Mr. Muhammad Imran Ghazi, Advocate for petitioner .
This constitutional petition seeks relief in following terms; -
1. Declare that the impugned selection of the petitioner for sales tax audit by the Respondents for tax period July 2014 through June 2020 is illegal, without lawful authority , and of no legal effect.
2. Declare that the impugned Show Cause Notice dated 24.12.2019 is also illegal, unconstitutional, without lawful authority , void ab initio and thus liable to be struck down.
3. Declare that the impugned Audit Policy 2016 for audit proceedings is ultra vires Article 25 of the Constitution as well as in violation of the order judgment of this Honourable Court".
2. Application bearing C.M. No 4705/202 0 along main petition are fixed today , both of which are decided through this single order .
3. Precisely the facts, essential for the adjudication of instant petition, are that petitioner - proprietor of M/s PLUS Enterprises - a registered person, was selected for the audit for tax periods, from July 2014 to June 2015, under section 72-B of Sales Tax Act 1990 (Act, 1990). Pursuant thereto, notice under section 25 of Act, 1990 was issued, calling upon petitioner to provide relevant documents for examination, which were provided. In wake of discrepancies identified, show cause notice, dated 21.05.2018, was issued. After intermittent appearances, petitioner absented itself, whereafter assessment order No.29/2018 dated 28.08.2018 was passed, determining the violations and liabilities. Petitioner challenged the assessment order , by filing appeal before the Commissioner Inland Revenue (Appeals-III) Lahore [CIR(A)], which appeal, after hearing, was partially allowed on 23.05.2019 - whereby principal amount was deleted, however , penalty and default surcharge were maintained. Dissatisfied, petitioner filed statutory appeal before learned Appellate Tribunal Inland Revenue. Lahore Bench, (ATIR), which appeal, after hearing, was disposed of through order of 16.10.2019, whereby matter was remanded to the Adjudication Officer for de-novo proceedings. Order dated 16.10.2019 was not challenged any further . Subsequent thereto, notice under section 11-B of Act, 1990 was issued on 20.11.2019. Petitioner responded on 04.12.2019 and sought closure of pending proceedings in wake decision in the case of TREET CORPORA TION LTD v.
FEDERA TION OF PAKIST AN and others (2018 PTD 1942 ). Respondent No.5 rejected contentions vide order of 24.12.2019, which order was not impugned at that point in time. Thereafter , intimation notice was again issued on 27.08.2020, wherein petitioner was asked to appear on 09.09.2020 and submit record / documents. Thereupon, petitioner opted to file instant constitutional petition. Now , I proceed to decide the matter .
C.M.No.4705/2020.
4. Through this application permission is sought to implead learned Appellate Tribunal Inland Revenue, (ATIR) as respondent. The request is devoid of any legal basis. Petitioner choose not to challenge the order dated 16.10.2019 by the ATIR - whereby matter was remanded for de-novo adjudication - despite remedy under section 47 of Act, 1990. In view of the failure of the petitioner to challenge order dated 16.10.2019 then, now, no permission can be granted to turn the clock back, and that too through a collateral attack. Application is unwarranted and same is, hereby , dismissed.
MAIN CASE
5. Learned counsel submits that selection for the audit and all proceedings subsequent thereto are illegal and without lawful authority , in view of the ratio of the decision in the case of TREET CORPORA TION LTD (supra).
Lastly submits that respondent No.5, while passing order dated 24.12.2019, erred in law while denying the benefit of said decision to the petitioner .
6. The case of the petitioner is distin guishable, on facts. It is expedient to highlight the facts of TREET CORPORA TION LTD (supra), which are that petitioner , a registered taxpayer , was informed vide letter dated 01.01.2017 regarding selection for audit, as a result of parametric computer balloting, details whereof were also published on the website of Federal Board of Revenue (FBR). Petitioner therein, forthwith, sought details regarding the parameters adopted and criteria devised for petitioner 's selection for audit, which were accordingly provided, and thereafter constitutional jurisdiction was invoked. In the case of TREET CORPORA TION LTD (supra), besides questioning selection for audit on account of alleged bias, prejudice and grievances, petitioner therein also challenged the vires / constitutionality of Tax-Payers Audit Policy 2016, (Policy 2016) which challenge was unequivocally rejected, and Policy 2016 was held constitutional. The case of TREET CORPORA TION LTD (supra) was decided in the context of aforesaid facts. And, when compared the facts of the case at hand are different, particularly the conduct of the petitioner and response to the selection for audit.
7. The fundamental question is that whether petitioner , at material time, raised objection qua its selection for audit or pleaded any purported grievance, bias or prejudice? Record reflected that objection to selection for audit was raised for the first time, while filling appeal before CIR (A) against the assessment order No.29/2018 dated 28.08.2018. Appeal before CIR(A) was filed on 27.03.2019 and decided on 02.05.2019. Order of CIR(A) was challenged before ATIR, which decided said appeal on 16.10.2019. Order 16.10 .2019 attained finality - though opportunity to file Reference application under section 47 of Act, 1990, and to raise question of law, was available - if petitioner was at all aggrieved of the selection or any apparent recurring prejudice - but not availed. Petitioner 's failure to invoke remedy manifests its acquiescence / acceptance to an act of selection for audit. And now petitioner is estopped to question such act / decision of selection for audit, through this petition, in view of the Article 114 of Qanoon-e-Shahadat Order 1984 and the doctrine of election of the remedies. See the case of TRADING CORPORA TION OF PAKIST AN v. DEVAN SUGAR MILLS LIMITED and others (PLD 2018 Supreme Court 828). Petitioner , has, by its conduct and subsequent actions, acquiesced to the selection for audit and waived any and all objections thereto, if at all any prejudice was allegedly caused as a consequence of selection for audit.
8. Learned counsel has argued that judgment in the case of TREET CORPORA TION LTD (supra) was a judgment in rem, benefit whereof can be claimed by the petitioner notwithstanding the fact that petitioner was not party thereto. The argument is fallacious. The decision in the case of TREET CORPORA TION LTD (supra) can at best be construed as res-judicata - between the parties thereto - and not to be confused with the rule of stare decisis.
The decision in the case of TREET CORPORA TION LTD (supra) was not a judgment in rem, but in personam - and therefore no benefit thereof can be extended to the petitioner . The vires / constitutionality of Policy 2016 was challenged, but rejected. Simplicitor the selection of the petitioner therein for audit - who has objected to the selection forthwith - and notice in respect thereof was set-aside. I wholly disagree with the construction advocated by learned counsel that, after the decision rendered in the case of TREET CORPORA TION LTD (supra), every single case of selection of audit is per-se illegal. The question is that whether decision in the TREET CORPORA TION (LTD). was a judgment in rem - constitute a 0precedent to be followed or a judgment in personam . To comprehend the distinction, reference to the decision in the case of MUHAMMAD SOHAIL and 2 others V. GOVERNMENT OF N.-W .F.P. and others (1996 SCMR 218) is apt, wherein principles of stare decisis, ratio decidendi and distinction between a judgment in personam, and judgment in rem, were elaborately discussed by making reference to the decision in the case of PIR BAKHSH REPRESENTED BY HIS LEGAL HEIRS AND OTHERS V. THE CHAIRMAN, ALLOTMENT COMMITTEE and others (PLD 1987 Supreme Court 145), relevant part thereof is reproduced here under as:- "Upon a consideration of what has been stated above, the formulation on behalf of the appellants cannot be accepted as it stands. In a controversy raising a dispute inter partes, the thing adjudged is conclusive as between the parties both on questions of act and law, but as to what the Court decides generally is the ratio decidendi or rule of law for which it is the authority . It is this ration decidendi which is applicable to subsequent cases presenting the same problem between third parties not involved in the original case nor will either of the original parties be bound in a subsequent dispute with a third party . It will be misnomer to say that this rule of law acts in rem, that is, as against the whole word as conceptually the applicability of the rule of law is either founded on the doctrine of precedent as under the English law or rule of stare decisis, and none of the doctrines in its application is inflexible for what has been recalled elsewhere in the judgment. Therefore, the judgment cannot act in rem as is sought to be argued ................... ..............................................................."The High Court in dislodging the appellan ts held that the judgment of the Supreme Court was not a judgment in rem, but in personam. The terms `in rem' and `in personam' are of Roman Law used in connection with actio, that is, actio in rem and actio in personam to denote the nature of actions, and with the disappearance of the Roman forms of procedure, each of the two terms `in rem' and `in personam' got tagged with the word judgments to denote the end-products of actions in rem and actions in personam. Thus, according to the civil law an action in which a claim of ownership was made against all other persons was an action in rem and the judgment pronounced in such action was a judgment in rem and binding upon all persons whom the Court was competent to bind, but if the claim was made against a particular person or persons, it was an action in personam and the decree was a decree in personam and binding only upon the particular person or persons against whom the claim was preferred or persons who were privies to them. Moni r in his 'Principles and Digest of the Law of Evidence' at page 563, gives the import of these terms as under"-- "The point adjudicated upon in a judgment in rem is always as to the status of the res and is conclusive against the world as to that status, whereas in a judgment in persnam the point, whatever it may be, which is adjudicated upon, it not being as to the status of the res, is conclusive only between parties or privies. A decision in rem not merely declares the status of the person or thing , but ipso facto renders it such as it is declared; thus, a decree of divorce not only annuls the marriage, but renders the wife feme sole: adjudication in bankruptcy not only declares; but constitutes the debtor a bankrupt; a sentence in a prize Court not merely declares the vessels prize, but vests it in the captor .'
Section 41 of the Evidence Act does not use the term 'judgment in rem', but it incorporates the law on the subject of judgments in rem, and makes them relevant not only against strangers but also conclusive of certain matters such as whether a person was entitled to a legal character or to any specific thing not as against any specified person but absolutely .
Judgments in rem are an exception to the rule of law that no man should be bound by the decision of a Court of Justice unless he or those under whom he claims were parties to the proceedings in which it was given. This rule of law is referable to the maxims of Roman Law namely , 'Res inter also judicata nullum inter alias prejudicium facit', or 'Res inter alias acta alteri nocere non debet'. Such exception of the judgment in rem in the Roman Law was the foundation of the exception in English Law. Section 41 of the Evidence Act is the foundation for the exception of judgment in rem in our corpus juris. The reason why a judgment should not be used to the prejudice of a stranger is that he is denied the fundamental right to make a defence, or to examine or cross-examine witnesses or to appeal from a judgment which aggrieves him. This is the requirement of most manifest justice and good sense".
9. Another submission that Audit proceed ings, conducted pursuant to selection for audit under Policy 2016, were void and of no legal effect in the wake of observations in the case of TREET CORPORA TION LTD (supra) is misconceived. It is expedient to reproduce the observations in the case of TREET CORPORA TION LTD (supra), which reads as: "that Audit Policy would only be effective, once parameters are drawn.
10. With utmost respect, I opine that above-noted observations are at best an obite r, having no persuasive / binding value, made 'by the way' and are entirely unnecessary , when policy 2016 was declared constitutional. Rule of obiter dicta was elaborated in the case of PIR BAKHSH REPRESENTED BY HIS LEGAL HEIRS AND OTHERS V. THE CHAIRMAN, ALLOTMENT COMMITTEE and others (PLD 1987 Supreme Court 145), relevant portion whereof is reproduced as under:- "There is a distinction in what a case decides generally and as against all the world from what it decides between the parties themselves. Salmond "On Jurisprudence", Twelfth Edition, at page 175, brings out this distinction in these words:- "What it decides generally is the ratio decidendi or rule of law for which it is authority; what it decides between the parties includes far more than just this. Since it would be obviously impracticable if there were no end to litigation and if either party to a legal dispute were at liberty to reopen the dispute at any time, the law provides that once a case has been heard and all appeals have been taken (or the time for appeal has gone by) all parties to the dispute and their successors are bound by the Court' s findings on the issues raised betwee n them and on questions of fact and law necessary to the decision of such issues. According to this principle three matters are now res judicata between them and cannot be the subject of further dispute. But the Court's findings will not be conclusive except as between the same parties. ..... Third parties not involved in the original case, however , will not be bound, nor will either of the original parties be bound in a subsequent dispute with a third party".
Elaborating further , it is the policy of the Courts to stand by the ratio decidendi, that is, the rule of law and not to disturb a settled point. This policy of the Courts is conveniently termed as the doctrine of rule of stare decisis. This rationale behind this policy is the need to promote certainty , stability , and predictability of the law. This, however , does not mean that this rule is inflexible. In this context, it will be of advantage to sum up this rule is inflexible. In this context, it will be of advantage to sum up what Hamoodur Rahman, C.J., in the case reported as Asma Jilani v. Government of the Punjab (1), said---- "I am not unmindful of the importance of this doctrine but in spite of a judge's fondness for the written word and his normal inclination to adhere to prior precedents I cannot fail to recognise that it is equally important to remember that there is no need for flexibility in the application of this rule, for law cannot stand still nor can we become mere slaves of precedents. . . . .
It will thus be seen that the rule of stare decisis does not apply with the same strictness in criminal, fiscal and constitutional matters where the liberty of the subject is involved or some other grave injustice is likely to occur by strict adherence to the rule".
While elucidating various categories / classes of precedents, Fazal Karim, J. in its book "Judicial Review of Public Actions (Second Edition) V olume-1, describes obiter dicta as under:- "Obiter Dicta: Distinction is then to be made between what is the ratio decidendi of the case and what is mere obiter dicta. What was necessary for the decision of the issue in the case is ratio decidendi and is binding but what was said "by the way" and was entirely unnecessary for the decision of the case or what is a mere gratuitous statement of the law is obiter dicta and is not binding. The distinction, as was pointed out by Lord Greene MR in Uoung v. Bristol Aeroplane, (1944) 2 All ER 293, 298, is between a decision and a dictum. "So far as dicta are concerned, we are, of course, not bound to follow them".
[emphasis supplied] Rule of obiter dicta was also elucidated in the case of IRSHAD AHMAD SHAIKH v. THE STATE (2000 SCMR 814), relevant portion whereof is reproduced as under:- "Now , every case is an authority , to the extent the same decides the legal controv ersy encompassed in it. In other words, the declaration of law has to be confined to the four corners of the dispute agitated before the Court. The rest, if any , is obiter and obiter , except of this Court or , before it, of the Privy Council is not/has not been binding".
In view of the aforesaid, no ratio decidendi or rule of law has been enun ciated in the case of TREET CORPORA TION LTD (supra) - for which it is an authority - to be adhered and followed under the doctrine of stare decisis .
11. The argument that drafting of parameters constitutes a condition precedent for the implementation of Policy 2016 is misconceived and tantamount to construe the judgment in a fashion, not even intended by the learned single judge in chambers, particularly when constitutionality of Policy 2016 was affirmed. Had it been the intent, it would have been amplified in the decision by declaring the Policy 2016 unconstitutional. The implementation or enforcement of Audit policy cannot be objected to by the petitioner , once it was held constitutional. The readiness of the courts to circumscribe or limit the policies - particularly relating to tax matters / audits - came under discussion in the case of "Commissioner of Inland Revenue, Sialkot and others Vs. Messrs Allah Din Steeel and Rolling Mills and others" ( 2018 SCMR 1328 ), relevant portion whereof is reproduced hereunder as:- "We note that the learned Single Judge had proposed certain guidelines for the Board to follow . However , while the guidelines may be useful pointers for the Board, it is not the function of the Courts to devise policies and recommend steps and measures to improve capacity or reduce delays which factors fall within the purview of policy . This is in view of the fact that on the principle of trichotomy of powers which lies at the heart of our Constitution it is the mandate of the Boar d to do so. The guidelines provided by the Courts in their judgments may therefore be used as useful pointers towards formulating policies in the future without in any manner encroaching the policy making domain of the executive."
12. Nothing has been argued that what prejudice has been caused to the petitioner upon selection for the audit.
Hon'ble Supreme Court of Pakistan in the case of COMMISSIONER OF INLAND REVENUE, SIALKOT and others, (supra) wherein it was observed that "mere selection for audit does not cause an actionable injury to the taxpayer".
13. Other judgments referred by learned counsel in the cases of SHAGUFT A BEGUM v. THE INCOME-T AX OFFICER CIRCLE-XI, ZONE-B, LAHORE (PLD 1989 Supreme Court 360) and EXECUTIVE DISTRICT OFFICER SCHOOLS AND LITERACY , DISTRICT DIR LOWER and others V. QAMAR DOST KHAN and others (2006 SCMR 1630 ) are not applicable to the facts of this case.
14. It is notable that the petitioner , one way or the other , is hindering audit proceedings by employing dilatory tactics - who consciously allowed the order of ATIR to have finality , and thereafter [instead of filing Reference under section 47 of Act, 1990] after lapse of almost one year invoked constitutional jurisdiction, in essence throwing challenge to order of 16.10.2019 of ATIR. The act of filing constitutional petition, in wake of peculiar facts, is devoid of bona-fides and there is no reason to exercise discretion to stall pending proceedings - as decisions taken in said proceedings can be competently challenged in wake of remedies provided under the Act, 1990, as and when the need arises.
15. This petition is devoid of merits and same is, therefore, dismissed. No order as to costs.