MS Levi Strauss Pakistan (PVT.) Limited through Mr. Abid Faiz Vs AssistantDeputy Commissioner (Audit) Inland Revenue

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Judgment Sheet

IN THE LAHORE HIGH COURT LAHORE

JUDICIAL DEPARTMENT

Case No: ITR No.28029/2024.

M/s Levi Strauss Pakistan (Pvt.) Limited Vs.

Assistant/Deputy Commissioner (Audit) Inland Revenue

JUDGMENT

Date of 07.10.2025 hearing Applicant M/s Muhammad Ajmal Khan, Rana Waqas by Habib Khan, Omer Wahab, Muhammad Azhar Khan Joiya, Muhammad Nadeem Sheikh, Azeem Ullah Virk and Rana Usman Habib Khan, Advocates

Respondents Mr. Abdul Muqtadir Khan, Advocate/Legal by: Advisor

ABID AZIZ SHEIKH, J. This reference application under section 133 of the Income Tax Ordinance, 2001 (Ordinance) is directed against the order dated 04.04.2024 (impugned order) passed by the Appellate Tribunal Inland Revenue (Tribunal).

2.Inter alia following questions of law have been raised:- “A). Whether the learned Appellate Tribunal Inland Revenue has rightly and correctly construed the provisions of section 4B of the Income Tax Ordinance, 2001 read with section 2(28A) of the Income tax Ordinance,

B). Whether the provisions of section 4B of the Ordinance carves out special

procedure in respect of payment of super tax and its recovery by a person liable to pay super tax who has failed to pay the same?

C). Whether order passed under section 4B of the Income Tax Ordinance, 2001 can be passed without issuance of notice under section 122(9) of the Income Tax Ordinance, 2001 (the Ordinance,

3.Relevant facts are that the respondent, a private limited company, filed income tax return for tax year 2018 on 15.12.2018. Upon examination, it revealed that the taxpayer’s normal imputable income aggregated to Rs.519,716,349/- against which the taxpayer did not pay super tax under section 4B of the Ordinance. Therefore show cause notice dated 11.01.2019 under section 4B of the Ordinance was issued to the taxpayer for the purpose of charging super tax. After the show cause notice, the taxpayer filed revised returns for tax years 2017 and 2018 on 25.01.2019 under section 114(6) of the Ordinance and reduced its income to Rs.37,359,034/- (on the ground that the said amount represents add back of liability which remained unpaid since tax year 2012 and inadvertently offered in tax year 2018 in the original return). Considering the revision of return after show cause notice, as an afterthought, the Assessing Officer invalidated the revision and charged super tax under section 4B of the Ordinance. In appeal, the Commissioner Inland Revenue Appeal (CIR(A)) declared the revision of return as valid and deleted the charge of super tax,

however the Tribunal accepted the departmental appeal, hence this reference application.

4.Learned counsel for the applicant submits that under section 114(6) of the Ordinance, the return could be revised subject to sub-section (6A) of section 114 of the Ordinance.

Submits that all preconditions were fulfilled, therefore, the order to declare revised return as invalid return and charging of super tax is not warranted by law.

5.Learned counsel for the respondent on the other hand supported the impugned order and submits that under proviso to section 114(6A) of the Ordinance, if revised return is filed after the issuance of show cause notice, the assessee is liable to pay the tax due alongwith default surcharge of 50% of the penalties.

Further submits that under section 114(6) and sub-clause (c) of the Ordinance, taxable income cannot be declared less than the income determined by an order.

6.Arguments heard. To better appreciate the respective arguments, section 114(6A) and section 114(6) and sub-clause

(c)of the Ordinance are reproduced hereunder:- “114 (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.

“114 (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:--

(c): taxable income declared is not less than and loss declared is not more than income or loss, as the case may be, determined by an order issued under sections 121, 122, 122A, 129, 132, 13 3 or 221:”

(emphasis supplied)

7.Plain reading of above provisions shows that under section 114(6) read with clause (c), any person who having furnished a return discovers any omission or wrong statement therein may file revised return subject to conditions including that taxable income declared is not less than as may be determined by orders issued under sections 121, 122, 122A, 129, 132, 133 or 221. Similarly under second proviso to section 114(6A), where the return is revised after the issuance of show cause notice under section 122(9) of the Ordinance, the amount of tax sought to be evaded shall be deposited.

8.In the instant matter, it is an admitted position that the original return was filed on 15.12.2018, followed by a revised return on 25.01.2019, which was submitted prior to the issuance of any notice under Section 122(9) of the Ordinance. It is pertinent to note that the notice dated 11.01.2019 was not issued under Section 122(9) of the Ordinance rather same was issued under Section 4B of the Ordinance. Consequently said notice cannot be construed or treated as one falling within the ambit of Section 122(9) of the Ordinance for purpose of invoking penal clause of section 114(6A) of the Ordinance.

9.It is settled law that tax provisions especially penal in nature are to be construed strictly and if two interpretations are possible then the one beneficial to taxpayer should be followed.

In this context some of the case law and legal propositions laid down therein is reproduced as under:-

(i)Government of Sindh through Secretary and Director General, Excise and Taxation and another vs. Muhammad Shafi and others (PLD 2015 SC 380). In this case, the Supreme Court held as under:-

“Before resolving the proposition(s) in hand, we may like to mention that the charging section in a fiscal statute, as per the settled law, demands its strict interpretation and application in so far as the revenue is concerned, but where is it susceptible to two possible interpretations, it should be liberally construed in favour of the tax payer/ citizen; particularly, where there is substantial doubt about the true import and application of a charging section, it (the doubt) should be resolved in favour of the tax payer/citizen.”

(ii)Chairman, Federal Board of Revenue, Islamabad vs. Messrs Al-Technique Corporation of Pakistan Limited and others (PLD 2017 SC 99). In this case, the Supreme Court reiterated the above legal position as under:-

“We reiterate that there is no cavil with the principle that a charging provision in a fiscal statute is to be given a strict interpretation and if a case does not fall within the purview thereof, tax cannot be charged from a person from whom it is being claimed.”

(iii)Messrs National Transmission and Despatch Company Limited vs. PUB Corporation and others (2017 SCMR 1506). In this case, the Supreme Court held as under:-

“It is well entrenched legal position in law that fiscal statutes are to be strictly construed imposition of any impost and or exemption from payment thereof cannot be claimed on mere assumption and or supposition.”

(iv)Commissioner Inland Revenue, Zone-II, Large Taxpayers Unit, Lahore vs. Messrs Coca Cola Export Corporation (ITR No.68412 of 2017). In this case vide judgment dated 17.09.2025, the Division Bench of this Court observed as under:-

“Be that as it may, even if it may be construed that two interpretations of the provision in question are possible, the one in favour of taxpayer has to be resorted to as it is well recognized cannon of construction of fiscal statutes that where a provision is susceptible of two interpretations and there was a doubt about its true import, the benefit will go in favour of the taxpayer and the language used in a tax or financial statute is not to be either stretched in favour of the State or narrowed in favour of the taxpayer.”

10.Without prejudice to the well recognized principles of construction of fiscal statutes in above case law, it is also well

settled law that the express mention of one thing excludes all others “expressio unius est exclusio alterius”. Hence, when the Legislature under Section 114(6A) of the Ordinance intended issuance of notice under Section 122(9) of the Ordinance, then notice under no other provision could be substituted. Needless to observe that notice under Section 4B of the Ordinance was intentional because under the express mandate of Section 4B(5) of the Ordinance, in cases where super tax remains unpaid by a person liable to discharge the same, the Commissioner is empowered to recover the amount through the machinery provided in Parts IV, X, XI, and XII of Chapter X and Part I of Chapter XI of the Ordinance.

11.Furthermore, upon filing of the return on 15.12.2018, it attained the status of a deemed assessment order under Section 120 of the Ordinance. Such deemed assessment does not fall within the scope of orders contemplated under Sections 121, 122, 122A, 129, 132, 133, or 221 of the Ordinance under the same maxim discussed above. As such, the applicability of Section 114(6)(c) is also ousted in the present context.

Therefore, in the absence of any formal order under above provisions or notice under Section 122(9) of the Ordinance, the revised return remains valid in the eyes of law and cannot be declared invalid merely on the basis of proceedings initiated under Section 4B of the Ordinance or deemed assessment order

passed under Section 120 of the Ordinance which have no nexus with section 114(6)(C) or 114(6A) of the Ordinance.

12.In light of the foregoing discussion, it is held that the Tribunal has erred in its interpretation of the relevant legal provisions and has unjustly invalidated the revised return filed by the applicant. Consequently, the questions are answered in favour of the applicant accordingly. The impugned order is hereby set aside, and the reference application stands allowed in the terms stated above.

13.Office to send copy of this judgment under seal of the Court to the Tribunal as required under Section 133(8) of the Ordinance.

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

Approved for reporting.

Judge Judge

Riaz Ahmad