JAWAD HASSAN, J.----Through this writ petition under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 (the "Constitution"), the Petitioner has challenged the Notice under Section 176 of the Income Tax Ordinance, 2001 (the "Ordinance") bearing No.Audit-II/2012/162, dated 13.08.2012, issued by the Respondent / Deputy Commissioner, Inland Revenue, Audit-II, RTO, Rawalpindi, being illegal and unlawful.
2. Brief facts for the disposal of this petition are that the Petitioner, who is an Advocates by profession, filed his income tax return for the Financial Years 2010 and 2011 along with wealth statement in accordance with the provision of Section 114(2) of the Ordinance. Under Section 120(1) of the Ordinance, the return filed by him shall be deemed to be an assessment order issued by the Commissioner but he received the impugned notice, which is reproduced as under: "Plz. refer to the above subject.
You are requested to provide the following documents:
1. Breakup of Business Capital Declared in Income Tax Return for the tax years 2010 and 2011.
2. Breakup of Profit and Loss Expenses claimed in Income Tax Returns for the tax years 2010 and 2011.
The information is being sought under Section 176 of the Income Tax Ordinance, and it should reach this office on or before 24.08.2012. Please note that if failure to furnish information sought under section 176 attracts penalty provided in the table provided under section 182(1)."
3. It is contended by the Petitioner that he is a practicing Advocate of Supreme Court and has been submitting complete tax returns regularly. Hence issuance of notice under Section 176 by the Respondent without fulfilling the legal requirements of Section 122(1) is against the scheme of the Ordinance. He explains that returns filed in the Financial Years 2010 and 2011 have attained the status of assessment Order under 120(1) of the Ordinance.
Further stated that an assessment Order under Section 120 can only be interfered with under Section 122 of the Ordinance. He has placed reliance on the judgment of this Court cited as "Chenab Flour and General Mills v.
Federation of Pakistan and others" (PLD 2021 Lahore 343).
4. Conversely, Mr. Muhammad Ameer Malik, Advocate for the Respondent has vehemently contested the petition on the ground of maintainability and supported the impugned notice by contending that the matter relates to the income tax years 2010 and 2011 and vide the impugned notice they only sought some information under Section 176 of the Ordinance without taking any action against the Petitioner. Therefore Petitioner has no locus standi to file the petition. He lastly submitted that as no adverse action has been taken by the Respondent against the Petitioner, therefore, petition is liable to be dismissed for being misconceived and non-maintainable. He relied on the judgment of this Court cited as "Northern Power Generation Company Limited v. Federation of Pakistan and others" (2015 PTD 2052).
5. Arguments heard. Record perused.
6. From perusal of impugned notice under Section 176, it reveals that the Respondent has sought information about Breakup of Business Capital Declared in Income Tax Return for the tax years 2010 and 2011 and Breakup of Profit and Loss Expenses claimed in Income Tax Returns for the tax years 2010 and 2011 by focusing that the Petitioner is an Advocate. For ready reference Section 176 is reproduced as under: "176. Notice to obtain information or evidence.---(1) The Commissioner may, by notice in writing, require any person, whether or not liable for tax under this Ordinance - "(a) to furnish to the Commissioner or an authorised officer, any information relevant to any tax leviable under this Ordinance or to fulfill any obligation under any agreement with foreign government or governments or tax jurisdiction, as specified in the notice; or"; and
(b) to attend at the time and place designated in the notice for the purpose of being examined on oath by the Commissioner or an authorised officer concerning the tax affairs of that person or any other person and, for that purpose, the Commissioner or authorised officer may require the person examined to produce any accounts, documents, or computer-stored information in the control of the person;
(c) the firm of chartered accountants or a firm of cost and management accountants as defined under the Cost and Management Accountants Act, 1966 (XIV of 1966), as appointed by the Board or the Commissioner, to conduct audit under section 177, for any tax year, may with the prior approval of the Commissioner concerned, enter the business premises of a taxpayer; to obtain any information, require production of any record, on which the required information is stored and examine it within such premises; and such firm may if specifically delegated by the Commissioner, also exercise the powers as provided in subsection."
Bare reading of Section 176 shows that the issuance of notice under the said Section is subject to the procedure provided in the Ordinance. Since the Ordinance has various Chapters, Divisions and Parts, particularly the Part- VIII deals with record, information collection and audit. The record mentioned in Section 174 means the accounts, documents and records maintained and kept by the taxpayer. It is version of the Petitioner that Section 174 cannot be read in isolation but it has to be read in totality. Section 120 of the Ordinance deals with "assessments" and once a taxpayer furnished a complete return of income it be considered as past and closed transaction and the Commissioner can only amend an assessment under section 122 of the Ordinance. Section 120 of the Ordinance is reproduced as under:
120. Assessments. (1) Where a taxpayer has furnished a complete return of income (other than a revised return under subsection (6) of section 114 for a tax year ending on or after the 1st day of July, 2002,
(a) the Commissioner shall be taken to have made an assessment of taxable income for that tax year, and the tax due thereon, equal to those respective amounts specified in the return; and
(b) the return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished.
(1A) Notwithstanding the provisions of subsection (1), the Commissioner may select a person for an audit of his income tax affairs under section 177 and all the provisions of that section shall apply accordingly
(2) A return of income shall be taken to be complete if it is in accordance with the provisions of subsection (2) of section 114.
(3) Where the return of income furnished is not complete, the Commissioner shall issue a notice to the taxpayer informing him of the deficiencies (other than incorrect amount of tax payable on taxable income, as specified in the return, or short payment of tax payable) and directing him to provide such information, particulars, statement or documents by such date specified in the notice.
(4) Where a taxpayer fails to fully comply, by the due date, with the requirements of the notice under subsection (3), the return furnished shall be treated as an invalid return as if it had not been furnished.
(5) Where, in response to a notice under subsection (3), the taxpayer has, by the due date, fully complied with the requirements of the notice, the return furnished shall be treated to be complete on the day it was furnished and the provisions of subsection (1) shall apply accordingly.
(6) No notice under subsection (3) shall be issued after the end of the financial year in which return was furnished, and the provisions of subsection (1) shall apply accordingly.
7. From the above it is crystal clear that no purpose i.e. amendment in assessment, etc. has been mentioned in the impugned notice and the Respondent only sought information regarding Breakup of Business Capital Declared in Income Tax Return for the tax years 2010 and 2011 and Breakup of Profit and Loss Expenses claimed in Income Tax Returns for the tax years 2010 and 2011, which is not a record as described in the Ordinance.
Moreover the Petitioner is neither a Company nor a businessman but a practicing Advocate, therefore, no question of declaration of capital as well as income and expense arises. Hence, the impugned notice has no value in the eye law.
8. As regard the maintainability of this writ Petition this Court has already observed in Reliance Commodities (Private) Ltd. v. Federation of Pakistan and others (PLD 2020 Lahore 632), that when a show-cause notice is based on mala fide or has been issued by incompetent authority the writ is maintainable. The relevant part is reproduced as under: "52. Moving further, it is reiterated that the Courts in the afore referred cases have held that issuance of a show- cause notice is itself a complete act and decision which could be subject to judicial review if inter alia, the show- cause notice was not lawfully issued by the competent authority, if the issuance of the show-cause notice was ultra vires the relevant law and if the issuance of the show-cause notice was without jurisdiction or with mala fide."
Moreover recently learned Division Bench of this Court in the judgment cited as "Chairman Federal Land Commission v. Mst. Sanam Iqbal and others" (PLD 2021 Lahore 42) has also observed that: "It is by now settled that a show-cause notice can be challenged in constitutional jurisdiction, for lacking jurisdiction. An action through a show-cause notice, found to be without jurisdiction, patently illegal or with mala fide intent, had to be nipped in the bud. Reference in this regard can be made to Commission of Income Tax v.
Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009 SCMR 1279), Al Ahram Builder (Pvt.) Ltd. v. Income Tax Tribunal (1993 SCMR 29), The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others (PLD 1971 SC 279), Reliance Commodities (Private) Ltd. v.
Federation of Pakistan and others (PLD 2020 Lahore 632), Dr. Fatima Arshad v. Government of the Punjab and others (2020 PLC (C.S.) 688), Messrs Pakistan Oilfields Limited through General Manager v.
Federation of Pakistan through Ministry of Finance and 4 others (2020 PTD 110) and Messrs J.K. Brothers Pakistan (Pvt.) Ltd. through Director v. The Additional Commission Inland Revenue and another (2016 PTD 461)."
9. When confronted whether the information sought through the impugned notice regarding capital, profit and loss, Inayat Malik, Additional Commissioner, RTO Rawalpindi, present in the Court states that the notice has been issued inadvertently since it is evident that such information cannot be sought under Section 176 of the Ordinance.
10. Moreover, this Court has already developed legal anthropology in the detail judgment (PLD 2021 Lahore 343) on the role of the Federal Board of Revenue (the "FBR") as being "Regulator" of all fiscal laws in the country and being a regulator it was vested with the main goal of tax collection in the country.
11. In view of above, this Petition is allowed and the impugned notice bearing No.Audit-II/2012/162, dated 13.08.2012, issued by the Respondent/Deputy Commissioner, Inland Revenue, Audit-II, RTO, Rawalpindi, is set aside.