FBR to flag errors in tax returns before any penalty action
Rule 38B, notified through SRO 2098 of 2026, gives a filer at least seven days to explain or correct a discrepancy the automated system detects
The Federal Board of Revenue has widened its use of artificial intelligence in the scrutiny of income tax returns, allowing an automated system to flag factual and legal errors and discrepancies before any legal or penal action begins.
The procedure was notified on Wednesday through SRO 2098 of 2026, which adds Rule 38B to the Income Tax Rules 2002. The rule is titled "Procedure for electronic scrutiny and intimation of issues detected by the automated system".
Under it, the system cross-matches what a taxpayer declared against other data held by the tax authorities and flags factual mistakes, legal errors and discrepancies in the record.
Dawn reported that the expanded scrutiny applies to individual tax returns, and that the purpose is to let a taxpayer clarify or rectify a discrepancy through a prescribed route rather than face proceedings first.
A taxpayer is told of a flagged issue through an online advisory or advance intimation sent through IRIS, the board's filing portal. The Inland Revenue officer with jurisdiction over the taxpayer may also issue the same system-generated intimation.
TechJuice reported that each notice must state a response period of at least seven days. Within it the taxpayer may explain the issue, correct the error or take other remedial steps. If no reply comes, the system sends a reminder allowing at least seven more days.
The taxpayer gets those windows before proceedings begin, and the officer acts after the reply is in or after the reminder period lapses.
Details of the issues detected, the notices issued and the responses received are passed to the responsible Officer of Inland Revenue and logged on a monitoring dashboard.
The officer reviews any response and assesses the matter, and may then act under the Income Tax Ordinance 2001 and the rules made under it.
How the reports differ
Dawn alone said the expansion covers individual tax returns, and framed the notification as a widening of the board's use of artificial intelligence with a chance to clarify or rectify before proceedings. TechJuice carried the mechanics: notices through IRIS, a response period of at least seven days, a reminder allowing at least seven more, and a dashboard recording every notice and reply. The ProPakistani standfirst available was cut off mid-sentence before it gave any detail beyond the launch of an automated checking system.
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