Fouzia Razzak Vs Federal Board of Revenue etc

2021 P T D 162

[Lahore High Court]

Before Jawad Hassan, J

Mst. FOUZIA RAZZAK

Versus

FEDERAL BOARD OF REVENUE and others

W.P. No.216965 of 2018, heard on 19th October, 2020.

Income Tax Ordinance (XLIX of 2001)---

----Ss.140 & 138---Constitution of Pakistan, Art.4---Right of individuals to be dealt in accordance with law---Recovery of tax out of property and through arrest of taxpayer--- Recovery of tax from persons holding money on behalf of a taxpayer---Scope---Petitioners assailed order of department regarding attaching their Bank accounts and recovery of tax amount by directly issuing notice under S.140 of the Income Tax Ordinance, 2001--- Validity---Department, before invoking S.140 of the Income Tax Ordinance, 2001, was required to issue a notice under S.138 of the Income Tax Ordinance, 2001 intimating the taxpayer regarding invocation of S.140 requiring him to make payment of tax liability within a reasonable time---Under Art.4 of the Constitution, it was an inalienable right of every citizen to be treated in accordance with law but, in the present case no notice under S.138 was served before invocation of S.140 of the Income Tax Ordinance, 2001---Impugned actions regarding attachment and recovery of tax amount from the Bank accounts of the petitioners were illegal and without lawful authority---Constitutional petitions were allowed.

Messrs HUAWEI Technologies Pakistan (Pvt.) Ltd. v. Commissioner Inland Revenue and others 2016 PTD 1799 ref.

Shahbaz Butt for Petitioner.

Ch. Muhammad Yasin Zahid for Respondent.

Date of hearing: 19th October, 2020.

JUDGMENT

JAWAD HASSAN, J.---Through this single judgment I intend to dispose of this Petition as well as W.P. No.225116 of 2018 titled "Tayyab Manzoor Tarar v. Federal Board of Revenue and others" as the same question of law is involved in these cases.

2.Through these writ Petitions under Article 199 of the Constitution of Islamic Republic

of Pakistan, 1973 (the "Constitution"), the Petitioners have impugned the actions/order of the Respondents regarding attaching their accounts and recovery of tax amount by directly issuing notice under Section 140 of the Income Tax Ordinance, 2001 (the "Ordinance"). They also prayed that the Respondents be directed to refund the amount already recovered.

3.Brief facts of the case are that the Respondent No.3 issued various notices and initiated proceedings which culminated into penalty order dated 04.04.2018 amounting to Rs.2,80,000/- (in W.P. No.216965 of 2018) and order dated 25.01.2018 amounting to Rs.1,30,76,489/- (in W.P. No.225116 of 2018). The Petitioners feeling aggrieved thereof filed appeals before the Commissioner Inland Revenue (Appeals-II) concerned but during the pendency of the appeals the Respondent/Commissioner Inland Revenue issued the notices under Section 140 directing the Respondent/Bank to hand over the aforesaid amount lying in the account of the Petitioners. Consequently the Respondent/Bank withdrew the said amount from the account of the Petitioners and handed over the same to the Respondent-Department, which is illegal and unlawful. Hence this Petition.

4.Learned counsel for the petitioners submits, that the appeals filed by the Petitioners are already pending before the Commissioners Appeals, therefore, during the pendency of appeal the Respondents has miserably failed to adopt the proper procedure and without giving notice under Section 138 of the Ordinance and Respondents have recovered the aforesaid amount. Learned counsel for the Petitioners vehemently argued that before invoking Section 140 and attaching the accounts of the Petitioners a notice under Section 138 was mandatory; requiring to petitioners to pay the tax due within a reasonable time, which says that for the purpose of recovery of tax due by a taxpayer the Commissioner may serve a notice in the prescribed form requiring him to pay the said amount within such time as may specified in the notice. Under Section 138(2), in case of failure by the taxpayer to make the payment within the prescribed time, the Commissioner can proceed to attach and sell any moveable and immovable property of the taxpayer. Adds that the actions taken under Section 140 of the Ordinance infringed fundamental rights of the Petitioners protected under Articles 4 and 10-A of the Constitution. Lastly submits, that it is well settled law that an act required to be done in a particular way has to be done in that manner. Learned counsel relied on the judgment cited as "Messrs HUAWEI Technologies Pakistan (Pvt.) Ltd. v. Commissioner Inland Revenue and others" (2016 PTD 1799).

5.Learned counsel for the Respondents vehemently opposed the arguments advanced by learned counsel for the Petitioners and submitted that Section 138 is independent and notice is required to be served only where attachment and sale is to be effected. In the impugned notice the Commissioner Inland Revenue granted permission under Section 140 of the Ordinance to attach bank accounts of the Petitioners for recovery of tax liability. Lastly adds that in order to exercise power under Section 140 of the Ordinance, there is no need to issue a notice prior thereto.

6.Arguments heard. Record perused.

7.Though the judgment of Messrs HUAWEI Technologies (mentioned above) is not binding on this Court, however, the principle laid down therein, is sound and in accordance

with law. The Respondent-Department before invoking Section 140 of the Ordinance is required to issue a notice under Section 138 of the Ordinance intimating the taxpayer regarding the invocation of Section 140 ibid and requiring him to make payment of tax liability within a reasonable time. For ready reference the Section 138 is reproduced as under:

138.Recovery of tax out of property and through arrest of taxpayer.-

(1)For the purpose of recovering any tax due by a taxpayer, the Commissioner may serve upon the taxpayer a notice in the prescribed form requiring him to pay the said amount within such time as may be specified in the notice.

(2)If the amount referred to in the notice issued under subsection (1) is not paid within the time specified therein or within the further time, if any, allowed by the Commissioner, the Commissioner may proceed to recover from the taxpayer the said amount by one or more of the following modes, namely:-

(a)attachment and sale of any movable or immovable property of the taxpayer;

(b)appointment of a receiver for the management of the movable or immovable property of the taxpayer; and

(c)arrest of the taxpayer and his detention in prison for a period not exceeding six months.

Under Article 4 of the Constitution, it is an inalienable right of the citizen to be treated in accordance with law. Also the trial and due process are the fundamental rights of the every citizen of Pakistan under Article 10-A of the Constitution but in the instant case no notice under Section 138 was served before invocation of Section 140. Hence, the impugned actions regarding attachment and recovery of tax amount from the bank accounts of the Petitioners are illegal and without lawful authority.

8.In view of above, both the Petitions are allowed and the impugned notices regarding attachment of accounts and recovery of amount are declared to be without lawful authority and of no legal effect. Since the appeals filed by the Petitioners are pending before the concerned Commissioner Inland Revenue (Appeals), who are hereby directed to decide the same within a period of sixty days from the receipt of certified copy of this order, meanwhile no coercive measure shall be adopted by the Respondent-Department regarding the disputed tax amount.

SA/F-16/L Petitions allowed.