Selection of taxpayers' cases for income tax audit whose income tax affairs have been audited in any of the preceding three tax years is in derogation of the exemption allowed to the petitioner.
It is not only arbitrary and against the law, but also militated against good governance.
Tax experts are of the view that after insertion of clause 105, the provisions of sections 177 and 214C of the Income Tax Ordinance, 2001 are inapplicable to the case of the petitioner for the tax year 2017, therefore, such a selection is patently illegal, unlawful and without jurisdiction.
They said the RTOs are involved in harassing taxpayers despite the exemption they are enjoying from application of the provisions of sections 177 and 214C.
According to them, Article 4 of the Constitution envisages that the public functionaries are duty-bound to act within the mandate given under the law and if any authority or office is restrained under the law from taking any action then the authority or office shall so restrain for the advancement of the purpose of the law.
Talking to Business Recorder, tax expert Muhammad Shahid Baig said the legislature in its wisdom inserted the clause (105) in Part-IV of the Second Schedule to the Ordinance through Finance Act, 2018, to provide immunity to the taxpayers from the selection of a case for an audit of income tax affairs u/s 177 and 214C if the case of a taxpayer has already been audited in any of the preceding three tax years.
The exemption under clause (105) is not only from the selection of audit rather it exempts the taxpayer from all the provisions of sections 177 and 214C, therefore, the provision of sub-section (7) of section 177 is equally inapplicable to the cases falling in view of the provisions of clause (105).
According to him, the proviso to clause (105) provides the mechanism for selection of cases for audits whereby a taxpayer whose case has already been audited can be selected by the Commissioner for audit u/s 177 but only with the approval of the Board.
He said it is trite law that when a thing is required to be done in a particular manner then it should be done in that manner and not otherwise. Therefore, the selection for audit by the Commissioner without approval from the Board is liable to be set aside and declared void.
Every public functionary is bound to obey the command of Law and nobody should be penalized by any unlawful action of the public functionaries. The public functionaries should not hesitate to allow the benefit of exemption from audit to the petitioner under clause (105) of Part-IV of Second Schedule to the Ordinance, for the interests of justice, he added.
Baig said a Commissioner while selecting the case for an audit of income tax affairs u/s 177(1) is required to give reasons for selection, which should be based on some objective criteria otherwise the same is a violation of law as enunciated by the superior courts.
He insisted that there is no concept of "unfettered discretion" in the fiscal laws of the land and arbitrary exercise of powers has to be struck down. It has been held by the Supreme Court of Pakistan in a case reported as "2001 SCMR 256" that discretion becomes an act of discrimination when it is improper or capricious exercise or abuse of discretionary authority and the person against whom that discretion is exercised faces certain appreciable disadvantages which he would not have faced otherwise.
Some other taxpayers have pointed out that a taxpayer could not be made to suffer for any action of the authorities who are obliged to follow the law and are responsible for taking an appropriate action.
The affected taxpayers have urged Chairman Federal Board of Revenue to declare all such notices as illegal, void ab-initio and of no legal effect.