Commissioner Inland Revenue Vs Ms Al-Qadir Seed Corporation (Pvt) Ltd through Imran Akram

Stereo H C J D A 38.

Judgment Sheet

IN THE LAHORE HIGH COURT LAHORE

JUDICIAL DEPARTMENT

Case No:ICA No.26984/2025.

Commissioner Inland Revenue Vs. M/s Al Qadir Saeed Corporation Pvt.

Limited and others

JUDGMENT

Date of 17.09.2025 hearing Appellant by Syed Zain ul Abidien Bokhari, Advocate Respondent Chaudhry Qamar uz Zaman, Advocate by:

ABID AZIZ SHEIKH, J. This Intra Court Appeal

(ICA) is directed against the judgment dated 17.03.2025 passed by the learned Single Bench whereby the constitutional petition was partly allowed and the impugned notices therein dated 30.01.2024 and 26.03.2024 therein for audit under section 177(1) of the Income Tax Ordinance, 2001 (Ordinance) were declared to have been issued without lawful authority.

2.Relevant facts are that the respondent No.1 (respondent) is a private limited company registered with Inland Revenue Zone Okara for tax purposes. The last date for filing of return for tax year 2023 was 31.12.2023 and respondent filed income tax return as nil. The notice dated 30.01.2024 was issued to the respondent under section 177(1) of the Ordinance, whereby it was informed that its case has been selected for audit. The

respondent replied to notice on 29.03.2024 objecting that issuance of notice for audit prior to lapse of 60 days period after filing of return was barred under section 114(6) of the Ordinance.

Notwithstanding the above objection, the department issued another notice on 26.03.2024 requiring the respondent to appear before the Officer of Inland Revenue alongwith documents.

Thereafter penalty notice under section 182(2) of the Ordinance was issued on 20.09.2024, which was followed by order under section 182(2) dated 22.10.2024. The respondent being aggrieved filed constitutional petition, which was partially allowed through impugned judgment and impugned notices dated 30.01.2024 and 26.03.2024 therein (impugned notices) were declared without lawful authority, hence this appeal by the department.

3.Learned counsel for the appellant submits that provisions of section 114(6) and 177 of the Ordinance are misconstrued by the learned Single Bench while holding that no notice for audit under section 177(1) of the Ordinance could be issued before expiry of 60 days period prescribed under section 114(6) of the Ordinance for filing of the revised return. Further submits that selection of audit does not cause any actionable injury to the taxpayer, hence no cause of action was available with the respondent to challenge the impugned notices. He placed reliance on Commissioner of Inland Revenue, Sialkot and others vs. Messrs Allah Din Steel and Rolling Mills and others (2018 SCMR 1328). Finally submits that finding in the

impugned judgment amounts to read into the conditions for audit which are not available in the relevant statute.

4.Learned counsel for the respondent on the other hand supported the impugned judgment and submits that no notice for selection of audit under section 177 of the Ordinance could be issued before expiry of 60 days period prescribed under section 114(6) of the Ordinance.

5.Arguments heard. Record perused. The moot question require determination in this case is that whether the notice for selection of audit under section 177(1) of the Ordinance could be issued before expiry of 60 days period prescribed under second proviso to section 114(6) of the Ordinance. In order to determine the aforesaid legal question, it is expedient to reproduce relevant clauses of section 177(1) and 114 of the Ordinance as under:-

177.Audit.--

(1)The Commissioner may call for any record or documents including books of accounts maintained under this Ordinance or any other law for the time being in force for conducting audit of the income tax affairs of the person and where such record or documents have been kept on electronic data, the person shall allow access to the Commissioner or the officer authorized by the Commissioner for use of machine and software on which such data is kept and the Commissioner or the officer may have access to the required information and data and duly attested hard copies of such information or data for the purpose of investigation and proceedings under this Ordinance in respect of such person or any other person:

Provided that—

(a)the Commissioner may, after recording reasons in writing call for record or documents including books of accounts of the taxpayer; and

(b)the reasons shall be communicated to the taxpayer while calling record or documents including books of accounts of the taxpayer:

Provided further that the Commissioner shall not call for record of documents of the taxpayer after expiry of six years from the end of the tax year to which they relate.

114.Return of Income.--

(6)Subject to sub-section (6A), any person who, having furnished a return, discovers any omission or wrong statement therein, may file revised return subject to the following conditions, namely: —

(a)it is accompanied by the revised accounts or revised audited accounts, as the case may be

(b)the reasons for revision of return, in writing, duly signed, by the taxpayers are filed with the return

(ba)it is accompanied by approval of the Commissioner in writing for revision of return; and

(c)---------

Provided that ---------

Provided further that the condition specified in clause (ba) shall not apply if revised return is filed within sixty days of filing of return.

(6A) If a taxpayer files a revised return voluntarily along with deposit of the amount of tax short paid or amount of tax sought to be evaded along with the default surcharge, whenever it comes to his notice, before receipt of notice under sections 177 or sub-section (9) of 122, no penalty shall be recovered from him:

Provided that in case the taxpayer deposits the amount of tax as pointed out by the Commissioner during the audit or before the issuance of notice under sub-section (9) of section 122, he shall deposit the amount of tax sought to be evaded, the default surcharge and twenty-five per cent of the penalties leviable under the Ordinance along with the revised return:

Provided further that in case the taxpayer revises the return after the issuance of a show cause notice under sub- section (9) of section 122, he shall deposit the amount of tax sought to be evaded, default surcharge and fifty per

cent of the leviable penalties under the Ordinance along with the revised return and thereafter, the show cause notice shall stand abated.

6.Plain reading of section 177(1) of the Ordinance manifests that the Commissioner may call for any record or documents including books of accounts maintained under the Ordinance or any other law for the time being in force for conducting audit of the income tax affairs of a person provided that Commissioner may after recording reasons in writing, (which shall be communicated to the taxpayer) call for record or documents of the taxpayer before expiry of six years from the end of tax year to which they relate. It is significant to note that there is no specific embargo in section 177 of the Ordinance that notice for audit under section 177(1) of Ordinance shall not be issued before expiry of 60 days from filing of the income tax return by the taxpayer.

7.The argument of the respondent and the law settled in the impugned judgment is that such embargo is available under section 114(6) of the Ordinance, hence notice for audit could not be issued before expiry of 60 days from filing of return. We have carefully examined above contentions and have also gone through the aforesaid provisions which shows that section 114(6) allow that any person who has furnished a return, discovers any omission or wrong statement therein may file revised return subject to certain conditions prescribed including clause (ba) that the return be accompanied with the approval of the Commissioner in writing for the revision of return. The second proviso to section

114(6) only prescribes that the condition specified in clause (ba) (pertaining approval of the Commissioner) shall not apply if revised return is filed within 60 days of filing of the return.

Neither in section 114(6) nor in the second proviso thereto, it is mentioned that notice for audit under section 177(1) of the Ordinance cannot be issued before expiry of 60 days period mentioned in second proviso to section 114(6).

8.The overriding provision of section 114(6A) shows that the intention of the legislation is otherwise. If a taxpayer files a revised return voluntarily alongwith deposit of the amount of tax and the default surcharge, whenever it comes to its notice, before receipt of notice under section 177, no penalty shall be recovered from him. This clause proves that notice under section 177 can be issued even before filing of the revised return, however no penalty shall be recovered in case the amount of tax sought to be recovered was paid before notice for audit under section 177 was issued. No specific time limit is given in section 114(6A) that notice of section 177 will be issued only after period of 60 days as held in the impugned judgment.

9.If intention of the legislation was that no notice for audit could be given before expiry of sixty days prescribed under section 114(6) of the Ordinance, then the provision of section 114(6A) would have been subject to section 114(6) and not otherwise. The fact that section 114(6) is subject to section 114(6A), elucidate the intention of legislation that notice for audit can be issued at any stage including before expiry of sixty days

period prescribed for filing of revised return under section 114(6) of the Ordinance.

10.No doubt under section 114(6), the return can be revised subject to conditions prescribed therein, but it does not curtail the power of the Commissioner under section 177(1) of the Ordinance for selection of audit and the only preconditions and limitations applicable for selection of audit are prescribed under section 177 of the Ordinance itself and cannot be further curtailed by provision of section 114(6) of the Ordinance which is not only subject to section 114(6A) but also pertains to return of income tax and not for audit by the Commissioner.

11.It is a settled canon of statutory interpretation that where the language of a statute is clear, plain, and unambiguous, the provision must be given effect according to its ordinary and grammatical meaning. The court is not at liberty to add to, subtract from, or otherwise modify the statutory language under the pretext of interpretation. The legislative intent is presumed to be expressed through the words employed thus, fidelity to the text is paramount. The literal rule remains the primary tool of interpretation in such cases, and deviation from it without compelling ambiguity would offend established jurisprudential norms. As articulated in the maxim verba legis non est recedendum, there must be no departure from the words of the law, courts are bound by the text unless it produces an absurdity or conflicts with the Constitution. Similarly, the principle expressio unius est exclusio alterius instructs that the express

mention of one thing implies the exclusion of another. Judicial re- crafting of statutory provisions, whether by structural alteration or substitution of language, not only risks misconstruing the intent of the legislature but also amounts to encroachment upon the domain of lawmaking, Unless the provision is demonstrably vague or leads to manifest injustice, the interpretive role of the court is confined to applying the law as written. Reliance is placed on the recent judgment passed by Hon’ble the Supreme Court of Pakistan in “Messrs Kassim Textile Mills (Pvt.) Limited vs. Commissioner Inland Revenue, Karachi” (2025 SCMR 1248). Relevant part is as under:

“The principles of statutory interpretation are well settled. Where the words of the statute are clear and unambiguous, the provision should be given its plain and normal meaning, without adding or rejecting any words. Departure from the literal rule, by making structural changes or substituting words in a clear statutory provision, under the guise of interpretation will pose a great risk as the changes may not be what the Legislature intended or desired. The Court cannot recast or reframe the legislation for the very reason it has no power to legislate. The Court cannot add words to a statute or read words into it which are not there unless the principles of interpretation of stature require otherwise. The legislature means what it says and says what it means. It is the obligation of the Courts of law to further the clear intendment of the legislature and not to frustrate it by ignoring the same. Legislative wisdom cannot be replaced by the Judge’s views.”

The same view was expressed by this Court in “A.M. construction Company (Private) Limited vs. Province of Punjab through Secretary Communication and Works Department and others” (2023 CLC 616) and held as under:-

“21. There is no cavil with settled law that where the plain and ordinary meaning may lead to inconsistency

with other expressions used in the document, then such plain and ordinary meaning can be modified to avoid absurdity or inconsistency. However the plain and literal reading of Paras 26(A), 26(B), 15 and 30 of the General Directions shows that there is no absurdity or inconsistency in these paragraphs. Paras 26(A), 26(B) and 15 deal with performance security or additional performance security from the “lowest bidder” if the tender amount is less than 5% of the approved estimated amount, whereas Para 30 deals with performance security by the successful bidder @5% of the contract price once his bid has been accepted and the forms of agreement are sent to him.”

Reliance is also placed on “Defence Housing Authority vs. The Federal board of Revenue and others” (2025 PTD 530), “Artistic Denim Mills Ltd. Vs. Federal Board of Revenue and others” (2017 PTD 730) and “Nadeem Asghar Nadeem and others vs. Province of the Punjab and others” (2016 PLC (CS) 155).

12.In view of the foregoing discussion, we are of the considered view that the learned Single Bench has misconstrued the true import and interplay of Sections 114 and 177 of the Ordinance. The finding that notices under Section 177(1) could not be issued prior to the expiry of the 60 days period prescribed under Section 114(6) is legally unsustainable to read such a limitation into Section 177(1) would violate the principle of harmonious construction, whereby all provisions of a statute must be given effect in a manner that preserves their respective purposes and avoids conflict. The Court cannot judicially import restrictions where the statute is silent, in accordance with the doctrine of casus omissus.

13.In view of the reasons recorded above, the appeal is allowed, impugned judgment dated 17-3-2025, passed by the

learned Single Bench is hereby set aside. The impugned notices dated 30.01.2024 and 26.03.2024, issued under Section 177(1) of the Ordinance, are declared to have been issued with lawful authority and in accordance with the statutory mandate.

(Malik Javid Iqbal Wains) (Abid Aziz Sheikh) Judge Judge

Approved for reporting.

Judge Judge

Riaz Ahmad