RTOs accused of violating Section 214C of IT Ordinance

In a clear violation of section 214C of the Income Tax Ordinance, 2001, the Regional Tax Offices (RTOs) have started selecting cases for audit, manually. The commissioners in RTOs are either selecting cases for Tax Year 2010 and Tax Year 2011 or asking to make compliances of the pending cases picked manually for audit under section 177 of the Income Tax Ordinance, 2001.
Although the Federal Board of Revenue (FBR) after induction of section 214C in the Income Tax Ordinance, 2001 could only select cases for audit through computerised ballot, the cases are being selected manually and the taxpayers are being pressurised by the RTOs to produce books of accounts and other relevant documents for the purpose.
Karachi Tax Bar Association (KTBA) has also expressed concern over the issue in its written communication to the board, saying that by virtue of induction of section 214C in Income tax Ordinance, 2001, the power for selecting case for audit lies only with the board. It further said Lahore High Court (LHC) in its latest judgement declared section 177 as subservient to the section 214C, thus the board should initially select cases under section 214C for audit and then the same could be transferred to the commissioner for audit under section 177 of the Ordinance.
KTBA has also termed the first proviso to section 177(1) of the Income tax Ordinance, 2001 as unconstitutional and illegal, saying that the same violates article 25 and articles 10A, 18 and 23 of the Constitution besides being inconsistent with the scheme of the Ordinance. KTBA said this proviso could not be read down but separated from the statute in order to protect legislative theme behind the Ordinance and to maintain the constitutionality of the remaining statute. With this declaration, the second proviso to section 177(1) becomes practically redundant and ineffective, it maintained.
The association has further clarified that section 177(8) of the Ordinance will come into operation after a person has been selected for audit by the FBR under section 214C. Therefore, the KTBA has requested to withdraw the audit of the cases selected manually under sections 177 of the Income Tax Ordinance, 2001 and section 25 (1) of Sales Tax Act, 1990.