Lahore High Court (LHC) has granted stay against a notice issued by Inland Revenue Officer (IRO) to a taxpayer, seeking information or evidence under Section 176 of the Income Tax Ordinance, 2001.
It is learnt here Saturday that a taxpayer had challenged the notices issued under Sections 176 and 161/205 of the Income Tax Ordinance with the submissions that IRO has no authority to invoke provisions of Section 176 of the Ordinance exclusively without any enabling provision, for carrying out inquiry and stay has been granted by LHC with the order that proceedings under the impugned notice shall be stayed.
When contacted, tax lawyer Waheed Shahzad Butt who pleaded the case before LHC stated that unbridled move under the umbrella of powers exercised under section 176 by the field formations of FBR without any check and balance is void ab-initio and without lawful jurisdiction. The same is also against the guarantees given under Articles 4, 10A, 14, 18 and 25 of the Constitution.
The case has been pleaded by the lawyer on behalf of a Sialkot-based Petitioner wherein LHC has granted interim relief. The petitioner contended "petitioner company is a manufacturer by status and engaged in exporters, as 100 percent of its sales are exports. In the stated background the provisions of sub-section (1) of Section 153 of the Ordinance shall not apply to the Petitioner being manufacturer-cum-exporter as the prescribed person.
Subsequently, filing of return of total income and regularly filing of monthly withholding tax statement all of a sudden, the IRO, on the strength of void authority delegated by Commissioner-IR, issued a void notice requiring certain vague information from the Petitioner under the garb/umbrella of powers exercised u/s 176 of the Ordinance. Without discussing or rejecting the basic jurisdictional objections raised by the Petitioner, the IRO is compelling the Petitioner through notice u/s 161/205 to attend the proceedings and submit documents in response to fairy tales stories communicated by the IRO. The issuance of notices by the IRO are un-constitutional, illegal, arbitrary, discriminatory, violative of the norms of natural justice, blind exercise of discretionary powers, and without lawful authority: Petitioner stated.
Petitioner further added "the notices issued by the IRO in terms of Section 176 and 161 of the Ordinance are illegal and without jurisdiction being overstepping the lawful jurisdiction available with IRO(s). Assumption of jurisdiction by the IRO by flouting the clearly worded law in shape of Clause 45 of Part IV of Second Schedule to the Ordinance is highly unjust, unconstitutional and a nullity in the eyes of law.
The authority to issue any notice u/s 176 ibid is vested in the CIR. The approval by CIR whereunder the IRO has assumed jurisdiction, is a controversial piece of delegated legislation providing source of undue harassment of taxpayers. Any information sought must be relevant to any tax leviable under the Ordinance. Such relevance must be specified in the Notice served under Section 176 of the Ordinance. Inasmuch as the powers conferred under Section 176 of the Ordinance is a serious restriction or limitation upon the fundamental rights of the citizens under Articles 4, 10A, 14, 18 and 25 of the Constitution, therefore, the provisions of Section 176 must be construed in such a manner so as to avoid any unreasonable encroachment upon such fundamental rights and the conditions prescribed by the legislature for the assumption and exercise of jurisdiction under Section 176 must be strictly complied with, failing which, judicial intervention is justified.
The IRO has no lawful authority whatsoever to issue any notice under Section 176 and 161 of the Ordinance, therefore, the impugned notices have been issued without lawful authority. It is not manifest as to how the information required by or confronted by IRO is relevant to any "tax leviable" or "tax deductible/recoverable", which is a condition precedent for the assumption and exercise of jurisdiction under Section 176 and 161. According to the scheme of the Ordinance after submission of return under Sections 114(1), 114(4) or Statement u/s 115(4) assessment stands completed as provided u/s 120 of the Ordinance and thereafter no action can be taken against the taxpayer by any tax authority unless jurisdiction is assumed under relevant provision of the Ordinance.
Provisions of section 176 of the Ordinance can only be invoked for obtaining/getting any information, document, record etc when any proceedings under sections 122, 177 or any other relevant provision of the Ordinance have already been initiated. The issuance of notice u/s 176 without there being any initiation of proceeding under sections 122, 177 or any other relevant provision of the Ordinance would be void, illegal, unjustified, unsustainable and without proper assumption of jurisdiction as the same would tantamount to fishing inquiries which action has largely been disapproved by the higher/superior judiciary of the country:
There is no concept of "unfettered discretion" in the fiscal laws of this land and arbitrary exercise of discretionary powers has to be struck down. If the IRO is permitted to conduct the void proceedings without adhering to any lawful jurisdiction then it will compromise the neutrality of the taxation system. It will also create a statutory anomaly whereby the IRO has to exercise jurisdiction within four corners of law; the petitioner added.
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