PAKISTAN TOBACCO COMPANY LIMITED vs FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad S

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PAKISTAN TOBACCO COMPANY LIMITED VS FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad Ss.177, 206, 213 & 214-C---Sales Tax Act (VII of 1990), S.25---Federal Excise Act (VII of 2005), S.46---Constitution of Pakistan, Art.199---Constitutional petition---Audit---Pre-condition for selection---Self-assessment---Direction by Federal Board of Revenue---Effect---Petitioners / taxpayers assailed notices issued for purposes of audit under S.177(1) of Income Tax Ordinance, 2001, S.25 of Sales Tax Act, 1990 and S.46 of Federal Excise Act, 2005---Validity---FBR could exercise its audit powers on objective basis under S.214-C of Income Tax Ordinance, 2001, in the manner prescribed, but could not force hand of Commissioners to exercise their subjective powers under S.177(1) of Income Tax Ordinance, 2001 to trigger audit of taxpayers effectively selected by FBR---Notices to some petitioners / taxpayers who were oil marketing companies were issued by Commissioner under S.177(1) Income Tax Ordinance, 2001 in view of circular issued by FBR---- Exercise of authority by Commissioner in such manner was based on extraneous consideration not contemplated by S.177(1) of Income Tax Ordinance, 2001---Fact that Commissioner, in compliance with direction of FBR, selected certain petitioners / taxpayers for audit and then documented reasons for purposes of S.177(1) of Income Tax Ordinance, 2001, had established that such taxpayers were not selected after independent application of mind by Commissioner for reasons that could be deemed reasonable for purposes of S.177(1) of Income Tax Ordinance, 2001---Audit selection notices issued under S.177(1) of Income Tax Ordinance, 2001, in compliance with circulars issued by FBR under S.206 of Income Tax Ordinance, 2001 were based on extraneous considerations---Such exercise of discretion controlled and directed by FBR suffered from legal infirmity---FBR was vested with no authority under S.206 read with Ss. 213 & 214 of Income Tax Ordinance, 2001 or any provision of Sales Tax Act, 1990 or Federal Excise Act, 2005 to issue directive or circular to Commissioners directing them to undertake sectoral audits or otherwise bind them in terms of how they were to exercise their discretionary authority under S.177(1) of Income Tax Ordinance, 2001 or S.25(1) of Sales Tax Act, 1990 or S.46 of Federal Excise Act, 2005---Any such directive was devoid of justification and a nullity---Audit selection notice issued by Commissioner under S.177(1) of Income Tax Ordinance, 2001 to Oil Marketing Company on the basis of sectoral audit directive issued by FBR was tantamount to a notice issued for extraneous reasons and was liable to be set-aside---Audit proceedings initiated on the basis of a directive issued by FBR having been declared to be void would also be devoid of lawful authority and would cease---Such proceedings did not inhibit Commissioner from independently exercising his/her authority under S.177 of Income Tax Ordinance, 2001 on the basis of reasons that satisfied requirements of S.177 of Income Tax Ordinance, 2001---Constitutional petition was disposed of accordingly.

PAKISTAN TOBACCO COMPANY LIMITED vs FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad Ss — 2022 PTD 1574 ISLAMABAD

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