Tax audit, assessment: FBR implements faceless system

The Federal Board of Revenue (FBR) has implemented a new system for conducting tax audits, income tax assessments, and related proceedings on October 15, 2026. This system, known as the National Faceless Centre (NFC), relies on artificial intelligence and electronic handling of cases. The new rules, SRO 1828(I)/2026 and SRO 1825(I)/2026, came into effect on the same date.

Chapter XX of the Income Tax Rules, 2002, and Chapter VIAC of the Sales Tax Rules, 2006, now apply to specific cases and proceedings, as per the notification. These rules require the assignment of audit, assessment, and quality-control functions to separate officers or units within the tax case and tax year.

Notices, orders, and other communications must be generated via the FBR's computerized system and assigned a Digital Identification Number (DIN). Taxpayers and their authorized representatives must submit replies, documents, and evidence electronically through their designated IRIS accounts. Physical verification is allowed under specific circumstances and through the Field Operations Wing, with proper authorization.

Rule 244 allows for the transfer of cases to another tax authority in certain situations, such as when physical records are involved, repeated verification is required, or other special handling is needed. Quality-control review is also incorporated into the framework - audit reports, adjudication notices, and assessment orders will be subject to quality-control review under the prescribed procedures.

Penalties and default surcharges under Sections 182 and 205 of the Income Tax Ordinance, 2001, are now covered under the faceless procedures, making these matters follow the same procedural framework as relevant designated cases. This new system provides a comprehensive, electronic, and transparent approach to tax proceedings, with functional separation, quality-control review, and provisions for physical verification or transfer of cases when necessary.