1

Index

FEDERAL TAX OMBUDSMAN

Judgments of the Supreme Court and High Courts

of Pakistan

S.

No

Citation Relevant

Section

(FTO

Ordinance)

Page

01

Hafiz Muhammad Arif Dar v. ITO

NO: CP 788YEAR: 1984 DECIDED ON 07/11/1988

CITATION: DTPSC0147; 60TAX52; 1989PTD485; 1990PTCL755

[The FTO forum offers an effective alternate remedy for

taxpayers against dept'l excess]

2(3)

02

02

CIT v. Media Network and others

NO: WPs 4320 4786 YEAR: 2003 DECIDED ON 28/02/2006

CITATION: DTPSC0270; 94TAX293; 2006PTD2502;

2007PTCL12006PLD787

[AUDI ALTERAM PARTEM - No one to be condemned

unheard]

2(3)

05

03

Eastern Leather Company Ltd. V. Federation of Pakistan

NO: WP 5893 YEAR: 2003 DECIDED ON 28/10/2003

CITATION: DTPHC1659; VOL7/12TF52

[Jurisdiction vested in the President and by implication, the FTO-

is quasi judicial and not administrative The petitioner cannot be condemned unheard]

9

33

04

Suleman Spinning Mills Limited v. IACIT Lahore

NO: WP 20218YEAR: 2002 DECIDED ON 27/02/2003

CITATION: DTPHC1624; 88TAX147; 2003PTD1343;

[ Federal Tax Ombudsman holding action of revenue in non-

recovery of Govt. funds as maladministration, recommended reference to Legal Advisor for prosecution proceedings against

them ]

2(3)

38

05

Farid Ullah Khan v. Federal Tax Ombudsman

NO: ICA 51 YEAR: 2005 DECIDED ON 01/02/2005

CITATION: DTPHC1738; 2005PTD1797;

[Maladministration in the Central Board Revenue or any of its establishment can be taken notice of by Federal Tax Ombudsman]

2(3); 9

46

06

Sahib Jee v. RCIT

NO: WP 11983YEAR: 2005 DECIDED ON 20/03/2009

CITATION: DTPHC2041; 100TAX274; 2009PTD955;

[No extension in time permissible for filing representation before President against FTOs order]

32

48

07

Lone Cold Storage v. Revenue Officer LESCO

NO: WP 7754 YEAR: 2010 DECIDED ON 15/07/2010

CITATION: DTPHC2104; 103TAX5; 2010PTD2502

2011PTCL305;

[Whether order where Court has not been properly assisted and main legal questions have not been raised, deliberated or

2(3)

54

2 discussed does not constitute binding precedent -- Held yes]

08 Muhammad Saleem V Federal Tax Ombudsman etc.

No: WP 11545-2012

[The FTO exercises concurrent jurisdiction without restraint in deciding complaints u/s 9 of FTO ord

Maladministration is a condition precedent for exercise of jurisdiction by the FTO]

9;14;2(3);29 75

09

10

[When special circumstances exist (such as involvement in bribery and corruption), any delay in filing complaint before FTO stands condoned]. IN THE ISLAMABAD HIGH COURT WP No. 1238 OF 2013 1. When invoking jurisdiction u/s 16 of FTO Ordinance, the FTO

exercises powers of a judge of the Supreme Court of Pakistan and the High Court is not competent to hear a writ petition challenging FTO's jurisdiction u/s 16. Any such writ must be filed before the Supreme Court. 2. No writ petition lies against a SCN.

10(3)

16

79

82

SUPREME COURT OF PAKISTAN

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Hafiz Muhammad Arif Dar v. ITO

NO: CP 788YEAR: 1984 DECIDED ON 07/11/1988

CITATION: DTPSC0147; 60TAX52; 1989PTD485; 1990PTCL755

---------------------------------------------------------------------------

Constitution of Pakistan, 1973 -- Section 65 -- Article 199 --

Writ jurisdiction -- Alternate remedy -- Relief -- Assessee filed appeal before

A.A.C. against the order of additional assessment made by the Income Tax

Officer -- During appeal assessee filed writ petition which was dismissed as

3 the petitioner had already availed alternate adequate remedy -- Relief refused

by the High Court -- Whether according to technicalities of procedural nature -

- Held yes --

Constitutional jurisdiction of High Court -- Grant of relief -- Alternate

adequate remedy -- Where a remedy by way of appeal was available, no relief

could be granted to the petitioner under article 199 -- If petitioner was not

allowed any relief by the departmental authorities (despite the observations by

the Supreme Court), it would not mean that the petitioner would have no

immediate remedy at all against the highhandedness of the department --

Petitioner could, among other reliefs, file a complaint and grievane

application before the Federal Ombudsman, who could also provide effective

redres, and provide the alternate effective and adequate remedy to the

petitioner in such cases --

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IN THE SUPREME COURT OF PAKISTAN}

HAFIZ MUHAMMAD ARIF DAR

v.

INCOME TAX OFFICER

Present: MUHAMMAD AFZAL ZULLAH and JAVAID IQBAL, JJ.

Civil Petition No. 788 of 1984, decided on 7-11-1988.

(On appeal from the judgment and order of the Lahore High Court, Lahore passed

in Writ Petition No. 2382 of 1984, dated 30-5-1984).

Syed Fayyaz Hussain Qadri, Advocate (absent) and S. Abid Nawaz, Advocate-on-

Record, for the Petitioner.

Nemo for Respondent.

Date of hearing: 7-11-1988.

---------------------------------------------------------------------------

ORDER

{Order of the Court was passed by MUHAMMAD AFZAL ZULLAH, J.}.---Writ Petition

against an Income-tax Assessment by Income Tax Officer was dismissed by the

High Court by the following short order:

``The petitioner is aggrieved with the order of additional

assessment made in pursuance of the provisions of Section 65 of

the Income Tax Ordinance by an Income Tax Officer. He has already

filed an appeal before the Appellate Assistant Commissioner. As he

had already availed of the alternate remedy this writ petition is

dismissed in limine.''

4 Leave to appeal having been sought, this Court passed interim orders on 23rd

July, 1984, 29th July, 1984, 9th August, 1984, 12th August , 1984, 16th August,

1984, 21st August, 1984, 28th August, 1984 and 29th August, 1984.

They are very instructive in so far as the attitude of respondent department is

concerned.

They are, therefore, reproduced below:--

``23-7-1984: Notice to the A.G. for the 29th of this month

29-7-1984: Adjourned to the 5th of August, 1984, to enable the

petitioner to produce the person from whom he had purchased the

shop which has been made the basis of enhancement of the

assessment.

9-8-1984: Hafiz Muhammad Arif Dar petitioner has been

assessed to Rs. 1,93,000 as his income on the ground that he had

enough money to purchase a shop on the Sarwar Road in Lahore

Cantt. and on investigation the relevant Income-tax Inspector

found that the vendors were fictitious persons and that this had

been done to avoid levy of income-tax. I required the

petitioner to produce the vendors namely Muhammad Ashfaq

son of Haji Sardar Muhammad and Muhammad Mushtaq son of

Ibrahim, so as to ascertain whether the finding of the

Income-tax Inspector that the vendors were fictitious, was

correct.

The petitioner has produced both the above-noted vendors whose

identity has been verified through their Identity Cards which bear

their photographs. Prima facie, it appears that the report of

the Income-tax Inspector, is wholly incorrect.

Mr. M.Z. Khalil, Advocate, appeared on behalf of Mr. Muhammad

Ilyas, Standing Counsel for the Income-tax Department to submit

that he (Mr. Ilyas) has left for U.S.A. and the case may therefore

be adjourned to a date after the vacations.

Petitioners counsel, however, submits that in view of the fact

that the allegation against the petitioner has been prima

facie proved to be incorrect, the case may not be adjourned.

Let notice be issued to respondent for the 12th of this

month, who may appear through a counsel engaged by the

Department alongwith the relevant Inspector who had submitted the

report on which action was taken against the petitioner.

No action shall be taken against the petitioner in the

meanwhile. Mr. M.Z. Khalil, Advocate is directed to advise the

respondent of the proceedings before this Court.

12-8-1984 : No one has turned for the respondent. Adjourned to the

16th of this month.

16-8-1984 : The matter was adjourned to be taken up at 1-30 p.m.

Learned counsel for the petitioner is present alongwith the

petitioner. Learned counsel for the respondent is, however,

absent. The case is, therefore, adjourned to 21-8-1984.

5

21-8-1984 : An official of the Cantonment Board be ordered to

bring the latest PTI Form pertaining to property No. 326-Sarwar

Road Sadar, Lahore, on the next date of hearing, in order to

enable this Court to ascertain the annual rent at which the said

property is assessed.

To come up on 28-8-1984.

28-8-1984 : Adjourned to tomorrow (29-8-1984) to enable the

Inspector of the Cantonment Board to explain how the value of the

place in question was calculated to be Rs. 1,50,000 when the

monthly rent of the house was Rs. 100 per month.

29-8-1984: On instructions from the I.T.O. the learned

counsel for the respondent submitted that the tax had been levied

according to the value of the property as calculated by the

Cantonment Board. However, I find that the property in question

is assessed by The Cantonment Board at Rs. 100 per month and as

such the value of Rs. 1,50,000 as determined appears to be

excessive and arbitrary. It would have been appropriate if, for

fixing the vaue of the property, the Cantonment Board had followed

the formula of ``10 years rent'', as done by the Wealth Tax Dept.

In this view of the matter the recovery of the tax amount is

stayed till the decision of the main petition.''

It is possible that in view of the aforequoted observations redress might

have already been provided to the petitioner.

One of the conditions for grant of relief in writ jurisdiction of the High

Court is that the petitioner before it should not have any alternative adequate

remedy. In this case, a remedy by way of appeal, as mentioned in the impugned

order, was such remedy. Therefore, it is correct that no relief could be

granted to the petitioner under Article 199 of the Constitution.

But that does not mean that, in case the petitioner has not been allowed any

relief by the departmental authorities (despite the observations by the Supreme

Court) the petitioner would have no immediate remedy at all against the

highhandedness of the department.

Amongst others he can file a complaint and grievance application before the

Federal Ombudsman, who can provide effective redress, in a case like the

present one. That forum has several attributes of a Court in many aspects of

its powers. It can also move in a matter promptly whenever so needed. At the

same time it does not suffer from some of the handicaps, due to the

technicalities of procedural nature, which operate as impediments or thwart

such like action by the Courts. For example the limitation of non-availability

of an alternate remedy in this case for the High Court under Art, 199 of the

Constitution, is not applicable to the said forum. Besides, the same being

quasi-judicial it is also headed by a Judge of the Supreme Court; with similar

powers to punish for contempt. In this context therefore, it can be safely

concluded, that it can provide the alternate effective and adequate remedy to

the petitioner also.

6

With the foregoing observations and remarks, leave to appeal is refused in the

circumstances of this case, due to the technical hurdle faced by the petitioner

in the High Court. He may file a complaint before the Ombudsman.

Leave refused.

SUPREME COURT OF PAKISTAN

-----------------------------------------------------------------

CIT v. Media Network and others

NO: WPs 4320 4786 YEAR: 2003 DECIDED ON 28/02/2006

CITATION: DTPSC0270 ; 94TAX293 ; 2006PTD2502 ; 2007PTCL12006PLD787

-----------------------------------------------------------------

Income Tax Ordinance, 1979 -- Sections 4A, 55, 59, 59(1A), 59(3),62, 63 --

C.B.R. Circular No. 7 of 2002, dated 15th June, 2002 --

C.B.R. Letter No. 7(7) Self Assessment /2002, dated 17-12-2002 --

Self Assessment Scheme, (2002-2003), paras. 9 and 10 --

Constitution of Pakistan, 1973 -- Articles 25, 185 --

Law Procedure Ordinance, 1972 -- Section 3

Words and phrases -- Word ``any'' -- Definition, amplitude and meaning --

Whether word ``any'' according to stroud's Judicial Dictionary exclude

limitations and qualifications and, therefore, ``any order'' would include both

interim as well as final order -- Held yes -- Whether word ``any'' used in

context of section 59 of Income Tax Ordinance, 1979 was word of expansion

indicative of width and amplitude sufficient to bring within scope and ambit of

words it governed and that could possibly be included in them -- Held yes --

Appeal to Supreme Court -- Self Assessment -- Issuance of policy guidelines by

C.B.R. to all Regional Commissioners of Income Tax -- Selection of case for

total audit -- Commissioner of Income Tax -- Selection of cases for total audit

-- Quashment of judgments by High Court -- Appeal against -- Principle of audi

alteram partem -- Canons of natural justice -- Departure -- Validity -- Whether

no prejudice was shown to have been caused for respondents on account of non-

specification of percentage of cases to be selected by C.B.R. through computer

balloting or by Regional Commissioners and as such paragraph 9 and 10 of scheme

could not be said to be ultra vires of provisions of section 59 or any other

provision of ordinance -- Held yes Whether discretion of Regional

Commissioners in selecting cases for total audit was restricted and they could

select only those revenue potential cases where there was evidence, information

or reason to believe that true particulars of income had been suppressed -

Held yes -- Whether objections as to non-publication of guidelines in official

gazette is concerned, there was no statutory obligation on part of C.B.R. to

have published guidelines in official gazette because they were in nature of

administrative instructions meant for internal consumption of Regional

Commissioners issued in aid of carrying out purpose of Self-Assessment Scheme -

- Held yes -- Whether rules of natural justice are not inflexible, they yield

to and change with exigencies of different situations and do not apply in same

7 manner to situations which are not alike -- Held yes Whether opportunity of

hearing was not required to be afforded by Commissioners to respondents at

preliminary stage of making proposals for recommendations of their cases to

Regional Commissioners for total audit -- Held yes

Self Assessment Scheme -- Filing of income tax return under the scheme --

Scope -- Assessee was not under statutory obligation to file his return of

total income for any year in terms of provisions of Section 59 of Income Tax

Ordinance, 1979 under Self Assessment Scheme -- Person who otherwise was

required to file a normal return under Section 55 of Income Tax Ordinance,

1979, was given option to file his return under Section 59 of Income Tax

Ordinance, 1979, for its acceptance in accordance with the provisions of Self

Assessment Scheme made by Central Board of Revenue for that year-Deputy

Commissioner of Income Tax would then assess, by order in writing, the total

income of the assessee on the basis of such return and determine the tax

payable on the basis of such assessment

Self Assessment Scheme -- Total audit -- Selection of case -- Procedure -- By

non-obstante clause of Section 59(1-A) of Income Tax Ordinance, 1979, it was

provided that Central Board of Revenue or any authority subordinate to it, if

so authorized by Central Board of Revenue could select out of returns, any

cases or class of oases or persons or class of persons howsoever determined for

assessment under Section 62 of Income Tax Ordinance, 1979, and Deputy

Commissioner would proceed to make the assessment under that section or if the

circumstances so warranted, under Section 63 of Income Tax Ordinance, 1979,

accordingly -- In such situation, the procedure provided under S.62 or S.63

of Income Tax Ordinance, 1979, as the case might be, would be followed by the

Deputy Commissioner

Total audit -- Procedure -- For total audit, under paragraph 9 of Self

Assessment Scheme, (2002-2003), twenty per cent. returns were to be selected,

through computer ballot which might be random or parametric as deemed fit by

Central Board of Revenue or/and by Regional Commissioners of Income Tax on the

recommendations of the Commissioners concerned in the light of guidelines

issued by Central Board of Revenue in that behalf -- Assessing Officer would

make necessary adjustments under Section 59(3) of Income Tax Ordinance, 1979,

if so required, after givinga notice in writing to the assessee and considering

his explanation if any -- Cases selected for total audit would be scrutinized

in detail, under paragraph 10 of Self Assessment Scheme, (2002-2003), including

field audit by departmental officers or by professional auditors

authorized under Section 4-A of Income Tax Ordinance, 1979, by utilizing the

information collected from available sources for determining income of the

taxpayer and tax payable thereon by observing the procedure of paragraphs 9 and

10 of the Scheme -- No limitation or restriction was imposed by Section 59(1-A)

of Income Tax Ordinance, 1979, as "any cases or classes of cases or person or

class of persons" could be selected for the purpose of total audit

8 Words and phrases -- `Any' -- Connotation -- Word ``any'' has diversity of

meaning and may be employed to indicate ``all'' or ``every'' as well as

``some'' or ``one'' -- Meaning of word ``any'' in a given statute depends upon

the context and subject matter of the statute

Total audit -- Selection of cases -- Non-specification of percentage of cases

to be selected for total audit -- Returns of assessees filed under Self

Assessment Scheme, (2002-2003), were selected for total audit -- Plea raised

by assessees was that Central Board of Revenue did not specify percentage of

cases to be selected for total audit and paragraphs 9 and 10 of Self Assessment

Scheme, (2002-2003), were ultra vires the provisions of Section 59 of Income

Tax Ordinance, 1979 -- Validity -- No exception could be taken to the selection

of cases of assessees in respect of their returns filed under Self Assessment

Scheme,(2002-2003) -- Final selection of case or cases were made by Regional

Commissioners of Income Tax, after affording fair and adequate opportunity of

hearing to assessees, who were issued show cause notices and their replies

to the same were duly considered -- For total audit, under Self Assessment

Scheme, (2002-2003), maximum of 20% of returns filed by assessees could be

selected -- Percentage of selected cases through computer ballot or by Regional

Commissioners of Income Tax was not squarely laid down with precision -- No

prejudice was shown to have been caused to assessees on account of non-

specification of percentage of cases to be selected by Central Board of Revenue

through computer balloting or by Regional Commissioners -- Paragraphs 9 and 10

of the Self Assessment Scheme were not ultra vires the provisions of Section 59

or any other provision of Income Tax Ordinance, 1979

Selection of cases for total audit -- Policy guidelines -- Scope -- Policy

guidelines were administrative in nature meant for internal consumption of

Income Tax functionaries, which did not create any rights nor did they impose

any obligations -- Such instructions did not take away any vested right of

assessees and did not govern the adjudicatory proceedings of quasi-judicial

nature -- Guidelines were not, in any way, extraneous, irrelevant or unfair to

the object to be achieved by the process of selection of cases for

total audit --

Total audit -- Selection of cases -- Reasonable classification --Non-issuance

of policy guidelines before promulgation of Self Assessment Scheme, (2002-

2003), -- Assessees were aggrieved of their selection of cases for total audit,

by Regional Commissioners of Income Tax -- Such order passed by Income Tax

Authorities, was set aside by High Court -- Plea raised by the authorities was

that policy guidelines had not become invalid for the reason of not having been

issued either before or contemporaneously with the promulgation of Self

Assessment Scheme -- Validity -- Held, there was no requirement of Section 59

of Income Tax Ordinance, 1979, or any other provision of the Ordinance or rule

for issuance of guidelines either before or along with the Scheme -- Very

object of the provisions of Section 59(1-A) of Income Tax Ordinance, 1979,

would have been frustrated if income tax payers were informed, before hand, of

the categories of cases or persons which would be selected for total audit --

9 If that was done, the possibility of tax evasion under the scheme at the

massive scale could not be ruled out -- Assessees were required to file their

true returns under the Scheme as far as possible -- Previous publication of the

guidelines would have been a hay-day for all the tax evaders as they would be

knowing before hand that their cases were not going to be selected or

scrutinized -- As long as the income tax Authorities acted within the

four corners of Section 59 of Income Tax Ordinance, 1979, and the Self

Assessment Scheme and did not abuse their power or authority, the objection as

to the provisional or/and final selection of cases for total audit was not

sustainable -- Guidelines for selection of cases by Regional Commissioners

would not suffer from any taint of invalidity merely because certain categories

had been identified for total audit based on reasonable classification, which

was not violative of Article 25 of the Constitution -- No requirement of law

existed for issuance of guidelines by Central Board of Revenue, side by side

with the announcement of the Scheme as they were to follow the Scheme after its

announcement and not to precede it -- Judgment passed by High Court was set

aside -- Appeal was allowed by the Supreme Court --

Policy guidelines -- Non-publication in official Gazette -- Effect -- No

statutory obligation on the part of Central Board of Revenue to have published

the guidelines in official Gazette -- Such guidelines were in nature of

administrative instructions meant for internal consumption of Regional

Commissioners issued in aid of carrying out purpose of Self Assessment Scheme -

- Policy guidelines did not enjoy the status of statutory rules, which were

required to be notified through .publication in official Gazette

Notification -- Publication of notification in official Gazette -- Principle --

Held, it all depends on the nature and context of statute whether the

provisions requiring publication of a notification in official gazette would be

construed as directory only or mandatory, so as to invalidate a notification or

instructions on account of non-publication in official Gazette,

Natural justice, principles of -- Preliminary inquiries or investigations

-- Opportunity of hearing-Principles-Rules of natural justice are not

inflexible, which yield to and change with the exigencies of different

situations -- Such rules do not apply in the same manner to situations which

are not alike-Said rules are not cast in a rigid mould nor can they be put in a

legal strait-jacket; these are not immutable but flexible and can be adopted

and modified by the statutes -- Need to act in an emergency may also exclude at

least a prior hearing or where a decision affects so many people that a

hearing would be impracticable -- In some cases there may be collective right

of hearing or to be consulted although not necessarily a hearing in individual

cases -- Depending upon the facts and circumstances of each case, there is no

mandatory requirement of natural justice that in every case the other side must

be given a notice before preliminary steps are taken -- It might suffice if

reasonable opportunity of hearing is granted to a person before an adverse

action or decision is taken against him -- However, it is not possible to lay

down an absolute rule of universal application governing all situations as to

10 the exclusion or otherwise of the audi alteram partem rule during the course of

preliminary inquiries or investigations --

Total audit -- Selection of cases -- Principles of natural justice --

Applicability -- Assessees were aggrieved of non-providing of opportunity of

hearing to them, before finalizing their cases for total audit -- Validity

Opportunity of hearing was not required to be afforded by Commissioners to the

assessees at preliminary stage of making proposals or recommendations of

their cases to Regional Commissioners for total audit -- Before final selection

of cases, the policy guidelines seemed to have been faithfully observed by the

Regional Commissioners of Income Tax, who were required to confront the

assessees with the material, provide them due opportunity of being heard and

communicate them the basis of their proposed selection -- In none of the cases,

any allegation of personal bias, mala fide or other unfair treatment by

Regional Commissioners or other officers of Income Tax Department were

specifically levelled or substantiated by the assessees-No exception could be

taken to the selection of the cases of assessees by Regional

Commissioners made after due process of law --

Direct appeal to Supreme Court -- Non-filing of Intra-Court Appeal --

Principles -- Ordinarily, Supreme Court insists the petitioner or appellant to

avail the remedy of Intra Court Appeal, in the first instance; however, this

is a rule of practice for regulating the exercise of discretion which does not

oust or abridge the Constitutional jurisdiction of Supreme Court -- Supreme

Court, in certain exceptional circumstances can entertain petitions, or as the

case may be, direct appeals even where the remedy of Intra -- Court Appeal

under Section 3 of Law Reforms Ordinance, 1972, has not been availed by a party

No prejudice caused on account of non-specification of the percentage of cases

to be selected by C.B.R. through computer balloting or by the Regional

Commissioners, paragraphs 9, 10 of the Circular No. 7 of 2002, dated 15th June,

2002 (Self Assessment Scheme for the Assessmenr year 2002-2003) is not ultra

vires the provisions of section 59

The procedure of selection of cases for total audit as provided paragraphs 9

and 10 of the Circular No. 7 of 2002, dated 15th June, 2002 (Self Assessment

Scheme for the Assessment year 2002-2003) was not nullified or whittled down by

the policy guidelines issued vide C.B.R. Letter No. 7(7) S. Asstt/2002, dated

17-12-2002 --

Guidelines issued vide C.B.R. Letter No. 7(7) S. Asstt/2002, dated 17-12-2002

were administrative in nature meant for the internal consumption of the Income

Tax functionaries which did not create any rights nor did they impose any

obligations

11 Instructions issued vide C.B.R. Letter No. 7(7) S.Asstt/2002, dated 17-12-2002

had not taken away any vested right of the assessees and would not govern the

adjudicatory proceedings of quasi-judicial in nature

It could not be said that the guidelines issued vide C.B.R. Letter No. 7(7)

S.Asstt/2002, dated 17-12-2002 were, in any way, extraneous irrelevant or

unfair to the object to be achived by the process of selection of cases for

total audit --

Supreme Court in certain exceptional circumstances can entertain petitions, or

as the case may be, direct appeals even where the remedy of Intea-Court appeal

under section 3 of the Law Reforms Ordinance, 1972 has not been availed by a

party

An assessee was not under any statutory obligation to file his return of total

income for any year in terms of provisions of section 59 --

There was no limitation or restriction imposed by section 59(1-A) of the

Ordinance as ``any cases or classes of cases or person or class of persons''

could be selected for the purpose of total audit --

Issuance of guidelines by C.B.R. were to follow the Self Assessment Scheme

after its announcement and not to precede it

There was no statutory obligation on the part of the C.B.R. to publish the

guidelines in the official Gazette as they were in the nature of administrative

instructions in aid of carrying out the Self-Aassessment Scheme

Opportunity of hearing was not required to be afforded by Commissioners

at preliminary stage of making proposals or recommendations of their

cases to the Regional Commissioners for total audit

Publication of Notification in official Gazette depends on nature and context

of statute

Natural Justice -- The rules of natural justice are not inflexible --

Words and phrases -- ``Any'' -- ``Any order'' -- ``Any law'' --

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IN THE SUPREME COURT OF PAKISTAN

COMMISSIONER OF INCOME TAX and others

v.

Messrs MEDIA NETWORK and others

Present: IFTIKHAR MUHAMMAD CHAUDHRY, C.J., FAQIR MUHAMMAD KHOKHAR and MIAN

SHAKIRULLAH JAN, JJ

Civil Appeals Nos.233 to 315 of 2004

12

On appeal from the judgment and order of the Lahore High Court, Lahore, dated

24-9-2003, passed in W.Ps. Nos. 4320, 4786, 5320, 5033, 6786, 4551, 5397, 4648,

4407, 6843, 4055, 7764, 6344, 6827, 6797, 6477, 6883, 5975, 5978, 5973, 7235,

5976, 6641, 6342, 7228, 10328, 5977, 7238, 5317, 4691, 4144, 7026, 4546, 4654,

4651, 4545, 4877, 6523, 4054, 7293, 4861, 4358, 4583, 5396, 4874, 7022, 5318,

5717. 4470, 4699, 4429, 5376, 5461, 4056, 4954, 5368, 4582, 929, 6971, 4862,

4319, 4875, 6230, 4682, 4639, 4476, 6521, 4700, 16879, 16003, 6370, 16079,

12338, 15374, 6490, 4688, 6345, 9016, 6478, 4683, 6343, 5974 and 9015 of 2003)

Civil Appeals Nos.833 to 848 of 2004

-------------------------------------

REGIONAL COMMISSIONER OF INCOME TAX and others

v.

M. YOUSAF ACADEMY QUICK FILL CNG. and others

(On appeal from judgments dated 10-6-2004, 31-3-2004, 4-5-2004, 12-4-2004, 10-

6-2004, 13-11-2003, 19-11-2003, 19-11-2003, 17-11-2003, 29-1-2004, 18-11-2003,

29-1-2004, 24-9-2003, 26-2-2004, 26-2-2004, 17-3-2004, passed by the Lahore

High Court, Lahore in W. Ps. Nos. 11719, 14047, 11306, 15467 of 2002, 15942,

16002, 16000, 16081, 8899, 16197, 12124, 6808, 17875, 17876 of 2003, 618 of

2004 and 17056 of 2005).

Civil Appeals Nos. 1041 to 1046 of 2004

---------------------------------------

REGIONAL COMMISSIONER OF INCOME TAX and others

v.

SADAQAT RAHIM and others

On appeal from judgment and order of the Lahore High Court, Lahore dated 10-10-

2003, 10-10-2003, 1-4-2004, 2-4-2004, 24-9-2003, 31-5-2004, 24-9-2003, passed

in W. Ps. Nos. 13516, 13517 of 2003, 3632, 616 of 2004 and 16540 & 9979 of

2003).

Civil Appeals Nos. 1211 to 1214 of 2005

---------------------------------------

COMMISSIONER OF INCOME TAX and others

v.

Messrs Haji MUHAMMAD TANVIR and others

(On appeal from the judgments and orders of the Lahore High Court, Lahore dated

24-9-2003, 5-8-2003, 31-3-2004, 29-6-2005, passed in W.Ps. Nos. 4653/2003,

4721/2003, 66/2004 and W.P. No.11614/2005).

13 Civil Appeals Nos. 1641 and 1704 of 2005

----------------------------------------

REGIONAL COMMISSIONER OF INCOME-TAX and others

v.

Messrs MIAN COLD STORAGE MEWA MANDI, SIALKOT and others

(On appeal from the judgments and orders of the Lahore High Court, Lahore dated

7-9-2005 and 29-9-2005, in W.Ps. Nos. 11847/2005 and 11948/2005).

Civil Appeals Nos. 233 to 315, 833 to 848, 1041 to 1046 of 2004, 1211 to 1214,

1641 and 1704 of 2005, decided on 28th February, 2006.

Makhdoom Ali Khan, Attorney General for Pakistan, Muhammad Ilyas Khan, Senior

Advocate Supreme Court, Muhammad Aslam Chatha, Advocate-on-Record, assisted by

Shahid Jamil Khan, Advocate, Khurram M. Hashmi, Advocate and Danish Zuberi for

Appellants.

Shahid Hamid, Senior Advocate Supreme Court for Respondents (in C.A. No. 1046

of 2004).

Shahbaz Butt, Advocate Supreme Court for Respondents (in C.As. Nos.233, 241,

243, 256, 261, 271, 274, 275, 279, 283, 286, 293, 296, 301, 304 of 2004).

Siraj-ud-Din Khalid, Advocate Supreme Court for Respondents (in C. As. Nos. 238

of 2004 and 1212 of 2005).

Muhammad Iqbal Hashimi, Advocate Supreme Court for Respondents (in C. As.

Nos.248 to 251, 256, 259, 303 and 1041 of 2004).

Mian Ashiq Hussain, Advocate Supreme Court for Respondents (in C. As. Nos.262,

265, 266 to 269, 294, 298, 835, 844 of 2004 and 1214 of 2005).

Muhammad Qamar-uz-Zaman, Advocate Supreme Court for Respondents (in C. A. No.

263 of 2004).

Muhammad Naeem Shah, Advocate Supreme Court for Respondents (in C. As. Nos.

276, 288, 315 of 2004 and 1213 of 2005).

Dr. Ilyas Zafar, Advocate Supreme Court for Respondents (in C. As. Nos. 841

and 843 of 2004).

M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.248 to 251, 259,

303 of 2004).

Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.A. No.263 of

2004).

Dates of hearing: 27th and 28th February, 2006.

14

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JUDGMENT

FAQIR MUHAMMAD KHOKHAR, J.-The Central Board of Revenue (C.B.R.) announced

Self-Assessment Scheme for the assessment year 2002-2003 through Circular No.7

of 2002, dated 15-6-2002 in exercise of powers under section 59 of the Income

Tax Ordinance, No.XXXI of 1979 (since repealed) (hereinafter referred to as the

Ordinance). The last date for filing the returns for non-company cases was

fixed as 30-9-2002 (subsequently extended to 15-10-2002) and for company cases

31-12-2002. Thereafter, the Board issued policy guidelines to all the Regional

Commissioners of Income Tax vide letter, dated 17-12-2002 for selection of

cases for total audit with the direction to finalise the process by 10-1-2003.

By letter, dated 31-1-2003, the C.B.R. informed the Regional Commissioners that

in view of a small number of returns of companies, the holding of ballot for

selection of 20% cases out of each category was not logical. Therefore, they

were directed to select the returns for audit up to 20% at their own level

under para. 9(2)(ii) of the Scheme and the guidelines, dated 17-12-2002.

2. The respondents, who were individual firms and companies limited by shares

filed their returns under the Scheme for the year, 2002-2003, Their cases were

selected by the concerned Regional Commissioners of Income Tax on the

recommendations of Commissioners of the Income Tax after following the

procedure laid down in the scheme and the policy guidelines, dated 17-

12-2002. The respondents felt aggrieved and filed writ petitions in the Lahore

High Court Lahore, which were allowed, by the impugned judgments and the

selection of their cases by the Regional Commissioners of Income Tax was

quashed. Hence, these appeals under Article 185 of the Constitution of Islamic

Republic of Pakistan, by leave of the Court.

3. Mr. Makhdoom Ali Khan, the learned Attorney General for Pakistan submitted

that Self-Assessment Scheme as announced on 15-6-2003 by Circular Letter No.7

and the policy guidelines issued by the Board vide letter, dated 17-12-2003

were not ultra vires any of the provisions of the Constitution and the law.

They were issued in conformity with letter and spirit of section 59 (1-A) of

the Ordinance and section 177 of the Income Tax Ordinance, 2001. There was no

violation of the principles of natural justice. It was further contended that

during the preliminary stage of the process of selection of cases through in-

house mechanism in the light of the scheme and the guidelines, the respondents

were not entitled to any show-cause notice or hearing as no adverse decision

had yet been taken. However, they were issued notices by the Regional

Commissioners before making a final selection. He referred to a Textbook titled

Administrative Law by Sir William Wade Ninth Edition pages 547-548. He also

relied on the cases of R V. Saskatchewan College of Physicians and Surgeons et

al, ex parte Samuel (1966) 58 Dominion Law Reports (D.L.R.) (2nd) 622 at pages

638-640), Parry Jones v. Law Society (1969) 1 Ch Division 1 at pages 8 and 10),

Norwest Hoist Ltd. v. Secretary of State for Trade (1978) 1 Ch. D 201),

Christopher John Moran v. Lloyd's (1981) 1 Lloyd's Law Reports (Volume-1) 423

15 at page 427) and Rees and others v. Crane (1994) 1 All E.R. 833 at P.P. 842-

845), in support of his submission that hearing was not required to be afforded

at preliminary stage of investigation or inquiry when no adverse action was

taken. Under section 59 of the Ordinance, once a case was selected for total

audit, the normal process as contemplated by section 62 was to take place. In

any case, even under the guidelines, dated 17-12-2002 a definite, fair and

reasonable procedure had been provided for to enable an income tax assessees to

place his point of view before the final selection of a case. The discretion of

the Regional Commissioners of the Income Tax and the Commissioner's of Income

Tax had been further curtailed by the C.B.R. through the scheme and the

guidelines.

4. It was further argued that it would have certainly created more

complications including the evasion of income tax if the guidelines were made

known either simultaneously with, or immediately after, the announcement of the

Self-Assessment Scheme. In such a case, all the assessees would have known

before hand as to who were going to be selected or left out. A prior warning

would have produced undesirable results detrimental to the Revenue and the

public interest. The course adopted by the C.B.R. had resulted in minimizing

the evasion of the income tax as everybody could expect that his case might be

scrutinized. If the C.B.R. had Mentified the classes or categories of cases or

persons and laid down guidelines before, the very purpose of provisions of

section 59 of 1979 Ordinance and the Self-Assessment Scheme announced

thereunder would have been defeated. The guidelines issued by the C.B.R. vide

circular letter, dated 17-12-2002 did not contravene the provisions of

section 59(1-A) of the Ordinance or the Self-Assessment Scheme. The guidelines

could not be considered to be an amendment to the Self-Assessment Scheme as

originally announced on 15-6-2002. The Self-Assessment Scheme and the

guidelines issued by letters, dated 17-12-2002 and 22-3-2003 were valid in all

respects.

5. It was next contended by the learned Attorney General that although certain

appeals of the appellants were barred by limitation but the delay ought to be

condoned by this Court for the grounds stated in the applications for

condonation of delay and in view of the law laid down in the cases of Ch.

Manzoor Elahi v. Federation of Pakistan and others (PLD 1975 SC 66 (100),

Mehreen Zaibun Nisa v. Land Commissioner, Multan and others (PLD 1975 SC

397) at P. 413), Fazal Ilahi and others v. P.T.C. and others (2001 SCMR 768) at

P. 770) and Sheikh Muhammad Rashid v. Majid Nizami, Editor-in-Chief, The Nation

and Nawa-e-Waqt, Lahore and another (PLD 2002 SC 514) at P.521).

6. It was further argued that in view of the substantial questions of law of

public importance involved in these cases, failure to avail the alternate

remedy of Intra-Court Appeal under section 3 of the Law Reforms Ordinance, 1972

was not an absolute bar for invoking the constitutional jurisdiction of this

Court. He referred to the case of Province of Punjab through Secretary, Excise

and Taxation, Government of Punjab and others v. Sargodha Textile Mills Ltd.,

Sargodha and others (PLD 2005 SC 988). It was emphasized that mala fide against

16 a public functionary was not to be assumed but the same was required to be

proved through positive evidence and material. The case of The Federation of

Pakistan through Secretary Establishment Division, Government of Pakistan,

Rawalpindi v. Saeed Ahmad Khan and others (PLD 1974 SC 151) was referred.

7. On merits, it was stated by the learned Attorney General that the selection

of the cases of the respondents was made after issuance of show-cause notices

and receipt of the replies of the assessees who were afforded reasonable

opportunity of hearing. The learned Attorney General referred to the case of

Muhammad Asghar and others v. Income Tax Officer and others (1986 PTD

357)(Lahore) in that the selection of cases for scrutiny by Income Tax

Authorities could not be objected to as the assessees were required to file

true income tax returns under the Self-Assessment Scheme. The guidelines laid

down an intelligible criteria with specificity which could not be said to be

capricious or arbitrary. The respondents were disentitled to invoke the

constitutional jurisdiction of the High Court conferred by Article 199

of the Constitution of Islamic Republic of Pakistan in the presence of

availability of adequate remedies provided by the Income Tax Ordinance.

Reliance was placed on the cases of Al-Ahram Builders (Pvt.) Ltd. v. Income Tax

Appellate Tribunal (1993 SCMR 29),-Khalid Mehmood v. Collector of Customs,

Customs House, Lahore (1999 SCMR 1881) at P. 1887). It was lastly submitted

that in cases in which notices had not been issued, the same would be issued by

the relevant authorities before making a final selection for proceeding further

in accordance with law.

8. On the other hand, Mr. Shahid Hamid, Senior Advocate Supreme Court, the

learned counsel for the respondent (in Civil Appeal No. 1046/2004) submitted

that the appeal filed by the appellants was hopelessly barred by the time and

no sufficient cause was shown in their application for condonation of delay. He

referred to the cases of Muhammad Hussain and others v. Muhammad and others

(2000 SCMR 367) and Ali Muhammad through Legal Heirs and others v. Chief

Settlement Commissioner and others (2001 SCMR 1822) to impress upon that the

delay in filing an appeal could not be condoned merely because some connected

appeals filed within time were to be heard on merits. It was next contended

that the remedy of Intra-Court Appeal provided by section 3 of the Law Reforms

Ordinance, 1972, against the impugned judgment, passed by a learned Single

Judge in Chambers of the Lahore High Court had not been invoked by the

appellants in these cases. Therefore, a petition or an appeal before this

Court under Article 185 of the Constitution was not competent in view of the

law laid down by this Court in the case of Imtiaz Ali Malik v. Mst. Surrya

Begum and others (1979 SCMR 22).

9. He further argued that the guidelines issued by the C.B.R. were over-broad

and went beyond the scope of section 59(1-A). They were ex facie discriminatory

in nature and were also capable of arbitrary application. They conferred

uncanalised power on the Regional Commissioners and the Commissioners of Income

Tax to pick and choose. There was no method to ascertain as to how many cases

were to be selected for computer balloting by the C.B.R. or by the Regional

17 Commissioners on the recommendations of the Commissioners. An unfettered

discretion had been conferred on them. He pointed out that in the Self-

Assessment Scheme for the year, 1998-99 a provision was made to outsource the

selected cases for audit purpose under sections 4 and 4-A of the Ordinance and

the C.B.R. was required to specify classes/categories of cases for special

audit through a separate circular. However for the assessment years 2002-2003,

the assessees were entrapped through the Self-Assessment Scheme and the

guidelines. The conduct of the C.B.R. was unconscionable, non-transparent and

discriminatory in nature.

10. Mr. Siraj-ud-Din Khalid, Advocate Supreme Court, learned counsel for the

respondents (in C.As. No.238 of 2004 and 1212 of 2005), adopted the arguments

advanced by Mr. Shahid Hamid, Senior Advocate Supreme Court and further stated

that the appeals were also liable to be dismissed on the point of limitation as

no sufficient cause was shown for condonation of delay.

11. Mian Ashiq Hussain, Advocate Supreme Court, the learned counsel for the

respondents (in Civil Appeals No.262, 265, 266, 269, 294, 298, 835, 844/2004

and 1214/2005) highlighted the history of the Self-Assessment Scheme in a

chronological order. He submitted that selection of cases through random ballot

as well as by the Regional Commissioners of Income Tax was not only against the

basic concept and purpose of the scheme but the same also suffered from the

vice of uncertainty. Para-9 of the Scheme was not clear as to the exclusion of

cases from the Scheme on the basis of computer balloting and the ratio out of

total of 20% of cases which were to be selected by the Regional Commissioners

of Income Tax. No justification was spelt out by the C.B.R. while issuing the

letter, dated 31st January, 2003 permitting the Regional Commissioners to

select such cases at their own level. A long arm was given to the Revenue

Officers to take advantage of the ambiguity of the Scheme as to'the percentage

to be allocated for computer balloting and Regional Commissioners of Income

Tax. It was argued that the guidelines were required to be issued either before

or at least simultaneously with the announcement of the Scheme so that the

assessees were not kept in dark to. Exercise their option for the Scheme or

otherwise before the period provided under section 59(4) of the Ordinance had

run out. It was very unfair on the part of the C.B.R. to adopt a mechanism of

laying a bobby trap for the assessees. The C.B.R. was not expected to be

secretive in the matter of identifying each category of cases to be selected

for total audit or scrutiny till the last date of submission of returns. It

would have been just and 'fair that the guidelines were made known to the

assessee well in time and not to hold them back for considerable period even

after filing of the returns. It was not the intention of law to give wide

discretion to the C.B.R. to issue the guidelines as contemplated in para.

9(a)(2) of the Scheme at its sweet will whenever it thought fit. It was

further urged that Assessing Officer had no discretion but to make assessment

under section 59(1) of Ordinance, 1979, in accordance with the returns once the

requirements of the Scheme was satisfied. The guidelines, dated 17-12-2002 were

in the nature of a bill of attainder i.e. pains and penalties and the net was

so widened that no taxpayer could feel safe even if all the codal formalities

18 were fulfilled. The parameters laid down by the guidelines were exhaustive in

nature as if those were an independent Scheme. The hunt for cases involving

``Revenue Potential'' would give a licence and unbridled discretion to the

Commissioners/Regional Commissioner of Income Tax to pick and choose anyone on

unreasonable grounds. The guidelines could be invoked in a selective manner

without providing any intelligible differentia and the same were hit by the

equality clauses laid down by Article 25 of the Constitution of Islamic

Republic of Pakistan, 1973. Reliance was placed on the case of Messrs Novitas

International v. Income Tax Officer (Films Circle) and others (1991 PTD 968).

It was lastly submitted that exclusion of cases from benefit of the scheme by

itself amounted to an adverse order which could not be done without affording

adequate opportunity of hearing by the relevant authorities during the process

of selection of cases by the Commissioners and Regional Commissioners of Income

Tax.

12. Mr. M. Naeem Shah, Advocate Supreme Court, learned counsel for the

respondents (in Civil Appeals No.276, 288, 315/2004) submitted that Circular

No.7 of 2002, dated 15-6-2002 and the guidelines, dated 17-12-2002 issued by

the C.B.R. purportedly under section 59 of the Ordinance, 1979, were violative

of Article 4 of the Constitution and the principles of natural justice. It was

an inalienable right of every citizen to enjoy the protection of law and no

action detrimental to reputation or property of any person could be taken

except in accordance with law. He argued that under the provisions of section

59(1) once a return filed under the Scheme qualified for acceptance, the Deputy

Commissioner of Income Tax was under an obligation to assess the total income

of the assessee on the basis of such return and to pass an order of

determination of the tax accordingly.

13. Dr. Ilyas Zafar, Advocate Supreme Court, the learned counsel for the

respondents (in Civil Appeals No.841 and 843/2004) submitted that the

guidelines issued by the Board were required to be published in the official

Gazette as required by section 165 of the Ordinance where-under the C.B.R. was

empowered, by notification in the official Gazette, to make rules and prescribe

the manner and the procedure by which the income, profits and gains liable to

tax and the tax payable under the Ordinance, would be determined in the cases

of persons to whom section 59 was applicable. Since the guidelines, dated (?)

therefore, they were not enforceable at law. It was next contended that the

guidelines vested the Income Tax Authorities with the powers of reopening the

cases for total audit in an arbitrary manner and without recording any reasons.

Therefore, those were invalid ineffective for non-compliance of the

requirements of section 24-A of the General Clauses Act, 1897, where under

every authority, officer or person making any order or issuing any direction in

exercise of powers conferred by or under any law was required to give reasons

for such an order or direction. The guidelines also ran counter to and

nullified the effect of section 59 ibid and those were an encroachment of

quasi-judicial functions of the Income-tax Authorities. Reliance was placed on

.the case of Messrs H.M. Abdullah v. Income Tax Officer Circle v. Karachi

and 2 others (1993 SCMR 1195) in which it was held that the C.B.R. exercising

19 administrative control or supervision could not give any directions or

instructions to the Assessing Officer, Appellate Assistant Commissioners,

Income Tax Appellate Tribunal or the Commissioners of Income Tax vested with

quasi judicial powers. He also made a reference to the case of Messrs Central

Insurance Company and others v. Central Board of Revenue and others (1993 SCMR

1232) wherein it was held that although the C.B.R. had administrative

control over the functionaries discharging their functions under the Ordinance,

but it did not figure in the hierarchy of the forums provided for adjudication

of cases of assessees as to the income-tax. It was further held therein

assessees as to the income-tax. It was further held therein that interpretation

placed by the C.B.R. on a statutory provision could not be treated as a

pronouncement by a forum competent to adjudicate upon such a question judicial

or quasi-judicial. Therefore, it was contended that the C.B.R. could not issue

any directions of the nature which would interfere with the judicial or quasi-

judicial adjudicatory functions entrusted to various functionaries under a

statute.

14. Messrs Muhammad Iqbal Hashmi, Advocate Supreme Court, and Shahbaz Butt,

Advocate Supreme Court, the learned counsel for the respondents (in Civil

Appeals No.248-251, 256, 259, 303, 1014/2004) and (Civil Appeals No.233, 241,

243, 256, 261, 271, 274, 275, 279, 283, 286, 293, 296, 301, 304 of 2004)

submitted that the C.B.R. was not empowered to issue guidelines having the

effect of modification of the Scheme already announced by it or to extend the

date for scrutiny of cases for total audit unilaterally.

15. We have heard the learned Attorney General for Pakistan and the learned

counsel for the respondents at length. Section 55 of the Ordinance required the

filing of Income Tax return by every person whose total income or the total

income of any other person in respect of which he was assessable for any income

year exceeded the maximum amount which was not chargeable to tax under the

Ordinance or who had been charged to tax for any of the four income tax years

immediately preceding the said income year. Section 59 of the Ordinance made a

provision for self-assessment of the income tax as under:--

59. Self-assessment: (1) Where the return of total income for any

income year furnished by the assessee (not being a public company

or a company engaged in the business of banking leasing and

modaraba), under section 55 qualifies for acceptance in accordance

with the provisions of a scheme of self assessment made by the

Central Board of Revenue for that year or under any instructions

or orders issued thereunder the (Deputy Commissioner) shall

assess, by an order in writing, the total income of the assessee

on the basis of such return and determine the tax payable on the

basis of such assessment

(Explanation: For the removal of doubt it is hereby declared

that a return of total income furnished under section 55 does

not include a return of total income furnished under section

57)

20

(1-A) Notwithstanding anything contained in subsection

(1), the Central Board of Revenue or any authority

subordinate to it if so authorized by the Central Board of Revenue

in this behalf, may in accordance with a scheme referred to in

subsection (1), select out of returns referred to in that

subsection any cases or classes of cases or persons or classes

of persons howsoever determined, for assessment under section 62,

and the (Deputy Commissioner) shall proceed to make the assessment

under that section or, if the circumstances so warrant, under

section 63 accordingly).

(1-B)

(2)

(3) In (assessing the total income and determining the tax

payable under subsection (1)) (Deputy Commissioner) may make such

adjustments as may be necessary, including any adjustment under

sections 34, 35, 36, 37, 38, 50, 53 or 54, the rules made under

section 165, the First Schedule and the Third Schedule.

(4) No order under subsection (1) shall be made in any cases after

the thirtieth day of June of the financial year next following the

income year in respect of which a return of total income has been

furnished under section 55:

(Provided that if such order is not passed by such date, the

acknowledgement issued under section 55A in respect of the return

of total income shall be deemed to be the assessment order

and notice of demand referred to in section 85)

16. However, section 59-A of the Ordinance laid down that if the Deputy

Commissioner was satisfied without requiring the presence of the assessee or

the production by him of any evidence that a return furnished under section 55

was correct and complete, he would by an order in writing assess the total

income of the assessee and determine the tax payable on the basis of such

return. It was further provided therein that the provisions of subsection (3)

of section 59 would apply to an assessment and determination under section 59-A

as they applied to an assessment and determination under section 59.

17. The C.B.R. by Circular No.7 of 200*2 (Income Tax), on 15th June, 2002

announced the Self-Assessment Scheme (S.A.S.) for the Assessment year 2002-2003

under section 59 of the Ordinance. Paragraphs 1.1, 9 and 10 thereof are

reproduced below for the sake of convenience:-

1.1 All returns filed by taxpayers, other than those that are

ineligible under para. 7 of this Scheme, shall qualify for

acceptance subject to the fulfilment of the following conditions,

namely:-

21

(a) tax has been fully paid under section 54 of the Ordinance and

proof of such payment is attached with the return;

(b) Return of income for the assessment year 2002-2003 has been

filed under section 55 of the Ordinance, within due date as

defined in this Scheme;

(c) Returns of Public Limited companies quoted stock exchange,

where tax payable on the income declared is equal to or more than

the tax payable on the income last declared or assessed, whichever

is higher;

(d) Returns of other Companies where tax payable on the income

declared is higher by ten percent (10%) or more compared to the

tax payable on the income last declared or assessed,

whichever is higher;

(e) Returns of Registered Firms of Professionals not liable to pay

Super Tax under clause (2B) of para (A) of Part-IV of 1st Schedule

to the Ordinance, where the tax computed, under Part-II of the 1st

Schedule to the Ordinance, on income declared is higher by twenty

per cent. (20%) as compared to the similar tax computed on the

income last declared or assessed, whichever is higher; and

(f) Return of Persons not being Companies or Registered Firms of

Professionals, as indicated in sub-paras (c) (d) & (e) above,

where tax payable to income declare is higher by twenty per

cent. (20%) or more as compared to the tax payable on the

income last declared or assessed, whichever is higher;

(9) SELECTION OF CASES FOR AUDIT:

---------------------------------

(a) From amongst the returns filed under the Self-Assessment

Scheme (excluding salary and only property income cases), twenty

per cent. (20%) returns may be selected for total audit in the

following manner:-

(i) through computer ballot which may be random or parametric, as

deemed fit by C.B.R.

(ii) by Regional Commissioners of Income Tax on the

recommendations of Commissioners concerned, in the light of

guidelines issued by the Central Board of Revenue in this behalf.

(b) Returns qualifying for self-assessment shall be expeditiously

processed either manually, or through computer, after the

22

selection of cases for total audit. The Assessing Officer shall

make necessary adjustments under section 59(3) of the Ordinance,

if so required, after giving a notice in writing to the assessee

and considering his explanation, if any, These adjustments may

include add-backs on account of:-

(i) expenses claimed which are legally inadmissible;

(ii) any sum(s) deemed to be income under the Ordinance; and

(iii) adding agricultural income to the chargeable income for rate

purposes in terms of Proviso to Clause (1), Part-1 of the Second

Schedule to" the Ordinance.

(10) PROCESSING OF CASES SELECTED FOR AUDIT.

--------------------------------------------

The cases selected for total audit, shall be scrutinized in

detail, including field audit by departmental officers or by

professional auditors authorized under section 4A of the

Ordinance. The investigation and assessment proceedings shall be

monitored and completed under guidance of supervisory officers

within the meaning of section 7 of the Ordinance. Information

collected from available sources shall be utilized for determining

income of the taxpayer and tax payable thereon.

18. The C.B.R. Islamabad vide Letter No.7(7) S. Asstt/2002, dated 17-12-2002

issued policy guidelines to all the Regional Commissioners of Income Tax for

selection of cases for total audit under para-9 (a)(ii) of the Self-Assessment.

Scheme for the assessment year 2002-2003 Paragraphs 2, 3 and 4 thereof, being

relevant, read as under:-

``(2) In order to fulfil the above obligation of the Scheme

regarding issuance of the guidelines, it has been decided that the

Resit shall select only those revenue potential cases, where there

is an evidence, information or reasons to believe that the true

particulars of income have been suppressed. Such selection may

be based upon factors including an evident decline in income and

disparity in expenses on utilities vis-a-vis income declared.

Besides, cases of taxpayers acquiring new assets or incurring a

liability of Rs.50,000 or more through a non-institutional loan,

as declared in their wealth statements or where Department is

otherwise in the knowledge of some investments made by them, also

need to be considered for selection, it is felt that sources of

such acquisition/investment require detailed examination. In order

to identify such cases the tax profiles of survey and Registration

may also be consulted.

23

(3) Further, the RCsIT may poee recall that last year a number of

taxpayers lodged complaints before he learned Federal Tax

Ombudsman that their cases were selected on frivolous grounds.

This time it must be ensured that selection is based on material

evidences and a fair and just treatment is accorded to all

taxpayers. Before making a final selection, the RCsIT must

confront the assessees, provide them due opportunity of being

heard and must indicate the basis of their proposed selection in

the notices to be communicated to them.

(4) Board would like to further add that powers to set apart cases

for total audit must not be indiscriminately used and be

restricted to only those revenue potential cases where there is a

sound basis. Board desires that the process of selection of cases

for total audit must be finalized by 10th of January, 2003 and

thereafter be favoured with Zone-wise list of cases so selected.

It may be reiterated that selection of cases for total audit must

be carried out in a judicious and transparent manner.''

By another directive, dated 22-3-2003, the C.B.R. extended final date of

selection of non-company cases for total audit up to 31-3-2003 in order to

allow sufficient time to the taxpayers to submit their replies to the show

cause notices to the Regional Commissioners of Income Tax. The same date was

also extended in respect of company cases.

19. A number of issues have been raised by both sides with regard to the

validity and scope ofthe Circular No.7 of 2002, dated 15-6-2002 and policy

guidelines, dated 17-12-2002 of the C.B.R. together with extension in fixing

dates for completion of total audit of cases. An assessee was not under any

statutory obligation to file his return of total income for any year in terms

of provisions of section 59 under the Self-Assessment Scheme. A person who

was otherwise required to file a normal return under section 55 of the

Ordinance was given the option to file his return under section 59 for its

acceptance in accordance with the provisions of self-assessment scheme made by

the C.B.R. for that year, The Deputy Commissioner of Income Tax would then

assess, by an order in writing, the total income of the assessee on the basis

of such return and determine the tax payable on the basis of such assessment.

By non-obstante clause of section 59 (1-A) it was provided that the C.B.R. or

any authority subordinate to it if so authorized by the C.B.R. could select out

of returns any cases or class of cases or persons or class of persons howsoever

determined for assessment under section 62 and the Deputy Commissioner would

proceed to make the assessment under that section or if the circumstances so

warranted, under section 63 accordingly. In such a situation, the procedure

provided under section 62 or section 63, as the case might be, would be allowed

by the Deputy Commissioner. Under paragraph 9 of the scheme, 20% returns were

to be selected for total audit through computer ballot which may be random of

parametric as deemed fit by the C.B.R. or and by Regional Commissioners

of Income Tax on the recommendations of the Commissioners concerned in

24 the light of the guidelines issued by the C.B.R. in that behalf. The Assessing

Officer would make necessary adjustments under section 59(3) of the Ordinance,

if so required, after giving a notice in writing to the assessee and

considering his explanation C if any. Paragraph 10 of the Scheme further laid

down that the cases selected for total audit would be scrutinized in detail

including field audit by departmental officers or by professional auditors

authorized under section 4-A of the Ordinance by utilizing the information

collected from available sources of determining income of the taxpayer and tax

payable thereon by observing the procedure of paragraph 9 and 10. There was no

limitation or restriction imposed by section 59(1-A) of the Ordinance as "any

cases or classes of cases or person or class of persons" could be selected for

the purpose of total audit.

20. The word `any' used in subsection (1-A) of section 59 of the Ordinance was

not without significance. In the case of Ch. Zahoor Ellahi M.N.A. v. The State

(PLD 1977 SC 273) the import of the word `any' was considered in the context of

section 13(1)(b) of the Defence of Pakistan Ordinance (XXX of 1971) whereunder

it was provided that.... ``no Court would have authority to revise such order

or sentence..... or to transfer any case from a Special Tribunals.... or have

any jurisdiction of any kind in respect of any proceedings in a Special

Tribunal.'' It was held that word `any' was of very wide amplitude and was

defined in Stroud's Judicial Dictionary as a word which excluded limitations or

qualifications and, therefore, "any order" would include both interim as well

as final orders. Similarly, in N.-W.F.P. v. Muhammad Irshad (PLD 1995 SC 281),

this Court took the view that the expression `any law' was used to enlarge the

amplitude of the term to which it was attached and there seemed to be no reason

why expression 'any law' occurring in Article 8(1) of the Constitution

would be so narrowly construed as to exclude from its purview a regulation

which possessed the efficacy of law in a part of Pakistan. In Inam-ur-Rehman v.

Federation of Pakistan (1992 SCMR 563) (at page 587) it has been stated that

the term 'any' according to the Black's Law Dictionary (Fifth Edition) page 86

means "one out of many; an indefinite number; one indiscriminately of

whatsoever kind or quantity. The word "any" has a diversity of meaning and may

be employed to indicate "all" or "every" D as well as "some" or "one" and its

meaning in a given statute depends upon the context and the subject-matter of

the statute. In M. Amjad v, Commissioner of Income Tax and 2 others (1992 PTD

513), it was held by a learned Division Bench of the High Court of Sindh that

the word `any' used in the context of section 59 of the Ordinance was a word of

expansion indicative of width and amplitude sufficient to bring within the

scope and ambit of the words it governed, all that could possibly be included

in them.

21. Therefore, no exception could be taken to the selection of cases of the

respondents in respect of their returns filed under the Self-Assessment Scheme.

It goes without saying that final selection of a case or cases had been made by

the Regional Commissioner of Income Tax after affording fair and adequate

opportunity of hearing to the assessees/respondents who were issued

showcause notices and their replies to the same were duly considered. It may be

25 observed that under the scheme a maximum of 20% of the returns filed by the

assessees could be selected for total audit. The percentage of the selected

case? Through computer ballot or by the Regional Commissioners of Income Tax

had not been squarely laid down with precision. However, no prejudice was shown

to have been caused to the respondents on account of the non-specification

of the percentage of cases to be selected by the C.B.R. through computer

balloting or by the Regional Commissioners. In our view, paragraphs 9 and 10 of

the Scheme could not be said to be ultra vires the provisions of section 59 or

any other provision of the Ordinance.

22. As regards the policy guidelines, dated 17-12-2000 issued by the C.B.R. to

the Regional Commissioners of the Income Tax, it seems that discretion of the

Regional Commissioners in selecting the cases for total audit was thereby

restricted. They could select only those revenue potential cases where there

was an evidence, information or reason to believe that the true

particulars of income had been suppressed. Under the Scheme, the number of

selected returns could not exceed the maximum limit of 20%. However, the

Regional Commissioner's were further directed to identify and select the

revenue potential cases only based upon factors including an evident decline in

income and disparity in expenses on utility vis-a-vis income declared. Besides,

cases of taxpayers acquiring new assets or incurring a liability of Rs.50,000

or more through a non-institutional loan, as declared in their wealth

statements or where Department was otherwise in the knowledge of some

investments made by them, could also be considered for selection. If it was

felt that sources of such acquisition/investment required detailed

examination. In order to identify such cases, the tax profiles of Survey and

Registration might also be consulted. The C.B.R. specifically directed that

before making a final selection, the Regional Commissioners of Income Tax must

confront ihe assessees, provide them opportunity of being heard and must

indicate the basis of their proposed selection in the notices to be

communicated to them. These guidelines were administrative in nature meant for

the internal consumption of the Income Tax functionaries which did not create

any rights nor did they impose any obligations. Those instructions had not

taken away any vested right of the assesses and would not govern the

adjudicatory proceedings of quasi-judicial in nature. However, it could not be

said that the guidelines were, in any way, extraneous, irrelevant or unfair to

the object to be achieved by the process of selection of cases for total audit.

In our view, the procedure of selection of cases for total audit as provided by

paragraphs 9 and 10 of the Scheme was not nullified or whittled down by the

policy guidelines, dated 17-12-2002.

23. Now, we have to examine whether the policy guidelines, dated 17-12-2002

were invalid for the reason of not having been issued either before or

contemporaneously with the promulgation of the Self-Assessment Scheme. There

was no requirement of section 59 or any other provision of the Ordinance or

rule for issuance of guidelines either before or along with the Scheme. The

very object of the provisions of section 59(1-A) would have been frustrated if

the income taxpayers were informed, before hand, of the categories of cases or

26 persons which would be selected for total audit. If that was done, the

possibility of tax evasion under the scheme at a massive scale could not be

ruled out. The assessees were required to file their true return under the

Scheme as far as possible. The previous publication of the guidelines would

have been a hay-day for all the tax evaders as they would be knowing before

hand that their cases were not going to be selected or scrutinized. As long as

the Income-tax Authorities acted within the for corners of section 59 of the

Ordinance and the Self-Assessment Scheme and did not abuse their power or

authority, the objection as to the provisional or/and final selection of cases

for total audit was not sustainable. The guidelines for the selection of cases

by the Regional Commissioners would not suffer from any taint of invalidity

merely because certain categories had been identified for total audit based on

the reasonable classification which was not violative of Article 25 of the

Constitution. There was no requirement of law for issuance of the

guidelines by the C.B.R. side by side with the announcement of the Scheme as

they were to follow the Scheme after its announcement and not to precede it.

24. The objection of Dr. Ilyas Zafar, Advocate Supreme Court, as to non-

publication of guidelines in the Official Gazette also needs to be attended.

There was no statutory obligation on the part of the C.B.R. to have published

the guidelines in the Official Gazette. They were in the nature of

administrative instructions meant for the internal consumption of the Regional

Commissioners issued in aid of carrying out the purposes of Self-

Assessment Scheme. They did not enjoy the status of statutory rules which were

required, by section 165 of the Ordinance, to be notified through publication

in the Official Gazette. Moreover, it all depends on the nature and context of

statute whether the provisions requiring publication of a notification in the

Official Gazette would be construed as directory only or mandatory so as

to invalidate a notification or instructions on account of non-publication in

the Official Gazette. The purpose of publication and the legal effect of non-

publication of a Gazette Notification in the Official Gazette has been examined

by the superior Courts in a number of cases. In Jalal Din v. Natha Ram and

another (AIR 1922 Lahore 474), a learned Division Bench of the High Court

observed that a notification was a method implied for communicating orders,

rules, etc. to the general publ'ic. In Pakistan through Secretary, Ministry of

Defence and others v. late Ch. Muhammad Ahsan through legal heirs and others

(1991 SCMR 2180), certain lands had been requisitioned under the Defence of

India Act, 1939 and the owners of the land were paid yearly lease money

thereunder. But the notification of the acquisition/requisition of land had not

been published in the official Gazette. It was observed that depending upon the

circumstances of each case, the mere fact that publication in the official

Gazette was delayed could neither invalidate the notification nor would make

its operation retrospective as such vis-a-vis the date of actual signing

it. It was found that factual acquisition of land had been acted upon for

nearly 50 years and there was an air field in the land for such a long time.

Notice/notification although had been signed and issued to all concerned but

had not been gazetted. In other words, the purpose of the publication in the

ordinary sense was practically served almost contemporaneously when the

27 acquisition took place and in fact it was more substantial publication insofar

as the owners were concerned than if it would Lave been in the official

Gazette. Mere fact that publication in the gazette was delayed, could not

invalidate the notification. A somewhat similar view was taken in the case of r

Muhammad Siddiquie v. Market Committee, Tandlianwala (1983 SCMR 785). In the

case of Saghir Ahmed through legal heirs v. Province of Punjab through

Secretary Housing and Physical Planning, Lahore and others (PLD 2005 SC 261), a

housing scheme had been approved and notified by the Government. There was no

stipulation of publication of such an approval in the official Gazette as a

mandatory condition. It was held that the non-publication of the Government's

approval of the scheme in the official gazette would not invalidate the

approval. It was further observed that the official acts performed by public

authorities deserved due regard by the Courts and every possible explanation

for their validity should be explored and the whole gamut of powers in

pursuance of which they acted or performed their function and discharged their

duties should be examined. In Mazur-ul-Haq v. Controlling Authority, Local

Councils, Montgomery and others (PLD 1963 SC 652), the names of the official

members were not notified in the official Gazette as provided by Article 26 of

the Basic Democracies Order, 1959, and section 17 of Municipal Administration

Ordinance, 1960. It was held that unless there be something in the language of

a statute which showed that the person concerned would not commence to hold

office till there was a notification in the Gazette, a provision for a

notification should not be interpreted as a condition precedent to the holding

of an office.

25. The learned counsel for the respondents also took a strong exception to the

preliminary selection of cases for total audit by the Commissioners of Income

Tax without affording prior opportunity of hearing to the assessees. We find

that the C.B.R. through policy guidelines had clearly directed the Regional

Commissioners of Income Tax to ensure that the selection was based on

material evidence and that a fair and just treatment was given to all

taxpayers. Before making final selection, they were required to issue notices

to the assessees indicating therein the basis of their proposed selection, to

confront them with relevant material and provide them due opportunity of being

heard. Therefore, the interests of the taxpayers were adequately safeguarded by

the policy guidelines of the C.B.R. in the process of final selection of their

cases by the Regional Commissioners even though they were not heard by the

Commissioners at an early stage.

26. The rules of natural justice are not inflexible. They yield to and change

with the exigencies of different situations. They do not apply in the same

manner to situations which are not alike. These rules are not cast in a rigid

mould nor can they be put in a legal strait-jacket. They are not immutable but

flexible. They can be adopted and modified by the Statutes. The need to act in

an emergency may also exclude at least a prior hearing or where a decision

affects so many people that a hearing would be impracticable. In some cases

there may be collective right, of hearing, or to be consulted although not

necessarily a hearing in individual cases. Depending upon the facts and

28 circumstances of each case, there is no mandatory requirement of natural

justice that in every case the other side must be given a notice before

preliminary steps are taken. It might suffice if reasonable opportunity of

hearing is granted to a person before an adverse action or decision is taken

against him. However, it is not possible to lay down an absolute rule of

universal application governing all situations as to the exclusion or otherwise

of the audit alteram partem rule during the course of preliminary inquiries or

investigations.

27. The application or otherwise of the principles of natural justice at

preliminary stage of administrative proceedings was examined in various

jurisdictions by way of judicial review. In Pearlberg v. Varty (Inspector

Taxes) (1972) 2 All England Reports 7) the Income-tax Authorities made an

application to the Commissioner under the provisions of section 6(1) of the

Finance Act of 1964 for leave to make assessment on a taxpayer for the years

1946-47 and 1950-51. The permission was granted without giving the taxpayer an

opportunity to be heard. The taxpayer claimed that those assessments were

invalid on the ground that the Commissioner had acted ultra vires in granting

leave without giving him an opportunity of hearing. The House of Lords observed

that the Commissioner was not required to give the taxpayer an opportunity to

be heard as his decision to give leave would not tantamount to any final

determination of the rights of the taxpayer.

28. In the case of Regina v. Saskatchwan College of Physicians and Surgeons

(supra) it was held that the preliminary inquiry committee had no power to

decide whether Dr. Samuels had been guilty of misconduct; it had no power to

affect any of his legal rights in any way whatever; and it had no power to

impose any penalty or obligation upon him. Having no power to adjudicate

anything, it was not, when conducting its investigation, acting in a judicial

or quasi-judicial capacity. In R. v. Church Assembly Legislative Committee

(1972) All England Reports 696) it was observed that the Church Assembly of the

Church of England and its Legislative Committee were bodies that set in motion

in a preliminary way, proposals for legislation, and they did not exercise

judicial functions for determination judicially questions affecting the

rights of subjects. In the case of Parry Jones v. Law Society and others,

(supra), the Court of Appeal took the view that where the only inquiry was as

to whether there was prima facie evidence, natural justice did not require that

the party should be given notice of it. In Norwesi Hoist (supra), the company

had moved the Court for a declaration that the view of the Inspectors to

investigate the affairs and submit report to the department was unlawful and

ultra vires as the information and the material had not been disclosed to the

company. The Court of Appeal held that under section 165(b) of the Companies

Act, 1967, the department had wide discretion to appoint inspector to

investigate and report to it which was exercised at a preliminary stage for the

purpose of good administration and carried with it no implication that there

was any case against the company. Accordingly, the principles of natural

justice were at that stage inapplicable.

29 29. In Christopher John Moran (supra), the Court of Appeal observed that it was

no good for the tactician to appeal to the rules of natural justice. They had

no application to a preliminary inquiry of that kind. The inquiry was made with

a view to seeing whether there was a charge to be made. It did not do anything

which adversely affected the man concerned or prejudiced him in any way.

It was simply a preliminary hearing to see if there was going to be a charge.

If there was, there should be a hearing in which an impartial body would look

into the rights and wrongs of the case. In all such cases, all that was

necessary was that those who were holding the preliminary inquiry should be

honest men-acting in good faith doing their best to come to the right decision.

In that case, a Committee had been appointed to investigate dealings of the

plaintif