FBR to focus AI tax audits on corporate and non-salaried returns

• Corporate and non-salaried returns will receive priority in the first phase of AI-based audits.
• Salaried taxpayers are not the main focus, though missing documents or payment shortfalls may prompt queries.
• New assessment proceedings must involve cases selected and assigned through FBR’s CRM system.

The Federal Board of Revenue (FBR) will prioritise corporate and non-salaried income tax returns during the first phase of audits conducted through its new artificial intelligence system.

Sources told Business Recorder that the technology would identify high-risk corporate cases for audit through FBR’s Compliance Risk Management (CRM) system. Information from non-corporate returns would also be reviewed to determine whether an audit is required.

According to the sources, the initiative is not aimed at the salaried class. However, salaried taxpayers whose returns contain incomplete documentation or tax payment shortfalls could receive queries through the CRM system.

The sources added that the AI system’s performance would improve over time through ongoing testing and learning.

Under FBR’s instructions, Inland Revenue field formations have been barred since September 1, 2026, from independently selecting cases for income tax assessment proceedings. Cases must be selected and assigned through the CRM platform before officers can take action.

The restriction applies to new assessment amendment proceedings, including those under sections 121, 122, 122A and 122C of the Income Tax Ordinance, 2001. Proceedings initiated in breach of the circular will be considered unauthorised and may be declared invalid from the outset by the competent authority.

Cases in which assessment proceedings were already underway by August 31, 2026, can be completed under the previous framework. However, any fresh amendment, reassessment or new show-cause notice issued in those cases on or after September 1, 2026, must meet the CRM selection requirement.

The Directorate-General of Compliance Risk Management has been instructed to ensure uninterrupted operation of the platform and provide technical assistance, training and guidance to field formations. Any system outage or technical issue affecting its operation must be reported to the Member Inland Revenue Operations within 24 hours.

Any request to bypass the CRM selection process must be submitted in writing to the Member Inland Revenue Operations with full justification. Exemptions require specific written approval from the member or an officer authorised by him.