Comments on Section 176 of Income Tax Ordinance 2001
COMMENTS ON SECTION 176 OF INCOME TAX ORDINANCE, 2001
By Tahir Mahmood Butt, Vice-President, Pakistan Tax Bar Association, Lahore
Section 176 of the Income Tax Ordinance, 2001 is an important provision but it has been noticed that the tax officials are not exercising their authority provided under the said provision in accordance with true spirit of law. I take this opportunity to express my point of view with regard to application of the subject provision. For ready reference the provisions of section 176 of the Income Tax Ordinance, 2001 are reproduced hereunder.
"176. Notice to obtain information or evidence .---(1) The Commissioner may, by notice in writing, require any person, whether or not liable for tax under this Ordinance:--
(a) to furnish to the Commissioner or an authorized officer, any information relevant to any tax leviable under this Ordinance as specified in the notice; or
(b) to attend at the time and place designated in the notice for the purpose of being examined on oath by the Commissioner or an authorized officer concerning the tax affairs of that person or any other person and, for that purpose, the Commissioner or authorized officer may require the person examined to produce any accounts, documents, or computer-stored information in the control of the person "or"
(c) the firm of chartered accountants, as appointed by the Board, to conduct audit under section 177, for any tax year, may with the prior approval of the Commissioner concerned, enter the business premises of a taxpayer, selected for audit, to obtain any information, require production of any record, on which the required information is stored and examine it within such premises; and such firm may if specifically delegated by the Commissioner, also exercise the powers as provided in subsection (4).
(2) The commissioner may impound any accounts or documents produced under subsection (1) and retain them for so long as may be necessary for examination or for the purposes of prosecution.
(3) The person from whom information is required, may at his option, furnish the same electronically in any computer readable media. Where a hard copy or computer disk of information stored on a computer is not made available as required under subsection (1), the Commissioner may require production of the computer on which the information is stored, and impound and retain the computer for as long as is necessary to copy the information required.
(4) For the purposes of this section, the Commissioner shall have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (Act V of 1908), in respect of the following matters, namely:--
(a) enforcing the attendance of any person and examining the person on oath or affirmation;
(b) compelling the production of any accounts, records, computer stored information, or computer;
(c) receiving evidence on affidavit; or
(d) issuing commissions for the examination of witnesses.
(5) This section shall have effect notwithstanding any rule of law relating to privilege or the public interest in relation to the production of accounts, documents, or computer-stored information or the giving of information."
From bare reading of the above it transpires that the scope of the provisions of section 176 are specific in nature and cannot be applied in a casual manner. The jurisdiction provided to the Commissioner regarding stage/time to issue notice, to whom notice can be issued and mentioning of relevant clause of section 176 of the Income Tax Ordinance, 2001 are the factors which are of immense importance. To further elaborate my point of view I take this opportunity to tendered my submissions point wise hereunder:--
POWERS AND JURISDICTION OF COMMISSIONER UNDER SECTION 176
From the bare reading of section 176 of the Income Tax Ordinance, 2001, it would reveal that the said section provide the following powers to the Commissioner or any of the authorized officer of tax department:--
(1) Call for any INFORMATION from any person relevant to any tax leviable under this Ordinance. 176(1)(a) .
(2) Direct any person to attend for the purpose of being examined on oath concerning the tax affairs of that person or any other person and to produce any accounts, documents, or computer stored information in the control of that person. 176(1)(b) .
(3) To accord approval to the firm of chartered accountant, appointed by the F.B.R for the purpose of audit, to enter the business premises and obtain any information, obtain record of the taxpayer who has been selected for audit under section 177. 176(1)(c) .
(4) To impound any accounts or documents produced and retain them as long as necessary for examination or for the purpose of prosecution. 176(2) .
(5) Subsection (3) of section 176 provide an option to the taxpayer to furnish the required information electronically, if hard copy or computer disc is not readily available. However, the commissioner is empowered to direct to produce the computer on which data is stored and may retain the same as long as necessary to copy the required information. 176(3) .
(6) For the purpose of section 176 of the Income Tax Ordinance, 2001, the commissioner have been provided with the same powers as are vested with a Court under the Code of Civil Procedure, 1908 in respect of certain matters narrated vide clauses (a) to (d) of subsection (4) of section 176. 176(4) .
(7) Subsection (5) of section 176 takes away the right of privilege or the public interest in relation to the production of accounts, documents, or computer-stored information provided under any other Law. 176(5) .
TIME AND MANNER TO ISSUE NOTICE UNDER SECTION 176
It would not be out of place to mention here that like Income Tax Ordinance, 1979, Income Tax Ordinance, 2001 also has its own mechanism, scheme and style. The provisions of both the Ordinances are to be applied strictly in accordance with their true spirit. The provisions of section 176 of the Income Tax Ordinance, 2001 are perameteria to that of sections 61, 144, 146 and 148 of the Income Tax Ordinance, 1979 and as such can only be applied at a specific point of time and cannot be issued merely on the sweet will of the concerned authority to issue the same to any person at any time.
In my humble submission according to the scheme of the Income Tax Ordinance, 2001 after submission of Return under sections 114(1), 114(4) or statement under section 115(4) assessment stands completed as provided under section 120 of the Income Tax Ordinance, 2001 and thereafter no action can be taken against the taxpayer by any tax authority unless jurisdiction is assumed under relevant provision of the Income tax Ordinance, 2001.
It is submitted that the provisions of section 176 of the Income Tax Ordinance, 2001 can only be invoked for obtaining/getting any information, document, record etc. when any proceedings under sections 122, 177 or any other relevant provision of the Income Tax Ordinance, 2001 have already been initiated. The issuance of notice under section 176 without there being any initiation of proceeding under sections 122, 177 or any other relevant provision of the Income Tax Ordinance, 2001 would be void, illegal, unjustified, unsustainable and without proper assumption of jurisdiction as the same would tantamount to fishing inquiries which action has largely been disapproved by the Higher Appellate Authorities of the Country.
As submitted earlier each subsection and clause of section 176 of the Income Tax Ordinance, 2001 is specific in nature and character so while issuing notice under this section, the concerned authority is required to mention relevant subsection and clause as all the subsections or clauses deals with different power and authority and cannot be applied at once.