Messrs HARVEST TOPWORTH INTERNATIONAL through Member, Lahore VS DEPUTY COMMISSIONER OF INCOME TAX, LAHORE, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 538 (2005)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 61 & 62---C.B.R. Circular No. 7 of 2002, dated 15-6-2002---Self-.Assessment Scheme, (2002-2003), para. 9(a)(ii)---Supreme Court Rules, 1980, O.XIII---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Total audit case---Selection---Grant of leave to appeal by Supreme Court---Effect---Assessees filed their returns under Self-Assessment Scheme but authorities selected their cases for total audit and notices under Ss. 61 and 62 of Income Tax Ordinance, 2001, were issued---Plea raised by assessees was that para. 9(a)(ii) of Self-Assessment Scheme (2002-2003) had been declared as without lawful authority by the High Court---Contention of authorities, was that against judgment of High Court, whereby para. 9(a)(ii) of the Scheme was declared without lawful authority, Supreme Court had granted leave to appeal---Validity---Supreme Court while granting leave to appeal did not suspend the judgment of High Court---Proceedings could not be stayed on the issuance of leave to appeal unless the order appealed from stood suspended-Supreme Court had taken very serious note of putting the proceedings at halt without any specific order of stay of proceedings---Cases of assessees were similar on facts as well as on question of law, therefore, selection of cases of assessees for total audit was improper---Proceedings initiated by the authorities were without lawful authority and with no legal effect---Petition was allowed in circumstances.

Messrs Sahib Textile Ltd. v. Federation of Pakistan 2004 PTD 1 fol.

Muhammad Naeem Shah for Petitioner.

Muhammad Shahid Jamil for Respondents.

Date of hearing: 12th July, 2005.

JUDGMENT

SYED HAMID ALI SHAH, J.---By this single judgment Writ Petition No.10721 of 2005 titled "Messrs Harvest Topworth International v. Deputy Commissioner of Income Tax and 2 others", Writ Petition No.10868 of 2005 titled "Messrs Family Food Industry v. Taxation Officer and another", Writ Petition No. 10870 of 2005 titled "Messrs Nawab Din and sons v. Taxation Officer and another", Writ Petition No. 11771 of 2005 titled "Messrs Hamsafar TPR Sle v. Federation of Pakistan and 4 others" and Writ Petition No. 12179 of 2005 titled "Mian Muhammad Jehangir v. Federation of Pakistan and 5 others" are decided as common questions of law and facts are involved in all these petitions.

2. Brief facts necessary for the disposal of these petitions .are that Central Board of Revenue issued "Schedule of Self-Assessment" for the year, 2002-2003 vide Circular No.7 of 2002, dated 15-6-2002. 20% of the Returns filed under Scheme of Self-Assessment are subject to total audit for which two methods are prescribed in paras. 9(a)(i) and 9(a)(ii).

3. The petitioners were served a show-cause notice pointing out facts on which the petitioners cases were selected for total audit under aforementioned para. 9(a)(ii). Petitioners replied to the notice but the respondent/RCIT felt dissatisfied with the explanation given by the petitioners and selected the cases of the petitioners for total audit and for this purpose notices under sections 61 and 62 were issued by the Taxation Officer for compliance.

4. Petitioners raised objection and conveyed through letter that selection of their respective case under para. 9(a)(ii) of the scheme (ibid) has been declared as without lawful authority by the High Court in the case of "Messrs Sahib Textile Ltd. v. Federation of Pakistan" (2004 PTD 1) and proceedings under the Scheme of Self-assessment are without lawful authority and of no legal effect. Through these petitions the petitioners have voiced their grievance against the selection of their cases for total audit under para. 9(a)(ii) of C.B.R. Circular No.7 of 2002, dated 15-6-2002.

5. Learned counsel for the petitioners have contended that this Court has decided a question of law; principles laid down in the case reported as 2004 PTD 1 (supra) are binding; and the action of the respondents tantamounts to misuse of power in excess of jurisdiction. It was argued that guidelines were issued on 17-12-2002, six months after the issuance of scheme, while such guidelines could only have the binding impact if the same were issued prior to the last date of filing the returns. It was lastly contended that the dictum laid down in 2004 PTD 1 (supra) was followed by the High Court in various cases, but the impugned action of respondent/RCIT is gross neglect of the said decision.

6. Learned counsel for the respondents has argued that leave to appeal against the decision in case of Sahib Textile (Pvt.) Ltd. (supra) has been granted by the Hon'ble Supreme Court and as such the petitioners cannot claim any relief on the basis of matter which is sub judice before the apex Court. He added that the right course available to the petitioners was to agitate their grievance before the available forms at revenue hierarchy. The cases have been selected for total audit strictly on the parameters of guidelines. Guidelines issued by C.B.R. are not prejudicial to the self-assessment scheme. These guidelines do not change, alter or modify the scheme in any manner, therefore, they can be applied to the cases of the petitioners retrospectively.

7. I have heard learned counsel for the parties at length and examined the record with their assistance.

8. This Court while dealing with the question of selection of cases for total audit under para. 9(a)(ii) under the guidelines in the case of "Sahib Textile (Pvt.) Ltd. v. Federation of Pakistan" (supra) has held:

"A glance at the guidelines, dated 17-12-2002 makes it clear that para 9(a)(ii) of the scheme has completely been substituted. The Revenue is totally silent as to why these guidelines could not be issued as part of para. 9, simultaneously with the scheme or at least before the filing of the returns. The shroud of uncertainty appears to have deliberately been allowed to remain covering guidelines only in order to have unchecked discretion to select a case for total audit. The withholding of the parameters or guidelines of selection out of the scheme may not necessarily be mala fide. However, withholding of the guidelines till the filing of these returns does not appear bona fide either. The State, does not cheat the citizens. The Revenue, therefore, is not correct in claiming that the purpose of these guidelines was to provide for impartiality and transparency."

9. The principles evolved in the said petition were followed in various writ petitions including Writ Petition No. 11614 of 2005. Federal Tax Ombudsman has also recommended in its various decisions the exclusion of the cases selected for total audit on the basis of guidelines under Circular No.7 of 2002. The august Supreme Court has granted leave against the judgment passed in Sahib Textile (Pvt.) Ltd. (supra) and other cases but while granting the leave the impugned judgment was not suspended by the apex Court. The arguments of learned counsel for the Revenue that these petitions be dismissed on the basis of leave grant order passed in Civil Petition No.3046/L of 2004 etc, is not well-founded for the Supreme Court Rules and Orders by itself provide that proceedings cannot be stayed on the issuance of leave to appeal unless the order appealed from stands suspended. Furthermore, the apex Court has taken a very serious note of putting the proceedings. Cases of the petitioners in these petitions are similar on facts as well as on the questions of law, therefore, I hold that the selection of the cases of assessees for total audit was improper. The instant petitions are allowed and the proceedings initiated are declared to have been taken without lawful authority and with no legal effect. Parties to bear their own costs.

M.H./H-101/LPetition allowed.