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Petitioner: Sahib Textile (Pvt.) Ltd. And Other VS Respondent: Federation Of Pakistan
Court Name: Lahore High Court Judge(s): Nasim Sikandar Title: Sahib Textile (Pvt.) Ltd. And Other vs Federation Of Pakistan Case No.: Writ Petition No. 9979 of 2003 Date of Judgment:2003-09-24 Reported As: PTCL 2004 CL. 43 Result: Petitions allowed
JUDGMENT
JUDGMENT MR. JUSTICE NASIM SIKANDAR.-(1). The Self Assessm ent Scheme (for short SAS) found its way in the statute as section 59 of the late Income Tax Ordinance, 1979. Earlier rule 46 was added to Income Tax Rules, 1962 on 25th August, 1964 which allowed the Income Tax Officer a discretion to complete assessm ents under section 23(1) of the Income Tax Act, 1922 in respect of certain categories of assessee, mostly salaried, on the basis of declared income. Section 59(1) of the late Income Tax Ordinance, 1979, at the time of its enforcement on 1-7-1979 provided:- "(i) Where the return of total income for any income year has been furnished by an assessee, the Income Tax Officer may, by an order in writing made before an assessment is made under sections 62, 63, or 65 as the case may be, determine the total income of the assessee and the tax payable by him on the basis of such return." 2.Section 59(1) was amended in the very next year viz. 1980 providing for the first time a scheme of self-assessm ent to be made by the Central Board of Revenue for that year. However, even before that amendment, the salient feature of a self-assessment scheme were published as part of budget document for the year, 1979-80. Thereafter Circular No. 3 of August, 13, 1979 was issued to give effect and to elaborate the scheme. 3.After identifying the kinds of assessee to be covered by the schemes para. 6 of the Circular stated that the Board shall select a number of cases or classes of cases for detailed scrutiny for which announcement was to be made within 15 days of the due date of filing of returns. These cases were to be kept out of the purview of SAS to be decided after thorough scrutiny of accounts. A number of circulars followed to explain parameters, mode and modalities of proposed scrutiny. 4.In the year, 1980-81 similar provisions were made to enable the Central Board of Revenue to
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select classes of cases or classes of income to be set apart for detailed scrutiny where ever deemed fit. In the year, 1981-82, the cases of certain professions car-dealers, recruiting agents etc. Were directed to be set apart for detailed scrutiny. In the year, 1982-83 besides provisions for setting apart, para. 9 was added to the scheme to cover concealment cases. It provided "Notwithstanding anything contained in the preceding paragraph, the cases where positive evidence of concealment exists or comes into possession of the department during the pendency of the assessm ent, such cases shall fall outside the purview of self-assessment scheme as well as from immunity from scrutiny, irrespective of the quantum of income declared or certificate furnished by the Chartered Accountant". 5.In the year, 1983-84 again the Central Board of Revenue arrogated to itself the selection of cases for detailed scrutiny "under a policy to be announced after the receipt of returns". Subsequently through Circular No.14 dated of November 24, 1983 certain categories of the business and profession, Flour Mills, beverage manufactures, commercial importers etc. Were selected for that purpose. However, still the Central Board of Revenue further reserved its right to select other cases as well. In the year, 1984-85 Regional Commissioners of Income Tax were involved for selection of "individual cases under a policy to be announced after receipt of returns". Finally the procedure given in 1983-84 scheme was adopted picking up certain kinds of business or professions for detailed scrutiny but still reserving the privilege of Central Board of Revenue to select other cases. In the scheme for the year 1985-86 for the first time the computers were involved for selection to "be made on the basis of random sample through the computer." The selection of classes of cases or classes of persons was to have the approval of Finance Minister and the selection among each such classes for detailed scrutiny was to be "on the basis of random sample through computer." In the year, 1986-87 an immunity from detailed scrutiny was provided for the assessee declaring 20% more income than in the previous year. In the year, 1987-88 for the first time the selection of number of cases for scrutiny was to be a percentage "on the basis of random sample through the computer." The Central Board of Revenue did not reserve any right nor a mode for itself or its officer to make selection for audit. In the years, 1988-89 and 1989-90 the scheme with similar features and characteristics was named as "simplified procedure for assessment". Section 59-B-was added to the late Ordinance through Finance Act, 1988 to give a legal cover to the new scheme which was however, meant for small earning groups only. The assessment on the basis of return filed was to be final "unless the Income Tax Department receives or discovers documentary evidence of concealment". Otherwise the acknowledgement of submission of return was deemed to be an order of assessm ent. No express provision for selection of cases for audit was given. That scheme was abandoned in the year 1990. In the year, 1990-91 self assessment scheme was again introduced. In the re-named scheme five per cent of the returns filed under the scheme were to be selected through computer and an unspecified number "with the approval of Regional Commissioner of Income Tax where gross under statement of income is suspected on the basis of definite information based upon material evidence". In the year, 1990-91 besides SAS a scheme of fixed tax was also sought to be introduced. That scheme does not appear to have received approval either from the assessee or the revenue. 6.The procedure and percentage of cases to be selected for total audit remained the same in the subsequent assessm ent years up to 1994-95 as it was for the year, 1990-91. In the year, 1995-96 the scheme was re-named as Broad Based Self Assessment Scheme (BBSAS) which did not provide for selection of cases for total audit. However, para 8 of the scheme notified on 11th July, 1995 contemplated acceptance of all returns with an over rider that a return could be subjected to concealment proceedings under section 65 of the late Income Tax Ordinance, 1979 where there was definite information of concealment of income or furnishing of inaccurate particulars. In other words a return filed amounted to a completed assessment and was to be reopened on the same
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basis and in the same manner as a regular assessment could be reopened under section 65 of the late Ordinance. 7.In the year, 1997-98 though the scheme retained its name yet it underwent some changes qua selection of cases out of the scheme. Unlike the earlier year, in para. 5 of the scheme it was stated that "a certain percentage of returns may be audited from amongst the returns filed by new tax payers under the scheme." Earlier in para. 4 it was explained that all returns meetings the requirements of scheme shall be accepted and no question shall be asked from the assessee. In the following two years viz. 1997-98 and 1998-99 the scheme was renamed as simplified self assessm ent scheme. In the first year viz., 1997-98 only 5% of returns were to be selected "for special audit through computer ballot". Also the scheme, for the first time provided for entrustment of selected cases to Chartered and Cost and Management Accountants for audit and the assessm ents to be made by Special Officers appointed in that behalf. Earlier section 4-A (private income tax authorities) was added in the late Income Tax Ordinance, 1979. It was completely substituted by section 4-A (appointment of Chartered Accountants) in the year, 1998. 8.In the second year viz., 1998-99 the percentage of cases to be selected through computer ballot was increased to 10% of the returns filed. A provision was also made to outsource the selected cases for audit purposes under section 4 or 4-A of the late Ordinance. In addition, the Central Board of Revenue retained its jurisdiction to "specify classes/categories of cases for special audit through separate circular." In the year, 1999-2000 the scheme had yet another name. This time it was notified as "Universal Self Assessment Scheme" (USAS) through Circular No. 18 of 1999. After a declaration in Para-2(b) that all returns of income for the year, 1999-2000 shall be entitled to benefit of self-assessm ent schemes except for certain specified taxpayers, (Banking Companies and Modarabas) para. 11 of the scheme held out an assurance that there will be no arbitrarily selection of cases for audit or scrutiny but cases of concealment/evasion of income will be brought to the notice of Regional Commissioners of Income Tax who may only "after counseling with the taxpayers take necessary decision for proceeding under normal law." In the next three years i.e. 2000-01, 2001-02, 2002-03 the scheme re-found its name as Self Assessment Scheme. Para-6 of the scheme in the year 2000-2001 provided for selection of 10% cases through random ballot and "Cases selected by CITs with the approval of RCITs concerned". In the latest two years viz. 2001-02 and 2002-03 para 9 of the scheme for selection of cases for audit remained exactly the same. Since that para in the year 2002-2003 is in issue in these Constitutional petitions, it is reproduced for facility of reference: SELECTION OF CASES FOR AUDIT (a) From amongst the returns filed under the Self Assessment Scheme (excluding salary and only property income cases), twenty per cent (20%) returns may be selected for total audit in the following manner:- (i)Through computer ballot which may be random or parametric, as deemed fit by CBR. (ii)By Regional Commissioners of Income Tax on the recommendations of Commissioners concerned, in the light of guidelines issued by the Central Board of Revenue in this behalf. (b)(Not relevant). 9.Before proceeding further, it is necessary that other aspects of the scheme in question are detailed to know precisely the grievance of the petitioners. The self-assessment scheme for the year 2002-03 was announced on 15-6-2002 through Circular No. 7 of 2002. Last date for filing of returns for non-company cases was fixed as 30-9-2002 (subsequently extended to 15-10-2002) and for company cases at 31-12-2002. After expiry of date fixed for filing of non-company cases the Central Board of Revenue on 17-12-02 issued a "policy guidelines" letter to all the Regional Commissioners of Income Tax. Para 2 of the letter reads as under:- "In order to fulfil the above obligation of the Scheme regarding issuance of the guidelines, it has
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been decided that the RCITs shall select only those revenue potential cases, where there is an evidence, information or reason to believe that the true particulars of income have been suppressed. Such selection may be based upon factor including an evident decline in income and disparity in expenses on utilities viz-a-viz income declared. Besides, cases of taxpayers acquiring new assets or incurring a liability of Rs.50,000/- or more through a non-institutional loan, as declared in their wealth statements or where department is otherwise in the knowledge of some investments made by them, also need to be considered for selection, if it is felt that sources of such acquisition/investment require detailed examination. In order to identify such cases the tax profiles of Survey and Registration may also be consulted." 10.In the last para of the above letter the Board desired that process of selection of cases must be finalized by 10-1-2003. However, that date was subsequently extended by the Board up to 31-3- 2003 for company cases through a letter issued on 15-3-2003. Another letter was issued by the Board on 22-3-2003 to extend the date for selection of non-company eases till 31-3-2003. Earlier on 31-1-2003 through a letter the Regional Commissioners were informed that due to filing of a small number of returns by the companies, the holding of ballot to select 20% cases out of that category was not logical and therefore, they were directed to select up to 20% returns for audit at their own level in the light of para-9 (2) (ii) of the Scheme and the guidelines of Central Board of Revenue dated 17-12-2002. 11.Now comes the bitter part of it. The petitioners are individuals, firms and in some cases companies limited by shares. All of them filed returns under self assessment scheme for the year 2002-2003. Their cases were selected for total audit by the concerned RCITs. Some of the cases were selected after the cut of date of 10-1-2003 given by the Central Board of Revenue in the said letter dated 17-12-2002. The selection of cases was admittedly made keeping in view the guidelines given by the Central Board of Revenue in its letter dated 17-12-2002. It is the case of the petitioners that selection of their cases based upon the said guidelines before or after the cut of date given in that letter is against para-9(a)(ii) of the Scheme. The reasons advanced at the bar follow as under:- (a)The circular No. 7 of 2002 circulating the scheme does not envisage issuance of fresh guidelines for selection of cases out of the scheme. The word "issued" as used in para-9(a)(ii) contemplates the guidelines either having already been issued or being issued simultaneously with the scheme. (b)After issuance of a scheme' the Board becomes functus officio to exercise the same power as vested in it under section 59(1) of the late Ordinance, the power to be exercised under section 59(1- A) again remains restricted to the scheme issued under section 59(1). (c)The power of the Board to make a scheme being a delegated power cannot be exercised twice. (d)Where all requirements of a scheme are answered the assessing officer is obliged to frame assessm ents in accordance with the return in view of the words "shall assess" used in section 59(1) of the late Ordinance. (e)The scheme once issued though can be explained or even softened but it cannot be changed to the detriment of the assessee to enlarge the scope for selection of cases out of the scheme. The guidelines issued by the Board on 17-12-2002 are in the form of a fresh scheme on the subject of selection of cases out of the scheme and therefore, are illegal on the face of it; that the aforesaid guidelines are not in accordance with the scheme particularly para 9 thereof. Factually these guidelines have taken away the benefit of SAS by extending unnecessarily the scope of the scheme. (f) As a ground reality, the selection of a case by RCIT will make it impossible for an assessee to convince the assessing officer of his point of view that there had not been any understatement. Also such selection will nullify the revisional powers of the RCITs conferred upon him under section 138 of the late Ordinance.
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(g)The impugned guidelines have destroyed the real sense and purpose of the self-assessment scheme as all returns are gone through and ignorable mistakes like leaving a column blank or settled issue as that of GP rate in a particular trade have been made grounds for plucking the returns out of scheme. (h)The issuance of letters extending the dates of finalization of selection of cases was also illegal as after expiry of the cut of date given in the letter dated 17-12-2002 the assessee acquired a vested right to get their returns finalized under the scheme. The extension is also stated to be bad for the reason that it was made after expiry of the original target date. (i)The letters extending dates for selection of cases were otherwise relevant only to the cases already picked up before 10-1-2003 and therefore, in the guise of these letters no fresh cases could be picked up for selection out of scheme. (j)Under section 20 of the General Clauses Act a scheme once issued cannot be amended and therefore, the guidelines are ultra vires of the powers of the Board. (k) The modification of scheme by letter dated 31-1-2003 asking the RCIT to select company cases at their own level instead of holding of ballot as stated in para-9 of the scheme is totally illegal. (l) The guidelines in order to have force of law were required to be published in the official gazette. That having not been done, these are not binding. These guidelines, otherwise having been issued six months after the scheme and more than two months after the filing of returns in non-company cases, could not be treated a part of the scheme nor any instructions or order issued thereunder. (m)Once an assessee has shown increased income to qualify for the scheme the Board has no moral authority to hook him through back door methods employed in the form of the said guidelines. (n)The process of selection for audit both through ballot and by the Regional Commissioners is not transparent. Till date the Board and the RCITs have not made public the details of the cases selected through ballot or through the RCITs and their percentage to be judged at the touch-stone of the figures given in para-9 of the scheme. (o) A scheme under the provisions of section 59 is in the nature of an offer and a promise held out to an assessee which, once accepted, cannot unilaterally be changed or amended particularly after the filing of the returns as the same would be against the principle of locus potentialise. 12.The revenue in rebuttal has taken up the position that no assessment order having so far been made in respect of any of the petitioners, they are not aggrieved persons to maintain Constitutional petitions, that having submitted their returns under the scheme the petitioners cannot dispute either the scheme or an instruction, orders or guidelines issued thereunder; that guidelines issued by the Board on 17-12-2002 are meant only to elaborate the scheme and it is neither an amendment nor an extension of the same; that fixation of cut of date for selection of cases and its extension is an administrative act and being in nature of a communication between the two official functionaries, it does not give rise to any right to an assessee; the fixation of a date for selection of cases and its extension being necessarily a policy matter, cannot be questioned in these proceedings, that extension in the cut of date was meant for allowing an opportunity of being heard to the assessee and therefore, being beneficial to them cannot be objected to by them. It is argued that the word "issued" in para 9(a)(ii) needs to be read as "to be issued" as the literal interpretation will result in absurdity to mean already issued even before the scheme, the guidelines, dated 17-12-2002 were issued to ensure objectivity, impartiality and transparency and therefore, these need to be appreciated in the same sense; the petitioners will have a right of appeal in case of framing of regular assessments and therefore, these petitions are not maintainable; that at best the vires of the scheme could be questioned in these proceedings which is not the case of the petitioners who are agitating selection of their individual case only; that guidelines being instructions issued by the Board are well covered by the provisions of section
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59(1) of the late Ordinance; that the basis for selection of a case for audit is a question of fact and therefore, cannot be challenged in these proceedings; that the scheme being optional an assessee having once availed the same cannot agitate the modes and modalities prescribed for its working; that irrespective of para 9 of the scheme and the guidelines dated 17-12-2002 a return filed under the scheme can always be taken up for regular assessment before the expiry of the period given in sub-section (4) of section 59 of the late Ordinance; that a scheme can always be changed and amended under section 21 of the General Clauses Act. 13.Heard the leamed counsel for the petitioners as well as the Revenue. The above grievances of the petitioner can very well be grouped into three. The first part pertains to para 9 of the scheme, the second to vires of the guidelines dated 17-12-2002 and the third to the different letters issued to extend the date for selection of company and non-company cases for total audit by the RCITs. 14.Taking up the third one first, I am not persuaded to agree that Central Board of Revenue has no authority to issue directions to the subordinate functionaries fixing a date for doing a job and then extending the same. Not only in matters of such scheme, the Board is otherwise competent to make orders under sections 7 and 8 of the late Ordinance, 1979 for the purposes mentioned in these provisions. I am not aware of any legal principle which directly means to create a vested right on the basis of a direction made by a higher revenue authority to a lower revenue authority touching a pure administrative act. The fixation of a cut off date for doing a particular job and then its extension is a pure policy matter falling absolutely within the domain of the officers in the official hierarchy. The fixation of that date had nothing to do with the assessee who had already filed their returns. The acceptance of contention of the petitioners may have chaotic results. For example if the Central Board of Revenue fixes a certain period for a certain officer or a region to recover the outstanding revenue and that deadline is not met by the concerned officer or the region, would it mean that the amounts which could not be recovered during that period had become non- recoverable or time-barred allowing the assessee-tax payers a right to refuse to pay. The same. The answer is a big NO. 15.As a rule, the accrual of a right immediately creates a corresponding liability. In the case in hand the extension in cut off date does not give birth to any corresponding liability or responsibility on the part of the tax-payers. The CBR by one of the aforesaid letters, as rightly pointed out by the leamed counsel for the revenue, rather required the Regional Commissioners to allow more time to the taxpayers before selection of their cases for total audit. It is also not correct on the part of the taxpayers to claim that issuance of such a direction destroyed the scheme in question or that it was otherwise harsh and unjust. In the final analysis the extension in time was not to the prejudice of the taxpayers as the purpose of extension was to allow them more time to place their view point before the revenue authorities that their cases could not be selected out of the scheme. Therefore, the reliance of the leamed counsel Mr. Shahbaz Butt, Advocate, on the ratio settled in re: Abdul Rauf and others v. Abdul Hamid Khan and others (PLD 1965 SC 671) is hardly of any avail. In that judgment the Hon'ble Supreme Court of Pakistan found that a mala fide act was by its nature was an act without jurisdiction. The act in question i.e. Extension in cut of date for selection can not be termed "mala fide" for the mere reason that possibly some more returns could be taken out of scheme in the meanwhile. The extention could be described mala fide only if the fixation of that date was itself mala fide which is not the case of the petitioners. The reliance of Mr. Siraj-ud-Din Khalid, Advocate, on re: Messrs Mardan Industries Ltd. v. Government of Pakistan and another (PLD 1965 Peshawar 47) is also impertinent. In that judgment the Hon'ble Peshawar High Court found a vested right as an immediate fixed right of present and future enjoyment in contra-distinction to a contingent right. 16.His reference to another judgment of the Hon'ble Peshawar High Court in re: Bannu Sugar Mills (Pvt.) Ltd. v. Inspector Customs and Central Excise (1990 CLC Peshawar 569) is also not of any avail.
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In that judgment the Hon'ble Court observed that vested rights could not be taken away by an executive action. Since in this case fixation of cut of date for selection of cases out of scheme did not confer any vested right on the assessee its taking away by another executive action does not arise at all. In re: Messrs Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan, Islamabad and 3 others (PLD 1996 Lahore 718 = PTCL 1997 CL. 1) a Division Bench of this Court observed that the impugned notification for withdrawal of exemption in the payment of sales tax could not be given retrospective effect and vested right could not be interfered with. That case relied upon at the bar by Mr. Siraj-ud-Din Khalid, Advocate, is also not relevant to the facts in hand. As observed earlier, the fixation of cut off date by a higher revenue authority to a lower in the hierarchy was a mere administrative communication between the two and its extension was as much an administrative act as its fixation was. The legal status of a…
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