SALEEM AKHTAR, J(R).-- This decision/recommendation will dispose of all the complaints listed in Annexure-A, as common questions of law and facts are involved therein, In all the cases the complainants have challenged the selection of their cases for total audit under Para 6(b) of Board's Circular No. 21 of 2000, as substituted by paragraph 4 of Board's Circular No. 26 of 2000. The complainants had filed their return under Self Assessment Scheme for the assessment year 2000- 2001. The department selected their cases for total audit under Para 6(a) through ballot, which was challenged by the assessee's. The main grievance was that the ballot was not a random ballot but parametric one. The complaints were decided on 2.6.2001 in the following manner:--
(i) The balloting for selection of returns filed under the Self Assessment Scheme 2000-2001 for total audit was not through a computer random ballot and therefore not according to Para 6(a) of the Self Assessm ent Scheme.
(ii) In all matters selected by computer ballot in which assessment has been completed and assessed tax has been paid without any objection by the assessee in respect of the manner of balloting shall not be affected by the recommendations and findings. However, the assessee will have the right to challenge assessme nt in proper forum as provided by law.
(iii) It is left to the option of the department to proceed with total audit under Para 6(b) of the Scheme in respect of return selected through random balloting if they deem fit to do so.
(iv) As the selection of cases for total audit is not mandatory the department may or may not enter into a fresh exercise for selection through computer random ballot under Para 6(a) of the Scheme.
2. After this the CBR issued instructions No. 7(7) S. Asst/2001 dated 9.6.2001 to all the Regional Commissioners of Income Tax, Northern/Eastern/Central/Southern and Corporate Regional, Islamabad/Lahore/Multan and Karachi which reads as follows:- "GOVERNMENT OF PAKISTAN REVENUE DIVISION CENTRAL BOARD OF REVENUE C. No. 7(7) S. Asst/2001. Islamabad, the 9 June, 2001 To All Regional Commissioner of Income Tax.
Northern/Eastern/Central/ Southern and corporate Regions, Islamabad/Lahore/Multan/and Karachi.
SUBJECT: SELF ASSESSMENT SCHEME FOR THE ASSESSMENT YEAR 2000-2001 SELECTION OF CASES FOR TOTAL AUDIT BY RCIT- POLICY/DIRECTION.
I am directed to refer to paragraph 4 of Board's Circular No. 26 of 2000 and issue following guidelines for selection of cases for total audit in the light of principles and parameters up held by superior Courts (1986-PTD-357). #tbs (a)declines in income,
(b) declines in gross or net profits, (c)declines in gross or net profits rates, (d)declines in turn over, (e)turn over Liquidity ratio, (f)Stock turn over ratio, (g)Addition in assets, (h)
(i) Property income declared for the first time, and (J)Information available on survey. #the Suitable number of revenue yielding cases may please be selected and decided expeditiously and ensure collection at the earliest.
Sd/- (Waqar Ahmed)
Secretary (Assessm ent)"
3. Acting upon these instructions the assessing authorities selected large number of cases including the cases, which had been previously selected under Para 6(a) for total audit. The complainants objected to this exercise and Challenged its legality by filing these complaints, It has been pleaded by the complainants that through circular letter dated 9.6.2001 only 10 categories of cases could be chosen by the CBR and therefore Regional Commissioners were obliged to pick up the cases from among the said categories. In case NO. 895 of 2001 it was also pleaded that complainant's was not picked up through random ballot and the department was not authorised to select the case under Para 6(b) as it was in contravention of recommendation No. 3 of the Federal Tax Ombudsman reproduced above, It has also been pleaded that the case was picked up for total audit contrary to circular letter dated 9.6.2001 as no category was indicated and despite request the category was not reveal by the department, In another case (1081 of 2001) it has also been .Alleged that the cases were indiscriminately and arbitrarily selected for total audit without going into merit of the case., In this case it was further pleaded that in view of the provisions of Finance Ordinance, 2001 the procedure and proceedings are illegal, It is a common ground in all the complaints that the cases were selected without first issuing a show cause notice to the assessee's.
4. Notice was issued to the Secretary CBR for submitting reply and the hearing was fixed on 20.7.2001. CBR by its letter No. 4(421) Insp/2001 dated 14.7.2001 requested by time upto 30.7.2001 to prepare the reply. The request was granted and the cases were fixed for hearing on 9.8.2001. Before the hearing CBR by its letter No. 4(457)/Insp/2001 dated 19.7.2001 informed that the "Board has decided to withdraw its letter No. 7(17) S. Asst./2001 dated 9.6.2001. Consequently the selection of cases under Para 6(b) of Shelf Assessment Scheme 2000-2001 stands withdrawn as a result of which the subject complaints stand vitiated and no grievance regarding selection of cases under the said Para remains", It was prayed that all complaints may be filed as infructuous. This letter was followed by CBR's letter dated 24.7.2001 inquiring "whether the hearing notice still remains to be attended or not", It was ordered that parties should appear on the date of hearing (9.8.2001) when order will be passed after hearing them.
5. The CBR also furnished a copy of the Circular No. C.7(7) S. Asst/2000 dated 17.7.2001 which reads as follows:-- "GOVERNMENT OF PAKISTAN REVENUE DIVISION CENTRAL BOARD OF REVENUE C. No. 7(7) S. Asst/2000 Islamabad, the 17th July, 2001.
To.
All Regional Commissioner of Income Tax, Northern/Eastern/Central/Southern and Corporate Regions, Islamabad/Lahore/Multan and Karachi.
Sub: SELF ASSESSMENT SCHEME FOR THE ASSESSMENT YEAR 2000-2001 SELECTION OF CASES FOR TOTAL AUDIT BY RCRT POLICY DIRECTIONS.
I am directed to refer to Board's letter of even number dated 9.6.2001 oh the above subject and to state that a number of representations have been received in the Board alleging that while selecting cases for total audit, under para 6(b) of Board's Circular No. 21 of 2000 as substituted by paragraph 4 of Board's Circular No. 26 of 2000, filed formations have not kept in view the policy directions on the subject and have arbitrarily selected cases. Some assessee's have approached various forums on which no adjudication has so far taken place.
2. The Board has given the matter an anxious consideration, It has been decided that lists of all cases selected for total audit under Para 6(b) of Board's Circular No. 21 of 2000, shall be withdrawn.
Further, in order to ensure a fair and just treatment to all assessee's, it has been decided that the RCIT shall select cases for total audit only where there is evidence, information or reason to believe that true particulars of income have been suppressed. Such selection may be based upon factors including an evidence decline in income, gross profit and net profit rates and any additions to the assets of an assessee. Further, RCIT may also confront the assessee's and provide them due opportunity of being heard before final selection.
3. I am further directed to state that policy directions issued earlier vide Board's letter of even number dated 9.6.2001 stands withdrawn, It is emphasised that selection of cases for total audit must be carried of in a judicious and transparent manner.
Sd/- (Waqar/Ahmad)
Secretary (Assessm ent)"
6. The Advocates for the complainants and the complainants present on the date of hearing and Mr. Vakil Ahmad Khan, Member CBR with officers of the CBR present on hearings held on 9th and 10th August, 2001 were heard at length. Mr. Ashraf Hashmi and Mr. Masood Ishaq, Advocates contended that after withdrawing list prepared under Para 6(b) a fresh list was prepared without following the guide line dated 9.6.2001. They also contended that as the CBR by its letter dated 2.4.2001 had declared and assured the assessee's that no case shall be selected by Regional Commissioner Income Tax for total audit the department is estopped from selecting the cases for total audit. Mr. Kh. Riaz Hussain, Advocate reiterated the same contentions. Mr. Sh. Nisar Ahmed and Mr. Siddiq Ahmad Ch., Ch Hafeezullah, Mr. Muhammad Shahid Abbas, Advocates and Dr. Anwar-ul- Haq all argued their cases. Mr. Vakil Ahmad Khan the learned Member CBR addressed arguments on behalf of the department. At the out set he stated that in view of the instructions dated 17.7.2001 the entire list of assessee's selected under Para 6(b) for total audit has been scrapped, It was further contended that since the list has been cancelled and no action is being taken in case selected for total audit under circular letter dated 9.6.2001 very little is left for consideration and proceedings be terminated. Mr. Vakil Ahmad Khan has contended that question of estoppel does not arise as the letter dated 2.4.2001 referred and relied upon by the complainants was in reply to query made in respect of northern Areas.
7. The plea of promissory estoppel is not sustainable. The complainants cannot press letter dated 2.4.2001 in service as it was neither addressed to them nor the assurance contained therein was made to public by a declaration through any statutory or legal document, It was issued on 2.4.2001, after the returns under Self-Assessment Scheme had been filed by the complainants. If such an assurance would have been given by any proper authority in a legal manner and acting upon such assurance the returns would have been filed, the complainants may been justified in pressing this objection, this contention has no merit and is rejected. Mr. Riaz Ahmad contended that the Finance.
Ordinance, 2001 was promulgated on 18.6.2001 by which Section 59(4) of the Income tax Ordinance was added and therefore there was no justification in hurrying up the completion of assessment.
This contention suffers from inherit infirmity as the Finance Ordinance was promulgated by a Notification issued by the Government w.e.f. 1.7.2001 and not from 18.6.2001. Faced with this situation the learned counsel did not press his objection. The learned counsel also contended that decline in income, gross profit and net profit rates cannot be made a ground for selecting a case for total audit. At the moment the list has been scrapped and if any selection for total audit is made in future on this basis the assessee would be given an opportunity to explain and defend himself before selection when he can press this objection.
8. The main question which has disturbed me throughout and I had made direct queries from both the parties that what is the effect of cancellation of the list under which cases for total audit were selected particularly in cases in which assessment has been completed. Mr. Ashraf Hashmi the learned counsel for the complainant contended that the entire proceeding will be void. Mr. Vakil Ahmad Khan the learned Member CBR also seems to be of the same view with reservation as to the agreed assessm ents. The question for consideration is that many assessee's who have undergone the rigors of total auditing may be satisfied and may not like to re-agitate the issue again. Cases may also arise where parties dissatisfied with the total audit assessment may have filed appeal, revision or challenged it before any other forum. Mr. Vakil Ahmed Khart made statement that no assessm ent will be finalised in cases selected under Para 6(b) in pursuance of instructions dated 9.6.2001, any Commissioner who has taken up the case will not finalise it. He also assured that all Zonal Commissioners will be advised to vacate order of Assessment and consider under new procedure, In case of ex-parte assessment in total audit cases the findings will be reversed and set-aside suo-moto.
9. There may be cases in which parties may be satisfied with the assessment made under total audit or for purchasing peace may not like to agitate the question again. In such cases if the assessee's inform the Regional Commissioner Income Tax that they do not wish to challenge the same, then such assessm ent may not be disturbed by the cancellation of the list.
10. After the hearing was completed circular letter C. No-. 7(7) S. Asst./2000 dated 10.8.2001 was received in this Secretariat which reads as follows:- "GOVERNMENT OF PAKISTAN REVENUE DIVISION CENTRAL BOARD OF REVENUE C. No. 7(7) S. Asst/2000 Islamabad, the 10 August, 2001.
To Regional Commissioner of Income Tax, Northern/Eastern/Central/Southern and Corporate Regions Islamabad/Lahore/Multan and Karachi.
Sub: SELECTION OF CASES FOR TOTAL AUDIT UNDER PARA 6(B) OF CBR CIRCULAR NO. 21 OF 2000 INSTRUCTIONS REGARDING.
In continuation of Board's letter of even number dated 17.7.2001 on the above subject. I am directed to state that Board has received a number of representations where queries have been raised as to what would happen to the cases where assessments have already been completed in pursuance of selection, under Para 6(b) of CBR's circular No. 21 of 2000, for total audit on the basis' of policy directions issued, vide Board's letter No. 7(7) S. Asst./2001 dated 9.6.2001 and withdrawn later.
2. The matter has been examine din the Board. Such taxpayers can avail their legal remedy either by filing appeals before the Appellate Additional Commissioners/Commissioners of Income Tax (Appeals) or revisions before the Zonal Commissioners, It has been decided that in cases where taxpayers of to avail the benefit of revision before the Zonal Commissioners, the assessments in those cases may please be set-aside. Such cases may, however, be re-considered for selection of total audit in the light of Board's fresh instructions on the subject, issued vide letter of even number dated 17.7.2001.
3. I am further directed to request that utmost care must be exercised in taking such decisions and the above facility would not be extended to the cases where assessments have been finalised on agreed basis.
Sd/- (Waqar/Ahmad)
Secretary (Assessm ent)"
11. Before parting with this decision I wish to place on record my appreciation for the realistic policy decision made by the CBR and it acceptance by the learned counsel for the assessee's and tax payers with trust and confidence. This proceeding is historic and a landmark, It is a milestone and a turning point in the attitude and understanding of the CBR. Never before any government department may have responded so swiftly and positively to accede to the just demands of the taxpayers. This amply demonstrates healthy change in thinking and approach of CBR to taxpayers problems. A visible difference from the past. This is the beginning of change in the tax culture of our country for which I have been striving hard to bring about, It is a matter of great satisfaction that immediately on filing of complaints in large number and issuance of notice from this office, the CBR realising the gravity of situation reassessed their position in a realistic and objective manner and offered a solution by withdrawing their instructions regarding total audit under Para 6(b) of the Self Assessm ent Scheme 2000 thereby crating an atmosphere of trust and confidence which positively has been responded by the assessee's.
12. It is recommended that:-
(i) Commissioner who have taken up the case for assessment in respect of an assessee who was selected for total audit under para 6(b) shall not finalise and the proceeding be terminated.
(ii) Assessm ent will not be finalized in cases selected under para 6(b) in compliance with instruction dated 9.6.2001 and the proceedings be terminated.
(iii) As assured by the learned Member, the C.B.R, to advise all Zonal Commissioners to vacate order of assessm ent except in cases in which the assessee agree to accept the assessment already made which will not be disturbed.
(iv) In case of ex-parte assessm ent in the total audit cases the appellant shall be set aside suo moto.
(v) In agreed assessm ent the assessee if he thinks proper may file appeal and Commissioner Income Tax (Appeal to follow the above directions.
(vi) In case the Department wishes to select any case for total audit under para 6(b). The same shall be selected by the Regional .Commissioner of Income Tax and no other officer keeping in view the parameters fixed by the C.B.R, in Circular/Letter dated 17.7.2001 which included a show-cause notice to the assessee before selection.