The Federal Board of Revenue (FBR) has declared that commissioner has the jurisdiction to issue notices in exercise of his powers under section 177 of the Income Tax Ordinance, 2001 without selection of a person for audit by FBR under section 214C of the said Ordinance. Referring to the Lahore Hough Court's (LHC) judgement, the FBR has informed chief commissioners that the powers of the commissioner under section 177 were independent of the powers of the Board under section 214C and nothing contained in section 214C restricted his powers of calling for record or document, including books of account of the taxpayer for audit and to conduct audit under section 177 of the ITO.
The judgment of LHC on calling record from taxpayers has great significance not only for the reason that powers of the commissioner for audit under 177(1) of the ITO, 2001 have been recognised, but strengthened, as well.
In this regard, the FBR in the light of judgement of LHC has issued instructions to the field formations on the issue of calling of record by the commissioner for audit u/s 177(1) of the ITO, 2001 in W.P.No 4691/2010 and 310 other petitioners. According to the FBR, 311 petitioners had challenged the validity of notices issued by the Commissioner Inland Revenue for audit of their income tax affairs under section 177 of the ITO, 2001 for the tax year 2009 before the LHC.
However, the LHC vide order dated 27.05.2015 (F/A) while dismissing all these petitions has held that: "For reasons recorded above. I find that the impugned notices were validly issued, and the Commissioner had the jurisdiction to issue notices in exercise of his powers under section 177 of the ITO, without selection of a person for audit by the FBR under section 214C of the ITO."
The LHC in para-23 of its order has also observed: "The arguments of the learned Counsel for the petitioners that this power of Commissioner was taken away by virtue of Section 214C through Finance Act, 2010 is misconceived and not supported by the language of section 177 and 214C. If at all there was any ambiguity in the matter the legislature itself clarified and explained the same by inserting the afore-noted explanation where for removal of doubt it was declared that the powers of the Commissioner u/s 77 were independent of the powers of the Board u/s 214C and nothing contained in section 214C restricted the powers of the Commissioner to call for record or document including books of accounts of the taxpayer for audit and to conduct audit u/s 177 of the ITO."