Self-assessment and audit

The taxpayers borne on the national tax number register of Pakistan are familiar with the concept of self assessment scheme. Prior to the promulgation of Income Tax Ordinance, 2001, almost every year taxpayers were anxiously waiting for a circular bearing the subject “Self assessment scheme or universal self assessment scheme”. In order to provide a consistent policy framework, Income Tax Ordinance, 2001 has embraced the concept of self assessment scheme through section 120. This concept is in line with the international norms of tax legislations, that is, Blind faith over the taxpayer but subject to a preventive system for intentional dishonesty, namely audit. The most striking motto of audit is of Institute of Internal Auditors [IIA], USA – In Allah [God] we trust, others we Audit – which shows the theme of audit.

The concept of self assessment scheme, as embraced by section 120 of Income Tax Ordinance, 2001, is riddled with presumptions and perceptions owing to be a new mechanism. Such presumption and perceptions of the stakeholders of returns filed under self assessment scheme turned up to be a rift situation between taxpayers and tax collectors on selection of cases for audit from the returns filed under self assessment scheme. This article is an endeavor to give a broad pictorial representation of the scheme of assessment and audit as defined in Income Tax Ordinance, 2001 apart from practical difficulties and inherent lacunas.