A.   BACKGROUND (BG)

1.     This refers to the related Important TLQCs in trail, blue, italic and double Line (a) 3092 of 22.4.25 about PTBA exposes Suspension issue & Bureaucrat hindering Digitalization. (b) 3091 of 22.4.25 about FBR appoints 438 Inspectors, BTB / Corruption & Be ready. (c) 3059 of 18.3.25 about Jurisdiction Gazette, No Enquiry u/s 122(5A), even for Deemed refund, 34(3) & 21(c) - ATIR

2.     We also refer to several Other TLQC including (a) 2931 of 21.10.24 about the FBR Restructuring story by Mr. Shabbar Zaidi, when he was Chairman. (b) 3092 of 08.8.24 about FBR Digitalization - PM creates Task Force.

B.   EXECUTIVE SUMMARY & KASBATI & CO RECOMMENDATION

FBR has started AI Driven notices issued for 5 years, which may be Data missing to Income & Sales Tax Registered Persons (Taxpayers).

We feel that AI should be used for preceding for current tax Based not for current Tax process.

We recommended that Internal Tax, Tax Department or Tax Advisory should keep its team members long term ready with Tax Courses covered in our TLQC 3221 of 29.7.25 about Special Discount on Taxation, etc. Courses for Team Development. Click on the link.

C.   DETAILS

Further to KQU 3479 of 24.7.25, being an important matter, we would inform you about FBR Shocks Taxpayers with AI-Driven Tax Notices (Attachment 3224.1) in the ensuing paragraph, with emphasis in bold & Underline for quick reading.

2.   In a dramatic move that has rattled the already tense business environment, the FBR has fired off a barrage of Artificial Intelligence (AI)-generated notices targeting sales tax return anomalies spanning the last 5 years. This sudden strike by the FBR has left taxpayers—especially exporters and manufacturers—reeling in disbelief

3.   Thousands of businesses registered under the Sales Tax Act, 1990 woke up to a surprise on July 23: AI-generated notices exposing inconsistencies in their sales tax filings from 2019 to 2024. This latest maneuver by the FBR has been dubbed nothing short of “tax terrorism” by critics, who argue that it amounts to open harassment of the business class.

4.   The timing of this development could not be more provocative. On July 19, the business community observed a countrywide strike protesting controversial sales tax clauses introduced through the Finance Act, 2025 (TLQC3183 of 30.6.25 refers). With tensions still simmering, the FBR has reignited the firestorm by unleashing a fresh wave of notices—this time courtesy of cutting-edge AI algorithms.

5.   A sample notice warns: The FBR uses advanced data analysis techniques to scrutinize tax returns and benchmark them against industry peers. The system operates without human involvement and performs ongoing surveillance to ensure compliance.”

6.   While the FBR claims these are merely cautionary messages urging future compliance, the fine print reveals a far grimmer reality. If taxpayers fail to address these anomalies, they could face:

(a)   Hefty financial penalties

(b)  Invasive FBR monitoring within business premises

(c)   Aggressive best judgment assessments

(d)  Freezing of bank accounts or sealing of operations

(e)   Selection for detailed audit scrutiny

7.   Tax experts warn that this digital crackdown could cripple already stressed enterprises. The FBR’s insistence that these notices are routine fails to convince a business community already burdened by overregulation and economic uncertainty.

8.   In a climate of growing distrust, the FBR’s latest AI experiment may have just opened a new front in its battle with taxpayers—one that could have serious economic fallout.

D.   FURTHER DETAILS & SERVICES 

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Advisory, Statement or Return Filing or Review services, or related accounting matters like the above, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com. Your Good self may continue to get other services from your current Tax & Legal Advisors.