' CH. ANWAAR UL HAQ, (JUDICIAL MEMBER).---The titled cross appeals pertaining to tax year, 2008, have been preferred at the instance of Taxpayer and Revenue, arising out of order dated 23-4-2011 passed by the learned CIR(A), Lahore. The taxpayer also preferred miscellaneous application through which following Additional Grounds of Appeal were raised which are admitted for adjudication:--
(i) That the selection of case for audit is illegal and unjustified and its resultant assessment is void- ab initio.
(ii) That without prejudice to the above ground, the assessing officer has no jurisdiction under law to modify the assessm ent right from assessment year, 2001 upto tax year, 2007. This action of assessing authority is legally not maintainable and the order on this point is liable to be cancelled straight way.
2. Brief facts of the case as transpired from the record are that the taxpayer being a listed public limited company is engaged in the business of spinning, weaving, dyeing, stitching, processing, doubling and sizing of yarn. The taxpayer filed return of income under Universal Self-Assessment Scheme which was deemed to be treated as assessment in terms of section 120 (1) of the Income Tax Ordinance, 2001. Later on the taxpayer's case was selected for audit under section 177(4) of the Income Tax Ordinance, 2001 by the concerned Commissioner Inland Revenue, Audit Division. The audit proceedings were initiated by the concerned assessing authority and finally in consequence thereof the assessing officer amended assessment under section 122(1) and made certain additions on account of depreciation, financial expenses and other issues. Being dissatisfied with the order passed under section 122(1) read with section 177 of the Income Tax Ordinance, 2001, the taxpayer filed an appeal before the learned CIR(A), who partially allowed the appeal and confirmed the addition on account of depreciation, gain on sale of business assets and research expenses. Wherein further he remanded the issue of interest on short term borrowings to the Assessing Officer. Against this impugned order the Taxpayer as well as Revenue have filed present appeals.
3. Before us, the learned AR of the appellant at the very outset contented that selection of case by the Commissioner Inland Revenue, Audit Division is totally unlawful and unwarranted. It was argued that the Board had directed the Department through letter C. No.4(7S)ITP/2009 dated 9-1-2010 to close the audit proceedings initiated in respect of tax year, 2008 but in the instant case the department had not complied with the directions. The contents of the Circular read as follows:-- "SUBJECT: AUDIT PROCEEDING FOR THE TAX 2008 ' Please refer to the proceedings of the meeting held by the Chairman FBR with the minutes of Income Tax Bar Association, Karachi, on 9th January, 2010 at F.B.R. Camp Office, Income Tax House, Karachi.
(2) As already decided in the Third Chief Commissioner's conference held on 19-12-2009 at "P" Block Auditorium Pakistan Secretariat and as conveyed through the minutes of this meeting dated 11-1- 2010, since random audit selection of cases for Tax Year, 2008 has been held for audit of Corporate cases and cases of AOPs, the cases of audit on any other basis for tax year, 2008 may be closed.
However, the cases with proof or evidence of gross irregularities may be intimated to the Board for guidelines as to further necessary action.
(3) These instruction may also be brought to the knowledge of all concerned."
4. The learned counsel for the taxpayer however, further argued that the Honourable Supreme Court of Pakistan in the case reported as 2012 PTD 693, has set aside the judgment dated 14th July, 2009 and 22nd October, 2009 and directed the department to follow the policy in letter and sprit circulated by the FBR reproduced above and if the letters have not been withdrawn, reasons should be assigned and after providing opportunity to the respondents, it be clearly pointed out to them that their cases are not covered under the policy and they may apply afresh if need be and if the department intends to proceed, then sufficient opportunity be given to the taxpayers to put up their arguments so that no prejudice may cause to them in any manner.
5. On the other hand the learned DR contented that the case of the taxpayer was selected for audit on a date preceding the date on which administrative instructions were received from the Board and therefore, Commissioner Audit Lahore was vested rightly with jurisdiction to select the case for audit under provisions of section 177(4) of the Income Tax Ordinance, 2001. DR further submitted that the said Board instructions would apply to cases of audit selected on .Any basis other than random ballot for tax year, 2008 in which proceedings were pending on the date instructions was received from Board. It is obvious that proceedings in such cases could be closed where proceedings were pending on the date, Board Circular was received but it was not the situation in the present case because the assessing officer had already finalized the proceedings before Board instructions were communicated on 9-1-2010. No provision of law authorizes the assessing officer to close proceedings in a case that has already been finalized.
6. We have heard the arguments of both the parties and have perused the available case record.
Perusal of the record reveals that the case of the taxpayer was selected for audit by the learned CIR, Audit Division, under section 177(4) of the Income Tax Ordinance, 2001. The case was assigned to the Assistant Commissioner, Audit-04, LTU, Lahore, who finalized the case on 31-5-2009.
7. The Federal Board of Revenue through Circular No.4(7S)ITP/2009 dated 9-1-2010 directed the field formations that as conveyed through the minutes of meeting dated 11-1-2010, random audit selection of cases for tax year, 2008 has been held for Audit of Corporate cases and cases of AOPs, the cases of audit on any other basis for tax year, 2008 may be closed. However, the cases with proof or evidence of gross irregularities may be intimated to the Board for guidelines as to further necessary action.
8. Perusal of the above discussion would reveal that the instant case was selected for audit on 26- 2-2009 and proceedings were finalized on 31-5-2009, much before that Board Circular dated 9-1- 2010 through which instructions to the field formation were conveyed that cases of Corporate cases and cases of AOPs have been selected through random ballot for tax year, 2008 for audit and therefore, the cases of audit on any other basis for tax year, 2008 may be closed.
9. Thus the Board instructions would apply to cases of audit selected on any basis other than random ballot for tax year, 2008 in which proceedings were pending on the date instruction was received from Board. It is obvious that proceedings in such cases could be closed where proceedings were pending on the date, Board Circular was received but it was not the situation in the present case because the Assessing Officer had already finalized the proceedings on 31-5- 2009 before Board instructions were communicated on 9-1-2010 and the submissions of the DR that policy letter of the board is not applicable to the instant taxpayer. When these facts were confronted to the AR of the taxpayer who submitted that 'firstly' it is settled law that an appeal is the continuation of assessm ent proceedings and the policy laid down by the Board is applicable to its case, secondly, he drew our attention to the following case-laws wherein it has been held by the superior Courts that "unless the law makes it prospective in clear and un-ambiguous terms, is always retrospective."
(i) 1993 SCM R 73 CIT v. Shahnawaz Ltd.
(ii) 1992 SCM R 1652 Army Welfare Sugar Mills Ltd v. FOP.
(iii) (2008) PTD 140(H C) CIT v. Ellcot Spinning Mills Ltd.
10. To support his contention that appeals are continuous assessment proceedings, he also made reference to the judgment of Honorable Supreme Court of Pakistan reported as 1992 PTD 1681 in re: Central Board of Revenue and others v. Chanda Motors, relevant portion of the said judgment is reproduced below:--
17. It is the language used in Paragraph 111(d) of Circular 9 of 1985, which requires detailed examination. What is meant by "assessments already finalised"? "Assessment" is defined in the Income Tax Ordinance, 1979, as including re-assessment and additional assessment, which shows that scope of assessment, is wider and larger than its ordinary meaning. Word "finalized " is derived from the word final" is which as defined in the Chambers 20th Century Dictionary to mean "last, decisive, conclusive: respecting the end or motive of a judgment ready for execution-last of series". "Finality" is defined as state of being final. Completeness or conclusiveness.
In Black's Law Dictionary, Fifth Edition, word "Final" is defined as, "last; conclusive, decisive, definitive; terminated; completed". In its use in reference to legal actions this word is generally contrasted with "interlocutory". Viewed in the light of meanings of the words "assessments" and finalized", it appears that assessment orders as such do not have touch of finality unless all the forums are exhausted in which such orders can be challenged so that the order takes the shape of final decision.
18. Legally speaking order of assessment passed by Income Tax Officer is an order of original authority but is not final for the reason that it can be challenged in appeal or revision as the case may be and would be final only when it goes through all the forums and the finding of the last forum shall be binding as conclusive.
19. The question whether appeal and other remedies provided under the law formed part of the proceedings or not came up for consideration before the Supreme Court of India in the case of Garikapati Vecraya v. N. Subbiah Choudhry and others reported in PLD 1957 Supreme Court (Ind.) 448. It is held as per majority opinion that legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding. Reference can be made to the case of Commissioner of Wealth Tax v. Vimlaben Vadilal Mehta reported in (1984) 145 ITR 11, in which it is held that it is well-settled that when an appeal is filed against an assessment order before the AAC, the assessment is thrown open and the Appellate proceeding constitutes a continuation of the assessment proceedings.
11. In the light of above judgment, it is clear that the appellate proceedings constitute continuation of assessm ent proceedings. The arguments advanced by the AR carry much weight and therefore, we are in line with arguments of the AR and accordingly hold that the present taxpayer is also covered in the said policy guidelines issued by the Board. Reliance in this regard is also placed on a recent decision of this Tribunal in the case reported as (2014) 109 Tax 184 (Trib.) in re: Messrs Ashraf Engineering Corporation, Lahore v. CIR, which is "on all fours" applicable in the instant case.
12. In view of the above and by following the dicta of the Apex Court of the country delivered in the judgment reported as 2012 PTD 693 (SC), the matter is directed to be treated as closed for the time being with the following course of action as directed by the I D Honourable Supreme Court of Pakistan:--
(i) Following the policy guidelines contained in FBR's letter C No. 4(7s)ITP/2009 dated 9-1-2010, reproduced in judgment of the apex Court quoted supra, in letter and spirit, for assigning reason for not withdrawing the letter for audit, if no reason should be assigned and after providing opportunity to the appellant, it be clearly pointed out that his case is not covered under the policy and he may apply afresh if need be.
(ii) If the Commissioner, Inland Revenue still intends to proceed, then sufficient opportunity be given to the appellant to put up the plea so that no prejudice may cause to him in any manner.
(iii) The cases of audit on any basis for the tax year, 2008 may be closed. However, the cases with proof or evidence of gross or irregularities may be intimated to the Board for guidelines to further necessary action.
13. For the reasons stated supra, the appeal of the appellant is disposed of in the above manner and orders of both the authorities are vacated. Since, we have disposed of the appeal of the taxpayer on legal grounds, other grounds of appeal need not to be adjudicated. Accordingly, the appeal of the department has become infrucutuous and therefore the same is dismissed.