEMENT & COLLECTION ENFORCEMENT & COLLECTION

DIVISIONDIVISION::

Tax collectionTax collection Monitoring of with holding taxesMonitoring of with holding taxes Issuance of refundsIssuance of refunds Rectifications and appeal effectsRectifications and appeal effects Charge of additional tax and imposition Charge of additional tax and imposition

of penaltiesof penalties Issuance of exemption certificates.Issuance of exemption certificates.

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Contd… INFORMATION & PROCESSING INFORMATION & PROCESSING

DIVISIONDIVISION

Data entry for other functional units, Data Data entry for other functional units, Data Processing Centre (DPCs) and Pakistan Revenue Processing Centre (DPCs) and Pakistan Revenue Automation Ltd (PRAL)Automation Ltd (PRAL)

Management of record and creation and Management of record and creation and maintenance of data base of taxpayers.maintenance of data base of taxpayers.

Receipt and processing of returns/statements and Receipt and processing of returns/statements and issuance of various notices under the Ordinance.issuance of various notices under the Ordinance.

Receipt and dispatch of information and record from Receipt and dispatch of information and record from and to other Divisionsand to other Divisions

Analysis and dissemination of information of Analysis and dissemination of information of taxpayerstaxpayers

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Contd…

LEGAL FUNCTIONLEGAL FUNCTION

Maintenance and processing of record, Maintenance and processing of record, adherence to time frame in follow up action adherence to time frame in follow up action relating to FTO matters, appeals before relating to FTO matters, appeals before CIT(A), Appellate Tribunal, High Court and CIT(A), Appellate Tribunal, High Court and Supreme Court.Supreme Court.

Alternate Dispute Resolution (ADR) matters.Alternate Dispute Resolution (ADR) matters. Scrutiny of appellate orders.Scrutiny of appellate orders.

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Parameters for Selection of Parameters for Selection of cases for Inspectioncases for Inspection

Desk AuditDesk Audit Cases selected for audit/amended Cases selected for audit/amended

assessmentsassessments Refund casesRefund cases Exemption CertificatesExemption Certificates Record relating to appealsRecord relating to appeals Record relating to Advance Tax u/s 147Record relating to Advance Tax u/s 147 Important sectors/trades/professions etc.Important sectors/trades/professions etc. Information available through print and Information available through print and

electronic mediaelectronic media

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Types of Inspection – Types of Inspection – Inspecting AuthoritiesInspecting Authorities

Sr. Sr. NoNo

Types of InspectionTypes of Inspection Inspecting AuthorityInspecting Authority

11 Regular InspectionRegular Inspection Additional DirectorAdditional Director

22 Special InspectionSpecial Inspection Additional DirectorAdditional Director

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Annual Schedule of Annual Schedule of InspectionInspection

Annual Schedule of Inspection is Annual Schedule of Inspection is prepared and approved by Directorprepared and approved by Director

Regular Inspection of different units Regular Inspection of different units of Functional Divisions in an of Functional Divisions in an LTU/RTOLTU/RTO

The Inspecting Authority conducts The Inspecting Authority conducts monthly inspections according to monthly inspections according to approved schedule.approved schedule.

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Internal Audit (Revenues)Internal Audit (Revenues)

ObjectivesObjectives

Examine fairly, independently and Examine fairly, independently and impartially leakages & loss of revenue impartially leakages & loss of revenue

Guide, educate and assist the field Guide, educate and assist the field formations on proper application of formations on proper application of law, rules and regulationslaw, rules and regulations

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Areas of Internal Audit Areas of Internal Audit (Revenue)(Revenue)

Misreporting, under reporting and over-Misreporting, under reporting and over-reporting of Direct Taxes Collection.reporting of Direct Taxes Collection.

Checking arithmetic accuracy of Checking arithmetic accuracy of computation of income, expenditure, computation of income, expenditure, assets and liabilities.assets and liabilities.

Detection of miscalculation of tax Detection of miscalculation of tax credits, tax rebates and refunds.credits, tax rebates and refunds.

Detection of wrong allowance of tax and Detection of wrong allowance of tax and improper application of tax ratesimproper application of tax rates

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Contd… Contd…

Checking the accuracy of depreciation, Checking the accuracy of depreciation, other allowances and correctness of other allowances and correctness of carry forward and adjustment of losses.carry forward and adjustment of losses.

Identifying improper deduction of Identifying improper deduction of Zakat, W.W.F., etc.Zakat, W.W.F., etc.

Pointing out mismanagement in field Pointing out mismanagement in field formations due to non-maintenance or formations due to non-maintenance or improper maintenance of prescribed improper maintenance of prescribed record.record.

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Contd…Contd…

Detection of wrong and time barred, Detection of wrong and time barred, rectification of mistakes and wrong rectification of mistakes and wrong issuance of refundsissuance of refunds

Detection of fraudulent tax challans.Detection of fraudulent tax challans. Pointing out lapses in monitoring of Pointing out lapses in monitoring of

with holding taxes and enforcement with holding taxes and enforcement of statements u/s 165of statements u/s 165

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Contd…Contd…

Checking of Incorporation Certificates Checking of Incorporation Certificates in case of transfer and receipt of in case of transfer and receipt of arrear demand.arrear demand.

Checking the correctness of brought Checking the correctness of brought forward arrear demand, its addition forward arrear demand, its addition and deletion.and deletion.

Checking correct levy of additional Checking correct levy of additional taxes and penalties under the law.taxes and penalties under the law.

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Constitution of Audit Party

Deputy/Assistant/Deputy/Assistant/

Extra Asstt: Extra Asstt: DirectorDirector

InspectorInspector

Supervisor/UDC/ Supervisor/UDC/ LDCLDC

Head of Audit Head of Audit PartyParty

MemberMember

MemberMember

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Annual Schedule of Internal Audit (Revenue)

Annual Schedule of Internal Audit (R) is Annual Schedule of Internal Audit (R) is prepared and approved by the Directorprepared and approved by the Director

Internal Audit of each Functional Internal Audit of each Functional Division in LTU/RTO is conducted at Division in LTU/RTO is conducted at least once during a Financial Year.least once during a Financial Year.

The Audit Authority conducts monthly The Audit Authority conducts monthly Audits according to approved schedule.Audits according to approved schedule.

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Internal Audit (Expenditure)

Internal Audit (Expenditure) is a new Internal Audit (Expenditure) is a new function assigned by the Board vide function assigned by the Board vide SRO No.660(1)/2005 dated 30-06-SRO No.660(1)/2005 dated 30-06-2005.2005.

Earlier Internal Audit of Expenditure Earlier Internal Audit of Expenditure was exclusively conducted by the was exclusively conducted by the Director General of Income Tax Director General of Income Tax (External Audit)(External Audit)

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Contd… ObjectivesObjectives

Conduct and report fair, independent and Conduct and report fair, independent and impartial audit of expenditures to enforce;impartial audit of expenditures to enforce;

Proper maintenance of expenditure recordProper maintenance of expenditure record Check the arithmetic accuracy of the Check the arithmetic accuracy of the

prescribed books of accounts, expenditure prescribed books of accounts, expenditure record and financial statements.record and financial statements.

Detection and prevention of errors and Detection and prevention of errors and mistakes through omission and commission in mistakes through omission and commission in the accounts.the accounts.

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Constitution of the TeamConstitution of the Team

Additional DirectorAdditional Director

DD/AD/EADDD/AD/EAD

InspectorInspector

Supervisor/UDC/LDCSupervisor/UDC/LDC

HeadHead

MemberMember

MemberMember

MemberMember

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Schedule of Internal Audit Schedule of Internal Audit (Expenditure)(Expenditure)

Annual Schedule of Internal Audit (Exp) Annual Schedule of Internal Audit (Exp) is prepared and approved by Directoris prepared and approved by Director

Internal Audit of each Functional Internal Audit of each Functional Division in an LTU/RTO is conducted at Division in an LTU/RTO is conducted at least once during a Financial Yearleast once during a Financial Year

The Audit Authority conduct monthly The Audit Authority conduct monthly Internal Audit (Exp) according to Internal Audit (Exp) according to approved schedule.approved schedule.

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The Director shall report to the DG The Director shall report to the DG the final compliance in the the final compliance in the prescribed format verified and prescribed format verified and signed by the Add. Directorsigned by the Add. Director

This shall be in no case later than 60 This shall be in no case later than 60 days from the date of delivery of the days from the date of delivery of the Inspection & Internal Audit Reports.Inspection & Internal Audit Reports.

Contd…Contd…

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Special Assignments Given Special Assignments Given By The CBR To The By The CBR To The

OrganizationOrganization

Desk Audit of returns Desk Audit of returns Monitoring of Withholding TaxesMonitoring of Withholding Taxes Audit of Arrear demand transferred Audit of Arrear demand transferred

to Model Tax Payer Unit (MTU) to Model Tax Payer Unit (MTU) LahoreLahore

Special Inspection of Refund cases.Special Inspection of Refund cases.

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Desk Audit of returnsDesk Audit of returns

Checking of admitted liability u/s 137Checking of admitted liability u/s 137 Checking of advance tax liability u/ 147Checking of advance tax liability u/ 147 Propose imposition of additional taxes Propose imposition of additional taxes

in case of defaultin case of default Desk Audit of large Tax Payer Unit Desk Audit of large Tax Payer Unit

Lahore was conducted pointing out loss Lahore was conducted pointing out loss to the tune of Rs:155.392 million so far to the tune of Rs:155.392 million so far

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Desk Audit- Monitoring of Desk Audit- Monitoring of Withholding TaxesWithholding Taxes

Desk audit was conducted in respect of Desk audit was conducted in respect of Withholding agents ofWithholding agents of

BanksBanks Corporate sectorCorporate sector Non corporate sectorNon corporate sector

Study report was prepared highlighting Study report was prepared highlighting the agents not fulfilling their statutory the agents not fulfilling their statutory obligations regarding filing of statements obligations regarding filing of statements

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Inspection of Arrear Inspection of Arrear demand transferred to demand transferred to Model Tax Payer Unit Model Tax Payer Unit

(MTU) Lahore(MTU) Lahore This exercise yielded following results:This exercise yielded following results:

Demand notices not available on record.Demand notices not available on record. Assessment Orders & I.T.30 Not available on Assessment Orders & I.T.30 Not available on

record.record. Assessment Order not served upon the tax Assessment Order not served upon the tax

payerspayers No recovery proceedings after appeal effect.No recovery proceedings after appeal effect. Arrear Transferred but incorporation Arrear Transferred but incorporation

certificate not obtained.certificate not obtained.

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Contd…

Demand not correctly entered.Demand not correctly entered. Cases set-a-side by ITAT but Cases set-a-side by ITAT but

assessment still pending.assessment still pending. Assessment record not matching with Assessment record not matching with

the entries mentioned in the arrear list.the entries mentioned in the arrear list.

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Significant AchievementsSignificant AchievementsINTERNAL AUDIT INTERNAL AUDIT

(REVENUE)(REVENUE)S #

Office Audited

Loss reported

(M)

Loss retrieved(M)

1 E&C-02, Lhr.

9008.832 9008.832

2 E&C- 12, Lhr

857.416 839.582

3 E&C-02, Lhr 3384.696 3384.696

4 E&C--06, Lhr.

1481.023 1039.993

5 E&C- 14, Lhr.

896.446 613.813

6 E&C- -05, Lhr.

894.063 713.237

7 E&C- -01,,Lhr.

777.604 597.867

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Significant AchievementsSignificant AchievementsINTERNAL AUDIT INTERNAL AUDIT

(REVENUE)(REVENUE)S #

Office Audited

Loss reported(M)

Loss retrieved(M)

8 MTU, Lahore 800.333 764.445

9 E&C-02, Lhr. 3955.597 2916.883

10 LTU,Lahore. 1579.124 59.692

11 E&C-03, Lhr. 1121.787 942.921

12 E&C 14,Div-I 424.166 197.311

13 E&C-07,Div-I 1010.613 229.457

14 E&C-09, Div-I 318.643 291.349

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Significant AchievementsSignificant AchievementsINSPECTIONINSPECTION

S.No.

Name of assessee Loss retrieved

(M)

1 M/s Akram Medical Complex,Lahore. 14.067

2. M/s First Jamia Services (Pvt) Ltd. 9.453

3 M/s Bundu Khan Restaurant,Lahore. 4.445

4 M/s Coca Cola Export Corporation Ltd.

7.283

5 M/s Suhail Travels (Pvt) Ltd,Multan. 5.798

6 M/s Farooq Habib Textille Mills Ltd. 16.892

7 M/s Qadri Brothers (Pvt) Limited. 5.238

8 Mian Iftikhar Ahmad. 10.115

9 Main After Ahmad. 12.900

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S.No.

Name of assessee Loss retrieved (M)

10 M/s Crescent Board Limited,Lahore. 9.126

11 M/s Lahore Grammer School (Pvt) Ltd. 21.191

12 M/s Ammar Medical Complex (Pvt) Ltd. 5.389

13 M/s Nicon Centre of Computer Science. 17.092

14 M/s Kings Tyres (Pvt) Limited. 7.271

15 M/s Sargodha Industrial Urban Development Cooperative Society.

11.465

16 M/s Allama Textile Mills Ltd. 75.967

17 M/s Margalla Textile Mills Limited. 43.580

18 M/s Crescent Board Ltd. 11.231

Significant AchievementsSignificant AchievementsINSPECTIONINSPECTION

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Sanctioned/ Working Sanctioned/ Working Strength of OfficersStrength of Officers

PostPost BPSBPS SanctionSanctioned ed

strengthstrength

WorkinWorking g

StrengtStrengthh

VacancyVacancy

LahoreLahoreDirectorDirector 2020 11 11 --

Additional Additional DirectorDirector

1919 22 22 --

S.A./Deputy/S.A./Deputy/Asstt: DirectorsAsstt: Directors

16/17/16/17/

181855 55 --

Admn OfficerAdmn Officer 1616 11 -- 11

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Sanctioned/ Working Sanctioned/ Working Strength of OfficersStrength of Officers

PostPost BPSBPS SanctioneSanctioned strengthd strength

WorkinWorking g

StrengtStrengthh

VacancyVacancy

MultanMultanAdditional Additional DirectorDirector

1919 11 -- 11

Deputy/Assistant Deputy/Assistant DirectorDirector

17/1817/18 11 11 --

GujranwalaGujranwalaAdditional Additional DirectorDirector

1919 11 11 --

Deputy/Assistant Deputy/Assistant Director.Director.

17/1817/18 22 -- 22

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This Directorate is facing acute This Directorate is facing acute shortage of shortage of supportsupport staff and this fact is staff and this fact is evident from the following sanctioned evident from the following sanctioned

strengthstrengthMultanMultan

DesignationDesignationOld Old

StrengthStrengthNew New

StrengthStrength Difference:Difference:

Steno typistSteno typist 11 -- 11

InspectorInspector 1010 22 88

U.D.C.U.D.C. 44 11 33

Driver.Driver. -- -- --

Naib QasidNaib Qasid 66 11 55

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This Directorate is facing acute shortage of This Directorate is facing acute shortage of support staff and this fact is evident from the support staff and this fact is evident from the

following sanctioned strengthfollowing sanctioned strength

Lahore

DesignationOld

StrengthNew

StrengthDifference

:

Stenographer 3 2 1

Steno typist 5 - 5

LDC 9 6 3

Daftri 1 - 1

Driver 1 1 -

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This Directorate is facing acute shortage of This Directorate is facing acute shortage of support staff and this fact is evident from the support staff and this fact is evident from the

following sanctioned strengthfollowing sanctioned strength

Gujranwala

DesignationOld

StrengthNew

StrengthDifference:

Stenographer 1 - 1

Steno typist 2 - 2

Inspector 6 1 5

UDC/LDC - - -

Driver - - -

Daftri 1 - 1

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Station- wise requirement Station- wise requirement of Vehiclesof Vehicles

StationStation AvailableAvailable RequiredRequired

LahoreLahore 55 44

MultanMultan -- 22

GujranwalaGujranwala 11 22

Total Total Requirement:-Requirement:-

66 88

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