MOHMANDS (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1437 (2005)

Income Tax Ordinance (XLIX of 2001)---

----S.177---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Audit---Tax year 2003---Fresh notice---Department conceded the contention of the assessee that fresh notice had to be issued under S.177 of the Income Tax Ordinance 2001 (as prevailing at that time) to process the case---Federal Tax Ombudsman recommended that while following the directions of apex Court the case of the complainant/assessee had to be processed at the earliest---Grievance of the complainant/assessee had been redressed, the case was closed and file was consigned to record by the Federal Tax Ombudsman.

Imtiaz Ali Khan, Advisor (Dealing Officer).

Riaz Hussain for the Complainant.

Ms. Shabana Mumtaz (DCIT) for Respondents.

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX OMBUDSMAN.---The grievance of the complainant against the selection of his return for the tax year 2003 for total audit is as under:--

(a) That selection of his return for total audit is illegal, unjustified and wrong as against the provisions of section 177 of Income Tax Ordinance, 2001.

(b) That selection of his return was to be made by the Commissioner on the basis of parameters incorporated in section 177 of Income Tax Ordinance, 2001.

(c) That his return was selected on the strength of illegal circular issued by the C.B.R. wherein the parameters given for the selection of cases for Total Audit.

2. Brief facts of the case are that the complainant, a private limited company, is deriving income from manufacturing of furniture as well as lease income. Income Tax Return for the Tax Year 2003 was filed under SAS under section 120 of the Income Tax Ordinance, 2001 declaring income at Rs.142,650. The deemed assessment was completed on the date of filing of return under section 120 of the Income Tax Ordinance, 2001. Respondents vide Letter No.3636 dated 4-5-2004 informed the complainant about selection of his return for the Tax Year under consideration. It is alleged that the selection of his return is a clear-cut violation of law. It is further submitted that in respect of returns of Tax Year 2003 Hon'ble Lahore High Court, Lahore in Writ Petition No.10150 of 2004 has held as under:--

"that the impugned order/notice is defective as the same lacks the essentials required by law to be noted therein which at the same time is abuse of exercise of the vested discretion and thus, the same is not sustainable at law and is declared to be illegal/void and non-existent. Before parting with the judgment,

I must observe that the Commissioner of Income Tax can initiate fresh proceedings of audit strictly in accordance with law and according to the observations made above. Resultantly, all the writ petitions mentioned in the schedule appended herewith, are accepted and writ, as prayed, is issued, with no order as to costs".

Against this judgment, respondents went into appeal before the Supreme Court of Pakistan. The judgment of apex Court is as under:--

"The appeals are disposal of with consent, consequently, the portions of impugned judgment reproduced hereinabove are deleted with the observation that let appellants issue fresh notices to the respondents in terms of section 177 of the Ordinance, as it was prevailing at the relevant time, disclosing criteria/reasons for selecting their cases for purpose of audit".

3. Respondents have forwarded parawise comments and reported that "the department filed appeal before the Supreme Court of Pakistan". The apex Court vide its judgment C.A. No.1962 of 2005 etc., dated 30-3-2006 has held that fresh notices may be issued to the respondents in terms of section 177 of the Ordinance, as it was prevailing at the relevant time, disclosing criteria/reasons for selecting their case for audit under the circumstances, the case of the complainant will be decided in the light of verdict of the apex Court.

4. Today i.e., 11-5-2006, on the date of the hearing, Mr. Riaz Hussain (Advocate), AR, appeared for the complainant and Ms. Shabana Mumtaz (DCIT), DR, attended on behalf of the respondents. DR repeated the same arguments as given in the parawise comments. AR has also referred to the judgment of the apex Court dated 30-3-2006 in C.A. No.1962 of 2005 in which their lordships have held in a "consent decree" that fresh notice be issued under section 177 of the Income Tax Ordinance, 2001 (as prevailing at that time) to process the case. Needless to say that the respondents have already conceded the contention of the AR in their parawise comments (para 3 above).

5. In view of the above judgment of apex Court dated 30-3-2006, it is recommended that while following the directions of apex Court (as narrated in the parawise comments) the case of the complainant may be processed at the earliest.

6. Apparently the grievance of the complainant has been redressed, the case is closed and file is consigned to record.

C.M.A./115/FTOOrder accordingly.