HONDA ATLAS CAR (PAKISTAN) LIMITED vs FEDERAL BOARD OF REVENUE Ss — 2025 PTD 502 LAHORE-HIGH-COURT-LAHORE

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HONDA ATLAS CAR (PAKISTAN) LIMITED VS FEDERAL BOARD OF REVENUE Ss. 122(5), 122(5a), 122(9) & 177---Ongoing proceedings of amendment of assessment---audit, selection for---Sectoral audit drive---Taxpayer assailed notices showing its selection for audit under S. 177 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') contenting that the impugned notices were part of sectoral audit---Validity---Notices impugned did not contain anything that would suggest that it was part of a sectoral audit drive authorized by the Federal Board of Revenue---In each of the notice reasons had been given for selecting the case of the petitioner for audit thereby satisfying the requirements of S. 177 of the Ordinance, 2001---No ground for interference by the High Court was made out---Constitutional petition was dismissed. Citation Name: 2025 PTD 502 LAHORE-HIGH-COURT-LAHOREBookmark this Case HONDA ATLAS CAR (PAKISTAN) LIMITED VS FEDERAL BOARD OF REVENUE Ss.122(5), 122(5a), 122(9) & 177---Ongoing proceedings of amendment of assessment---audit, selection for---Parallel proceedings---Scope---Taxpayer assailed notices showing its selection for audit under S. 177 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') contenting that in the presence of proceedings for amendment of its assessment the parallel proceedings for tax audit could take place---argument of the petitioner /taxpayer was that its selection for audit must pass the rationality test laid down in the case titled Raza Motor Industries v. Federation of Pakistan reported as 2022 PTD 19 ('Raza Motor case')---Validity---Contents of impugned notices revealed that reasons set out in the same (notices) for selection of petitioner for audit had no nexus with the proceedings that were initiated for amendment in the assessments and orders passed thereon---audit under S. 177 of the Ordinance, 2001 falls in the jurisdiction and authority of the Commissioner, that is, to select the case of a taxpayer and the Legislature has granted considerable flexibility and discretion to the Commissioner to call for the record and documents from the taxpayer without confining it by any specified criteria except requiring him to give reasons for summoning the record/documents---Under S.177 of the Ordinance 2001, the Commissioner is required to grant a further right of hearing at the culmination of audit to the taxpayer seeking its explanations on the issues that surfaced during the audit and that even after the amendment of the assessment multiple rights of appeal/reference are available to the taxpayer---Concept of audit requires pinpointing of non-compliant trends, defects in system, ambiguities in practice and law and selection and conduct of audit is not necessarily detrimental to the interests of the taxpayer---Taxpayer's duty to make correct declarations in the tax returns under the self-assessment regime must be balanced against the right of the Revenue to audit---In case, the taxpayer satisfies the authorities that the tax returns submitted by him are truthful, reliable and supported by the necessary documentation, it may not culminate in further proceedings or in an amendment in the returns and enhanced tax liability may not be the outcome---This is so because mere selection for audit by itself is not a complete process, but is the beginning of a process which may or may not culminate in revision of assessment, enhanced tax liability or other adverse legal consequences---Even otherwise, the Commissioner is merely seeking the records / documents from the taxpayer by providing him reasons which at the pre-audit stage cannot be assailed before a Court of law---Petitioner's contention/ argument (that its selection for audit must pass the rationality test laid down in the 'Raza Motor case') had no force---No ground for interference by the High Court was made out---Constitutional petition was dismissed. Citation Name: 2025 PTD 502 LAHORE-HIGH-COURT-LAHOREBookmark this Case HONDA ATLAS CAR (PAKISTAN) LIMITED VS FEDERAL BOARD OF REVENUE Ss. 122(5), 122(5a), 122(9) & 177 [as amended through Finance act, 2009 and Finance act, 2010]---audit---Selection for multiple years---Scope---Taxpayer assailed notices showing its selection for audit under S. 177 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001')---argument of the petitioner /taxpayer was that as per Circular dated 05.10.2009 issued by the Federal Board of Revenue, there was no warrant under S. 177 of the Ordinance, 2001 for selection of audit of a taxpayer for multiple years---Validity---Text of S. 177 of the Ordinance, 2001 does not lay down any impediment on the authority of the Commissioner to select the case of a taxpayer for multiple years---all that the provisions in S. 177 require from the Commissioner is to record reasons in writing for calling for record/documents and those reasons are to be communicated to the taxpayer---If these conditions are fulfilled, the Commissioner can select a taxpayer for multiple years---Thus, reliance placed by the petitioner on Circular-in-question is of no help to it---Petitioner ignored the amendments made in S. 177 through Finance act, 2009 and Finance act, 2010---Section 177(7) visualizes a situation where audit in a particular year has already taken place and audit for subsequent year would require furnishing of reasonable grounds---This provision is not applicable to selection of audit for multiple years---In the present case, the Commissioner had furnished reasons for calling for record/documents for conducting audit in each of the notice which fulfilled the conditions laid down in the proviso to section 177---No ground for interference by the High Court was made out---Constitutional petition was dismissed.

HONDA ATLAS CAR (PAKISTAN) LIMITED vs FEDERAL BOARD OF REVENUE Ss — 2025 PTD 502 LAHORE-HIGH-COURT-LAHORE

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