' JAWAID MASOOD TAHIR BHATTI, CHAIRMAN.-- Through the subject appeal the appellant/taxpayer impugns the order dated 6-6-2012 passed by the learned first appellate authority while disposing of taxpayer's appeal for the tax year 2008 in respect of amendment order dated 30-8-2011 passed by the Deputy Commissioner Inland Revenue, Audit -- 2, Zone II, Large Taxpayers Unit, Lahore.
2. The learned first appellate authority rejected the taxpayer's appeal by observing that no ground could be entertained in appeal regarding the selection of case under section 177 of the Income Tax Ordinance:2001 (hereinafter referred to as the 'Ordinance'), the only point agitated before him by the appellant/taxpayer at the time of arguing the appeal culminating into the impugned order. In arriving at the conclusion, as aforesaid, it has been observed by the learned first appellate authority that no appeal was filed against the order under section 177 of the Ordinance and since it was the amendment order under section 122(1) of the Ordinance regarding which the appeal was filed by the appellant/taxpayer before him, therefore, he could only examine whether or not the requirements of the provisions of section 122 were fulfilled by the concerned officer.
2A. The taxpayer, in this case, is a private limited company in whose case the audit proceedings for the subject year i,e, tax year 2008 were outsourced to Messrs Baker rlly. Mahmood Idrees Qamar and Co., Chartered Accountants, Lahore through a process of random balloting carried out by the Federal Board of Revenue on 11-12-2009. It is an undisputed position that it was these audit proceedings that formed the basis of the amendment order dated 30-8-2011 passed by the learned taxation officer. It is also an admitted position that the honourable Sindh High Court, in its order reported as 2011 PTD 1558 has already held the subject computerized balloting dated 11-12- 2009 together with all audit proceedings held thereunder or in consequence thereof, to be without lawful authority and of no legal effect. It was in this background that the appellant/taxpayer before the first appellate authority assailed the amendment order by arguing that since the very basis for selection of case had been held by the honourable Sindh High Court to be null and void, therefore, the resultant amendment order, being equally a nullity in the eyes of law, was liable to be set at naught and vacated. The learned first appellate authority, however, did not agree with the submissions of the appellant/taxpayer for the reasons noted above.
3. Before us the learned counsel for the appellant/taxpayer vehemently opposed the findings of the learned first appellate authority and argued that these are in direct conflict with the well-settled principles repeatedly enunciated by the higher appellate authorities. It was submitted that courts have time and again held that where the very foundation of some proceedings is illegal the superstructure built thereon is equally illegal and hence could not be considered to be lawful or sustainable. In this respect, reliance was, placed on decision reported as 2010 PTD (Trib.) 1477 in which, in the context of similar issue as is involved in the subject appeal, this tribunal by reference to various other pronouncements reinforced the principle that any superstructure raised on illegal foundation would crumble and be set at naught and will be equally illegal as very foundation is not in accordance with law. By reference to this decision, it was argued that since there is no disagreement that the honourable Sindh High Court has already declared the selection to be null and void then how and on what basis the amendment order passed in pursuance of such selection could be allowed to hold the field, particularly when it has also been noted by the honourable Sindh High Court in the order, referred supra, that all audit proceedings held thereunder or in consequence thereof remained of no legal effect. The learned DR opposed the averment and submitted that since the order of the Sindh High Court has already been challenged before the honourable apex court, therefore, the same does not constitute to be considered as a final decision on the matter of selection and hence may not be followed.
4. We have heard both the representatives, perused the available record, given earnest consideration to the submissions of the rival parties and gone through the decisions relied upon by the learned counsel for the appellant/taxpayer. We do not find any merit in the submissions of the learned DR that since the decision of the honourable Sindh Court has already been challenged before the apex court, therefore, the same does not constitute the final decision regarding the validity or lawfulness of the selection of cases for audit. The position enunciated in the Constitution of Pakistan vis-a-vis Article 201 is clear and unambiguous. The decision of any High Court, on a point of law, remains binding unless overruled by the apex court. The subject decision having not been overruled by the apex court therefore constitutes binding precedent. No exception could be taken from what has been held by their lordships in the said judgment, especially when no contrary decision has been given by any other High Court of the country. Having this decision operative and valid in the field, there remains no complexity or complication for us to resolve the controversy involved in the subject appeal.
5. In our considered opinion, the following excerpts from the decision in 2010 PTD (Trib.) 1477 relied upon by the learned counsel for the appellant/taxpayer, clinches the controversy that whether or not the appellate authorities could proceed to hold an amendment order to be illegal/unlawful where the same has admittedly been passed in consequence of a 'selection' that had already been held to be unlawful by courts:-- "The next objection raised by the learned DR is that section 177 of the Ordinance is not appealable and, therefore, the arguments taken by the appellant needs to be disregarded. We are of the view that this objection raised by the learned DR is also unfounded and misplaced. In the present case, the appellant has challenged the amendment order under section 122(5) of the Ordinance which has been passed in pursuant of selection of case for audit in the manner discussed supra. The arguments of the appellant is that the amendment order issued under section 122(5) of the Ordinance is stand on an illegal foundation and that being the case said amendment order is liable to be annulled.
' We find force in the contention of the learned Counsel of the appellant that any order which is built on an illegal foundation is equally illegal and unsustainable in the eyes of law. The reliance in this regard may be placed on the decisions reported as 1993 PTD 85 (SHC), 1990 PTD 389 (SHC), 2006 PTD 276 (LHC), 2004 PTD (Trib.) 2691 and 2002 PTD (Trib.) 2512, wherein the consistent interpretation that arises out of these judgments is that any superstructure raised on an illegal foundation would crumble and set at naught and will be equally illegal as the very foundation is not in accordance with law. This principle shall be fully applicable in the present case once it is established that the very selection was contrary to the mandate available to the concerned Commissioner. Consequently, we do not agree with the objection raised by the learned DR and hold that one can challenge in appeal any amendment order on the grounds that the initial selection was illegal and if the said selection is observed to be illegal then of course the consequential amendment order would have the same fate...."
6. The contention of the learned counsel for the appellant/taxpayer, narrated supra, is unexceptionable and derives further strength from the decision of the honourable Islamabad High Court in 2008 PTD 1440 wherein his lordship held, in unequivocal terms, that in an appeal against the order of assessm ent the petitioner carries a right to urge that the case was wrongly selected for audit. In the background of the aforesaid findings contained in the order of the honourable Islamabad High Court one hardly needs any further debate to arrive at the conclusion that the reason advanced by the learned first appellate authority, in the impugned order, for rejecting the appeal was incorrect, improper, unlawful, illegal and without substance. The same could not be approved on any basis whatsoever. In concluding that in this case the orders of both the authorities below are liable to be cancelled and vacated, being based on illegal foundation, we are further fortified by the decision of this tribunal in I.T.A. No, 1386/LB/2011 dated 27-1-2012, placed before us by the learned counsel for the appellant/taxpayer, wherein this tribunal has already declared the assessm ent framed on the basis of selection dated 11-12-2009 to be unsustainable in the eyes of law.
7. Consequently, for what has been discussed above, we accept this appeal, vacate the orders of the authorities below and hold that the assessment finalized by the taxation officer was without jurisdiction and hence its confirmation by the learned first appellate authority was also null and void. Both the orders are cancelled.
8. Appeal of the taxpayer succeeds in the above manner.