Income Tax Ordinance (XLIX of 2001)---

----S.177---Audit---Essential requisites of exercise of powers under S.177, Income Tax Ordinance, 2001---Notice which failed to disclose any reason for conducting audit of the assessee's return was illegal and void---Department was at liberty to undertake audit of the assessee by taking essential legal steps strictly in accordance with law.

Ch. Muhammad Hussain v. Commissioner of Income Tax, Sialkot 2005 PTD 152 fol.

Mian Nasir Mehmood for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 14th April, 2005.

JUDGMENT

UMAR ATA BANDIAL, J.---This petition challenges notice, dated 27-5-2004 issued by the respondent No.2 informing the petitioner that its income tax return for the tax year 2003 under the Universal Self-Assessment Scheme has been selected for audit under section 177 of the Income Tax Ordinance, 2001 ("Ordinance"). Thereafter the respondent No.3 by notice, dated 16-6-2004 has required the petitioner to attend his office with complete tax account and supporting details/documents for completion of audit of the petitioner's return for the tax year 2003.

2. The learned counsel for the petitioner contended that the question whether audit can be initiated by the respondents under section 177 of the Ordinance without disclosure of grounds has been answered in the negative by a detailed judgment of this Court given in the case of Ch. Muhammad Hussain v. Commissioner of Income Tax, Sialkot 2005 PTD 152 wherein similar impugned action was declared illegal. The petition was admitted to regular hearing by order dated 22-12-2004 on the strength of the aforesaid judgment. The respondents were directed to file their written statement within four weeks. The case has been fixed for hearing today when the duly appointed counsel for the respondents has not entered appearance. However, Mr. Ilyas Khan, the learned Senior Legal Advisor of the respondent-Department was present in Court and rendered assistance on the legal issue raised in the petition. He accepts that the impugned single line order for audit, made by the respondents without support of any reasons has been set aside in several cases by this Court. The aforesaid judgment by the learned Single Judge draws the following conclusion on this point:

"This brings me to hold that Commissioner of Income Tax can proceed against any person but while so doing he has to mention under the clause of section 177(1) of the Ordinance, 2001, under which he proposed to proceed and at the same time, he has to give reasons for the action against the assessee because his assessment order is to be reopened and declaration in the return is to be scrutinized which is an order adverse to the provisions of section 120 of the Ordinance (ibid)."

3. The impugned order in the present case also lacks the disclosure of reasons for selection of the petitioner's case for audit for the tax year 2003 under section 177 of the Ordinance. In the light of law declared by this Court in the case of "Ch. Muhammad Hussain" in relation to the essential requisites for the exercise of powers under section 177 of the Ordinance and because the present case also contains the same stereotyped facts, I have no hesitation in holding that the notices impugned in this petition fail to disclose any reason for conducting an audit of the petitioner^'s return for the year 2003. Accordingly, the impugned notices, dated 27-5-2004 and 16-6-2004 are declared to be illegal and void. However, the respondent-Department is at liberty to undertake an audit of the petitioner^'s returns by taking the essential legal steps strictly in accordance with law. The writ petition is allowed with no order as to costs.

M.B.A./A-650/L????????????????????????????????????????????????????????? Petition accepted.