BARKAT ALI SALAH UD DIN AHMAD & CO. (PVT.) LTD. VS FEDERATION OF PAKISTAN through Secretary Finance, 2011 PTD-LAHORE-HIGH-COURT-LAHORE 1122 (2011)

Income Tax Ordinance (XLIX of 2001)---

----S.177---Constitution of Pakistan, Art.199---Constitutional petition---Selection of case for audit---Initiation of audit proceedings by authority without deciding assessee's claim of immunity from such proceedings---Validity---Before selecting a case for audit, Authority was legally bound to decide through a speaking order whether assessee was liable to assessment/filing of return and payment of tax---High Court directed assessee to move application to the Authority setting out therein grounds of immunity and further directed Authority to hear assessee and pass speaking order thereon, and then proceed in accordance with law.

Mian Ashiq Hussain for Petitioner.

Muhammad Ilyas Khan for Respondents.

ORDER

IJAZ UL AHSAN, J.---Through this single order I propose to dispose of petitions listed in the schedule hereto as identical question of law arise in all these petitions.

2. Through these petitions, the petitioners have challenged their selection for the purpose of Audit under section 177 of the Income Tax Ordinance, 2001 and referral of their cases to different chartered Accountants for the purpose of commencement of audit proceedings. During the course of arguments it has transpired that in a number of cases one of the grounds taken by the petitioners is that they are not liable to assessment under the relevant laws including the Sales Tax Act, Federal Excise Act and Income Tax Ordinance, 2001. It is argued that despite the fact that they are not liable to assessment are subject to final Tax regime under section 148(7) of the Income Tax Ordinance and have filed audited accounts and reports as required by law notices for audit of their accounts have been issued and the matter has been referred to different Chartered Accountants by the Commissioners for the purpose of commencement of audit proceedings. It is submitted that this would be an exercise in futility.

3. It appears that the department has not gone through the exercise of first determining whether a person company or entity is liable ,to assessment/filing returns and payment of tax before including names of such persons, companies or entities for the purpose of selection for audit.

4. It, therefore, appears appropriate to direct the petitioners who claim that they were not liable to assessment/file returns/pay tax to move appropriate applications with the department setting out all grounds on the basis of which they claim immunity from Audit Proceedings and, therefore, not amenable to audit of their accounts. The department shall hear the petitioners in this regard and pass speaking orders in the light of various notifications/letters issued by the Federal Board of Revenue, provisions of relevant laws and judgments of this court as well, as Hon'ble Supreme Court of Pakistan. Once such orders have been passed and determination has been made on the question whether or not an applicant is liable to assessment/file returns/pay taxes, the department may proceed further in accordance with law.

5. There is consensus between the parties on the point that this exercise will cut short the controversy regarding audit, proceedings pending before this Court, save valuable judicial time and avoid an exercise which may ultimately be found to be futile. With the consent of the learned counsel for the petitioners as well as the Revenue, it is, therefore, directed that the petitioners may, if they have not already done so, move appropriate applications with the concerned Commissioners/ Competent authorities. The Commissioners/Competent authorities shall hear the petitioners and decide their applications through reasoned orders within a period of four weeks. Let the petitioners appear before the respective Commissioners/Competent Authorities on 6-4-2011. The Commissioners/Competent Authorities shall make arrangements to ensure that each petitioner is given a specific date of hearing.

6. The audit proceedings shall remain deferred for the aforesaid period of 4 weeks/till the matters are filially decided by the Commissioners/Competent Authorities.

7. These petitions are disposed of with the above directions.

S.A.K./B-11/LOrder accordingly.