' CH. ANWAAR UL HAQ (JUDICIAL MEMBER).---Through this appeal, the appellant has objected the impugned order of the learned CIT(A) dated 31-12-2012 on a number of grounds.
2. Brief facts of the case as transpired from the record are that the taxpayer is a private limited company engaged in the business of manufacturing and sales of chemicals. The taxpayer filed its income tax return for the tax year 2010, declaring income at Rs,531,617 under Universal Self- Assessm ent Scheme. Later on, the case was selected for composite audit under section 214C of the Income Tax Ordinance, 2001 by the Federal Board of Revenue. As per list of cases selected for audit by the FBR the appellant's case falls at S.No,14. In consequence thereof the statutory notices were issued requiring the appellant to produce complete books of accounts along_ with necessary vouchers/details/ documents in support of its declared results but no compliance was made.
Finally the assessing officer issued notice under section 121(1)(d) read with section 177(10) of the Income Tax Ordinance, 2001 informing the appellant to finalize the assessment ex parte to the best of her judgment and also confronted certain proposed additions. The appellant did not bothered to reply the notice and accordingly the assessing officer passed an order ex parte under section 121(1)
(d) of the Income Tax Ordinance, 2001 vide order dated 2-6-2012.
3. Being dissatisfied with the order passed under section 121(1)(d) read with section 177(10) of the Income Tax Ordinance, 2001, the taxpayer filed appeal on a number of grounds before the learned CIR(A), who also dismissed the same vide impugned order dated 31-12-2012.
4. Before us, the learned AR of the appellant at the very outset contented in terms of ground No,2 that very selection of case by the Federal Board of Revenue under section 214C of the Income Tax Ordinance, 2001 is illegal and void ab initio, therefore, the superstructure built thereon in the shape of passing of an assessm ent order as well as impugned appellate order automatically falls to ground. He submitted that the "composite audit", which was being held pursuant to the computer ballot, meant an audit of both Income Tax and Sales Tax affairs, which could not be combined in this manner. Learned counsel for the appellant also pointed out that it was only the Federal Excise Act, 2005 which recognized the concept of a composite audit under section 46(5) of the said Act.
Thus, on any view of the matter, the entire exercise was unlawful. Reliance was placed on the judgment titled as Messrs Shahnawaz (Pvt.) LTD. v. FOP and others (2011 PTD 1558).
5. The learned AR further contented that the Board is vested with powers for selection for audit independently and separatelyy under section 214C of the Income Tax Ordinance, 2001, 72B of the Sales Tax Act, 1990 and 42B of the Federal Excise Act, 2005 on parametrical or random basis, The Board subsequently in respect of tax year 2011 has exercised its right for parametric selection through single balloting dated 13-11-2012. The said ballot was challenged before the Lahore High Court, Lahore in the case titled as Messrs Premier Industrial Chemical Manufacturing Co. v. CIR and others (2013 PTD 398) wherein during the course of hearing the consensus arrived among the parties and accordingly the case was decided with certain directions for fresh' selection independently under section 214C of the Income Tax Ordinance, 2001, 72B of the Sales Tax Act, 1990 and 42B of the Federal Excise Act, 2005. The learned AR further states that alleged selection for the year 2010 for audit has also been made by the Member Audit and not by the Board (FBR) itself as required under section 214C of the Income Tax Ordinance, 2001. The parent statutes do not permit re-delegation. It is settled law that the authority to which the power is delegated in the first place would not be permitted to re-delegate the same to a sub-ordinate authority. It is also settled law that where the law requires an act to be done/performed in a particular manner it should be so performed and not otherwise and that what cannot be done directly cannot be done indirectly, the said principal is attracted in the instant case. If the express provision of law has conferred power for the exercise of an authority by a particular person or body, it should only be exercised strictly in accord thereto. And, if there is no provision for the delegation/sub-delegation in the law, under no rule or principle of law, such power could be exercised by any other person/body, on the basis of delegation by whom, such power is exercisable under the law.
6. On the other hand the learned DR has supported the order of the Deputy Commissioner Inland Revenue as well as the impugned appellate order.
7. We have heard the arguments of both the parties and have perused the available case record.
The expression "composite audit" came up for consideration before Hon'ble Sindh High Court, in the above referred case of Messrs Shahnawaz (Pvt.) Ltd., wherein their lordships declared the composite audit illegal and without lawful authority in the following manner:-- "23. We now turn to consider the second important aspect of the matter before us, namely, the issue of the "composite audit". This term is not defined or used in either the 2001 Ordinance or the Sales Tax Act, 1990 ("1990 Act"). As noted above, as used by the board, it indicates that the persons selected through the computer ballot will be audited for both their income tax and sales tax affairs. Learned counsel for the petitioners contended that this is not legally permissible, and after a review of the relevant provisions, we are inclined to accept this submission. Both the statutes question contain provisions for audit, and those in relation to the 2001 Ordinance have been examined in detail in the paras supra. Sections 25 and 32A deal with audit under the 1990 Act, and these provisions, though sharing some similarities with section 177, are cast in somewhat different terms. There also does not appear to be any equivalent to section 214C in the 1990 Act. The exercise of any statutory powers relating to audit under one law obviously cannot result in action being taken under the other, since each is necessarily governed only be its own provisions. It is to be noted that even the relevant authorities under the two laws are different, being the income tax authorities under the 2001 Ordinance (section 207) and the sales tax authorities under the 1990 Act (see section 30). The concerned authority under each law has to apply its mind independently to the relevant statutory provisions in order to determine whether, and if so how, an audit is to be called under the concerned law, and how a person is to be selected for such an audit. It is also significant that while section 207 expressly recognizes the Board as the authority at the apex of the income tax authorities, section does not, as such, recognize the Board as part of the sales tax authorities. Furthermore, while the Board has power to call for an audit under both sections 177 and 214C (in the manner as explained above), it has only the power to call for a "special audit" under section 32A of the 1990 Act, and no such power at all under section 25 thereof. The Board cannot simply therefore apply the provisions of one law to the other, and direct that the taxpayer selected for audit under the 2001 Ordinance by way of computer ballot shall also be called for a sales tax audit or vice versa. This last point also has another aspect. Even assuming for the moment that a computer ballot could be held under both laws for selecting person for audit, a combined selection under one ballot would still be unlawful. The reason is that if ballots were held separately under the two laws, it is quite possible that a person could be selected under one, but not the other. The combined ballot exposes a person simultaneously to the "double jeopardy" of an audit of both sales tax affairs as well as income tax affairs, for which there does not appear to be any warrant in law. In this context, it is also to be noted, as pointed out by learned counsel for the petitioners, that the Federal Excise Act, 2005 does provide (in its section 46(5)) for a composite audit. It seems therefore that wherever a composite audit was deemed appropriate, the legislative intent was clearly stated, and the absence of any such provision in either the 2001 Ordinance or the 1990 Act indicates that no such audit is permissible in relation to these two laws. For all of the foregoing reasons, we are therefore of the view that the "composite audit" in the present case was also without lawful authority. "
8. Similar question also came before the honourable Lahore High Court, Lahore in the above quoted case of Messrs Premier Industrial Chemical Manufacturing Co. (2013 PTD 398), whereby the consensus arrived among the parties and accordingly the case was decided with certain directions for afresh selection independently under section 214C of the Income Tax Ordinance, 2001, 72B of the Sales Tax Act, 1990 and 42B of the Federal Excise Act, 2005. The question of delegation of powers of the Board in terms of section 214C of the Income Tax Ordinance, 2001, 72B of the Sales Tax Act, 1990 and 42B of the Federal Excise Act, 2005 along with the vires of Rule 3 of the Federal Board of Revenue Rules, 2007 in the back ground of section 8 of the Federal Board of Revenue Act, 2007 Was also considered in the aforesaid judgment and on the request of the learned counsel for the Board who gave assurance to the Court that as the entire audit process would be conducted afresh, FBR will also reconsider the question of delegation. Relevant option of the said judgment reads as under:- "3. Additionally, the petitioners vehemently argued that the Federal Board of Revenue has not framed the parameters for selection of audit under the aforesaid laws. The parameters reflected in Letter dated 24-10-2012 issued by the Federal Board of Revenue, Taxpayer's Audit Wing has been issued under the signature of M. Majid Qureshi, Chief (Taxpayer's Audit) (who is present in person) but does not have the approval of the FBR. In response Dr. Tariq Masood, Additional Commissioner, FBR (HQ) Karachi on behalf of respondent FBR referred to Section 8 of the Federal Board of Revenue Act, 2007, as well as, Rule 3 of the Federal Board of Revenue Rules, 2007 ("Rules") to submit that said powers stand delegated to Member (Audit). He, however, admitted that there is no specific notification delegating the powers under the aforementioned audit provisions in favour of the Member (Audit) but justified the same by relying on Rule 3 (3) of the Rules to submit that the said powers can be exercised by the Member (Audit) till delegation takes place.
4. I was minded to proceed further to consider the question of delegation of the powers of the Board in terms of section 214C of the Income Tax Ordinance, 2001, section 72B of the. Sales Tax Act, 1990 and Section 42B of the Federal Excise Act, 2005 along with the vires of Rule 3 in the background of the parent Act i,e,, Federal Board of Revenue Act, 2007 and the legality of Letter dated 24-10-2012 issued by Chief (Taxpayer's Audit). However, at this stage learned counsel for the respondent Federal Board of Revenue, namely Mr. Muhammad Ilyas Khan, Advocate assured the court that as the entire audit process is being initiated afresh, FBR will also reconsider the question of delegation and will proceed in framing the parameters for selection of audit strictly in accordance with law. On this assurance given by the learned counsel for the respondent FBR, the question of delegation does not require further deliberation in this case. "
9 . In view of what has been discussed hereinabove and on a careful consideration of the legal proposition in the light of law and judgments quoted supra, the instant appeal is accepted and the orders of authorities below are vacated, as in the instant case the Board has also made a combined selection under one ballot in terms of section 214C of the Income Tax Ordinance, 2001 read with 72B of the Sales Tax Act, 1990 and 42B of the Federal Excise Act, 2005. Since the present appeal of the appellant has been decided purely on legal grounds, therefore, it is not necessary to dilate upon the other grounds of the appellant.
' Appeal Allowed.