From September 1, 2026, the Federal Board of Revenue (FBR) has barred Inland Revenue field officers from initiating any new income tax assessment, reassessment, or amendment proceedings unless the case has first been selected and assigned through the FBR's automated Compliance Risk Management (CRM) System. Proceedings initiated outside the system may be declared void ab initio - treated as having no legal effect from the start.

What the circular says

Income Tax Circular No. 01 of 2026-27, IR-Operations (also referred to as Income Tax Circular No. 1 of 2026) was issued on August 31, 2026, under Section 214 of the Income Tax Ordinance, 2001. It directs all Inland Revenue field formations that no new proceedings under Sections 121, 122, 122A, 122C, and 177 of the Income Tax Ordinance, 2001, shall be initiated or amended unless the case has been selected and assigned through the CRM System.

The FBR stated the measure aims to bring transparency, uniformity, and objectivity to case selection, replacing the earlier practice in which individual officers could select cases for assessment or audit at their discretion. The circular is part of the FBR's broader push to digitise and automate tax administration.

What happens to ongoing cases

Assessment proceedings that were already underway as of August 31, 2026, may be concluded under the existing framework. However, any fresh amendment, reassessment, or new show-cause notice issued on or after September 1 in relation to those cases must comply with the CRM-based selection process.

Procedure for field officers

  • All new assessment, reassessment, or amendment proceedings under the specified sections must be initiated only after the case has been selected and assigned through the CRM System.
  • Any proceeding initiated without CRM-based selection may be considered unauthorised and rendered void ab initio by the competent authority.
  • Exemptions from the CRM process require a written request to the Member (Inland Revenue - Operations) with full justification; approval must also be in writing from the Member (IR-Operations) or an authorised officer.
  • All Chief Commissioners Inland Revenue (CCIRs) must ensure compliance within their jurisdictions.
  • System downtime or technical issues affecting the CRM System must be reported to the Member (IR-Operations) within 24 hours.

CRM system and its legal basis

The CRM System is defined under the Finance Act 2026 in Section 165AB(f) of the Income Tax Ordinance as a computer program that identifies risks related to compliance with tax laws and provides information about such risks. The FBR has directed the Directorate-General (Compliance Risk Management) to keep the system operational around the clock and to provide technical training and support to field formations.

The circular overrides and supersedes any previous FBR or field-level circulars, instructions, standard operating procedures, or administrative orders that are inconsistent with the mandatory use of the CRM System for initiating assessment proceedings.

What this means for taxpayers

Under the previous procedure, field officers could directly select certain cases for scrutiny. The new system replaces that discretion with data-driven risk criteria, meaning taxpayers should expect assessment and audit cases to be flagged through an automated process based on compliance indicators rather than individual officer judgment. Taxpayers who receive notices should verify that the proceeding has been initiated under the CRM framework.

What remains unclear

The circular does not specify the detailed risk-scoring criteria the CRM System uses to select cases, nor does it establish a timeline for when taxpayers will be informed that their case was CRM-selected. Whether the FBR will publish the CRM selection parameters or create an independent oversight mechanism for the system's decisions has not been announced.