2002 PLP 2904 (PTD)

‑‑‑‑ Any practice which was contrary to the provision of law could not be accepted nor can such practice validate any illegal act. DECISION/FINDING

1. The complaint was decided on 18‑7‑2001 in which inter alia recommendation was made that "(i) C.B.R. to initiate proper disciplinary proceeding against the Special Officer for initiating action under section 65 without obtaining the previous approval of the IAC". Compliance report was submitted in which the explanation of Mr. Nasir Maqbool Hashmi, Special Officer was forwarded with favourable recommendation by the CIT and IAC. These explanations were not satisfactory and, therefore, order dated 2‑6‑2001 was passed giving full details and reasons for not accepting the explanations.

2. In response to the notice Mr. Daud appeared and submitted that the show‑cause notice under section 65 was a pre show‑cause notice for purpose of ascertaining the facts and to seek clarification after which proper show‑cause notice as required under section 65 of the Income Tax Ordinance, 1979 would have been served on the assessee. According to the learned CIT, this practice was in vogue since long and no‑one has objected to it.

3. Section 65 provides that no proceedings under this provision shall be initiated unless definite information has come into possession of the DCIT and he has obtained prior approval of the IAC in writing to do so. It is, therefore, mandatory that the DCIT having obtained definite information should before initiating any proceedings against an assessee obtain prior approval in writing of the IAC. Without obtaining prior approval, no action under section 65 can be taken. The show‑cause notice which is alleged to be a pre‑notice for ascertaining the correctness of information obtained by DCIT is completely illegal and unwarranted. The department may call it a pre‑notice but, in fact, it amounts to initiation of proceedings under section 65 of the Ordinance. Such action is illegal void and without any jurisdiction. In the present case without prior approval in writing of the IAC, following the illegal practice, notice was issued to the complainant. The CIT justified the explanation of the Special Officer on the basis of this practice. Any practice which is contrary to the provisions of law cannot be accepted nor can such practice validate any illegal act: The CIT has referred to 2000 PTD 1574 and other judgments in which according to the department reference to such practice was made but it was not rejected or held as illegal. In all these judgments although while stating facts reference was made to such notice issued in view of the practice prevailing in the department the question whether such a notice was valid was not under consideration nor the superior Courts have approved this practice. Judgment of superior Court is binding on point of law which it determines. Since the validity of this practice of pre‑show‑cause notice was never, an issue and no findings have been given the judgment referred to are not applicable to the present case.

4. In these circumstances, it is recommended:‑ (i) The CIT should issue warning to the Special Officer for issuing notice under section 65 of the Income Tax Ordinance without prior approval of the IAC in writing. (ii) C.B.R. to issue directions to, all officers of the Income Tax Department not to adopt the practice of issuing pre show‑cause notice under section 65 of the Income Tax Ordinance and all such notices issued be withdrawn .and cancelled. (iii) Compliance be reported within 30 days of the receipt of this order. C.M.A./M.A.K./410/FTO Order accordingly.