FBR moves to end discretionary tax notices 

Under Income Tax Circular No. 01 of 2026-27, issued by the Revenue Division on August 31, the FBR has directed that proceedings involving

ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a major change in the tax assessment process, requiring field officers to route new income tax proceedings through the automated Compliance Risk Management (CRM) System from September 1, 2026.

Under Income Tax Circular No. 01 of 2026-27, issued by the Revenue Division on August 31, the FBR has directed that proceedings involving assessment, reassessment or amendments under relevant provisions of the Income Tax Ordinance, 2001, must be selected and assigned through the CRM system.

The circular states that Inland Revenue officers will not be authorized to independently initiate or amend cases without CRM-based selection. Any assessment or amendment undertaken outside the prescribed system may be cancelled at any stage and treated as having no legal effect from the outset.

The new mechanism covers proceedings under Sections 121, 122, 122A, 122B and 177 of the Income Tax Ordinance. The move is intended to replace manual selection with a data-driven risk assessment process and bring greater transparency, consistency and objectivity to tax administration.

However, cases already initiated by August 31, 2026, will continue under the procedures applicable at the time of their initiation. Any fresh show-cause notice or reassessment proceeding initiated from September 1 onward will have to comply with the CRM selection mechanism.

The FBR has instructed all Chief Commissioners Inland Revenue to ensure strict implementation of the new procedure in their respective jurisdictions. Any request for exemption from CRM selection must be submitted in writing to the Member Inland Revenue (Operations), along with detailed justification. Such exemptions will require written approval from the competent authority.

The Directorate General of Compliance Risk Management has also been directed to maintain round-the-clock availability of the system and facilitate technical training for relevant officers. Any technical problem affecting the system is required to be reported to the Member IR-Operations within 24 hours.

The reform forms part of the FBR’s broader digitalisation and automation agenda aimed at reducing human discretion in tax administration. Officials and tax experts view the development as a step towards limiting arbitrary case selection and ensuring that taxpayers are identified for scrutiny through documented risk-based criteria rather than individual discretion.

The latest circular will also supersede previous instructions to the extent that they are inconsistent with the new CRM-based procedure.