COMMISSIONER INLAND REVENUE Vs MS. M. FAISAL LAHORE

Stereo. H C J D A 38.

JUDGMENT SHEET

LAHORE HIGH COURT LAHORE

JUDICIAL DEPARTMENT

Case No: I.T.R. No. 41034 of 2017

Commissioner Inland Revenue Versus M/s Muhammad Faisal Zone-III, RTO-II, Lahore

JUDGMENT

Date of Hearing: 24.10.2025

Applicant by: Mrs. Kausar Parveen, Advocate.

Respondent by: Mr. Hassan Kamran Bashir, Advocate.

C.M. No.1 of 2019 & Main Case Hassan Nawaz Makhdoom, J. Through this Reference Application filed under Section 133 of the Income Tax Ordinance, 2001 (the “Ordinance”), the applicant has called in question the order dated 27.02.2017 passed by the learned Appellate Tribunal Inland Revenue, Lahore (the Tribunal) in ITA No. 1540/LB/2015 (Tax Year 2013).

2.The controversy originated from tax proceedings initiated by the applicant-Department against the respondent, a dealer and distributor of biscuits manufactured by M/s Ismail Industries Limited, relating to Tax Year 2013. Based on information received regarding alleged unexplained purchases of Rs.21,033,395/-; the Assessing Authority issued notice under Section 114 of the Ordinance, followed by a show-cause notice under Section 122C, which remained un-complied with, culminating into a provisional assessment dated 15.05.2014. The respondent subsequently filed returns for Tax Years 2012 and 2013 declaring nominal incomes, whereupon notice under Section 122(5) read with Sections 122(9) and 111 was issued alleging unexplained investment. Thereafter, an amended

assessment order dated 27.02.2015 was passed assessing income at Rs.21,482,393/- and raising tax demand of Rs.5,093,098/-. The appeal filed by respondent before the CIR(A) was dismissed on 19.05.2015, whereafter the Tribunal allowed ITA No. 1540/LB/2015 on 27.02.2017 by holding that the respondent, being merely a commission agent of M/s Ismail Industries Ltd., was not liable for the alleged purchases and that the assessment suffered from procedural and jurisdictional defects. Aggrieved thereby applicant has filed the instant Reference Application.

3.This Reference Application was earlier decided on merits by this Court on 27.02.2024, setting aside the Tribunal’s order and deciding the questions of law in favour of the applicant. The said order was impugned by the respondent before the Hon’ble Supreme Court in Civil Petition No. 2100 of 2024. The Apex Court vide judgment dated 04.03.2025 reported as Muhammad Faisal Prop., F.A. Traders, Lahore v. Commissioner Inland Revenue, Zone-II, RTO-II, Lahore (2025 SCMR 930) remanded the matter to this Court for a speaking determination on the applicant’s application (CM No.1 of 2019) under Section 05 of the Limitation Act, 1908 (the Act). Operative part of the judgment is reproduced as under:

“11. We, therefore, are of the view that in order to do complete and substantial justice in the instant matter, it would be in the fitness of things that we remand this case to the High Court with the directions to pass a clear and speaking order on the CMA concerning the condonation of delay, after granting opportunity of hearing to both the parties. The High Court, in our view, should clearly mention in its order the complete facts with regard to what objections were raised by the office and when were they finally removed and then ultimately give a decision on the CMA, in accordance with the law, since the point of limitation is always considered to be a mixed question of law and fact which needs to be decided at the preliminary stage.”

4.Learned counsel for the applicant submitted that the Reference Application was instituted well within limitation period; the defects were technical, non-substantive, and were

cured with due diligence; certification from the ATIR Registry consumed time beyond control of the officer; the delay is minimal (08 days) and bona fide; hence, justice demands condonation so that the matter be decided on merits

5.Conversely, learned counsel for the respondent submitted that the present Reference Application is barred by limitation, as though it was filed on 29.05.2017, the office objections were removed 08 days after expiry of the prescribed limitation period ending on 07.06.2017. It is argued that the statutory limitation under Section 133(1) of the Ordinance is mandatory, and no valid explanation has been offered by the applicant to justify the delay; that the application under Section 5 of the Act, seeking condonation of delay, lacks each day’s explanation or supporting affidavit to show due diligence; contended that mere filing of defective Reference Application does not stop running of the limitation period, and re-presentation after the expiry of limitation period amounts to a fresh institution. Relied on Abdul Jabbar Shahid and others v. National Bank of Pakistan and others (PLD 2019 Lahore 76) and Asad Ali and 9 others v. The Bank of Punjab and others (PLD 2020 SC 736) to urge that limitation creates a vested right in favour of the adversary party, which cannot be relaxed on equitable considerations, thus, the application seeking condonation of delay merits dismissal and the Reference Application also deserves the same treatment.

6.In rebuttal learned counsel for the applicant has opposed the objection and stressed upon the Reference Application to be within time, as per law, in terms of its institution/re-filing. In this regard, learned counsel has placed reliance on Deputy Collector of Customs and 2 others v. Muhammad Tahir and another (PLD 1989 Supreme Court 627), Muhammad Ahmad v. Muhammad Ali and another (PLD 1996 Lahore 158) and Government of Khyber Pakhtunkhwa through Secretary Industries Commerce

and Mineral Development Peshawar and others v. Frontier Chemical Industries Ram Bagh, Mardan (2016 SCMR 1410).

7.Heard. Record perused.

8.As reflected from the remand order, this Court has been mandated to decide the CMA first, filed by the applicant, seeking condonation of delay, therefore, the moot point involved in this matter revolves around the question of limitation, and we deem it imperative to decide the same and then to proceed further to decide the matter on merits, if need be. The relevant provision is Section 133 of the Income Tax Ordinance, 2001, which, at the time of institution of the present Reference Application, prescribed a period of 90 days for filing of a Reference Application before this Court. In order to ascertain the timeliness of the Reference Application, it is necessary to examine the chronology of dates in this regard. The Tribunal had decided the appeal vide order dated 27.02.2017, which was communicated to the applicant-Department on 09.03.2017. The applicant initially filed the present Reference Application in this Court on 29.05.2017 vide Diary No. 34083, thus, consuming 82 days from the date of communication of the Tribunal’s order. However, the office raised objection, against filing of the Reference Application, as noted at Serial No. 31 (Totally Incomplete) on the Objection Sheet, and returned the file with a direction to re- file the same within three days after removal of the defects. It is not disputed by the learned counsel for the applicant, and is also evident from the noting on the Urgent Form that after removal of the objections, the Reference Application was re-filed on 15.06.2017, thereby consuming additional 08 days beyond the expiry of the limitation period, and, thus, totally consuming 98 days from the date of communication of the Tribunal’s order. It is noted that, as per the mandate of Section 133, the Reference Application ought to have been properly filed on or before 07.06.2017. Although the record reflects that an Incomplete

Reference was filed on 29.05.2017, the same was materially defective and could not be treated as a valid institution within the meaning of law. It was only upon re-filing on 15.06.2017, after removal of objections, that the Reference Application became complete in all material aspects, by which time the period of limitation had already expired.

9.It is settled law that the time granted by the office for removal of objections must be strictly adhered to, and failure to re-file an appeal, revision, or application within the time so fixed renders it time-barred, for the period consumed in removing objections cannot be excluded while computing limitation under the Limitation Act, 1908.

It, therefore, follows that unless the Court, upon being satisfied of a “sufficient cause”, expressly condones the delay in re-filing, any period consumed beyond the time fixed by the office cannot be excluded for the purpose of computing limitation, and, consequently, the filing shall be deemed barred by limitation in the absence of any such judicial indulgence.

10.It transpires from perusal of the file/Objection Sheet that the objection raised by the office was not removed within the permitted period of 03-days. The applicant filed CM No.1 of 2019 on 13.05.2019, seeking condonation of delay in filing the present Reference Application. Paragraphs 3 and 4 thereof are reproduced herein below:

“3. That the under-signed Counsel has inspected the record of the case and have found that the Income Tax Reference was filed within the period of limitation as is evident from the following:

• Order of learned Appellate Tribunal received by Commissioner on 09/03/2017.

• Reference filed in the concerned Branch of Honorable High Court on 29/05/2017.

That period of 90 days was to expire on 07/06/2017 and as such the Income Tax Reference filed on 29/05/2017 was within time.

4.That it is respectfully submitted that inspite of the facts as given above, in case the filing of reference is late by 8/9 days as has been alleged by the learned Counsel of the Respondent taxpayer, perhaps referring to the period consumed in removing objections of the Branch, the same may very kindly be condoned in the interest of justice and for deciding the case on merits instead of technicalities.

A plain reading of the above paragraphs reveal that the reasons advanced are vague, mechanical and devoid of material particulars. No day-to-day explanation, affidavit of any responsible officer, or supporting record has been furnished to substantiate these general assertions. Such bare and formulaic averments do not constitute “sufficient cause” within the scope of Section 5 of the Act, nor do they justify relaxation of statutory period which confers a vested right of finality upon the respondent. Hence, the contents of the said application fail to meet the legal threshold required for condonation of delay.

11.It is a well-settled proposition of law that when objections are raised by the office at the time of filing of a case, those must be removed within the original period of limitation prescribed by law. If those objections are removed after the expiry of the said period, the filing of the lis is deemed to be barred by limitation. Therefore, a defective filing of lis cannot be validated retrospectively by curing deficiencies after the limitation period has lapsed. Reliance is placed on Asad Ali’s case, supra, (PLD 2020 SC 736) wherein it was held that if objections or deficiencies raised by the office are not removed within the prescribed limitation period, the institution of such a case shall be treated as incompetent and hit by limitation. For ease, the relevant excerpt of the said precedent is reproduced hereunder:- “17. In cases in which certain objections are raised by the office which rendered the institution of the case in itself invalid or incompetent should be held to be time-barred unless the objections or deficiencies pointed out by the office are met within the time specified by the office in this regard which in turn should be within the limitation period prescribed by the law. It is trite law that what cannot

be done directly can also not be allowed to be done indirectly. If what is filed within the limitation period cannot be said to be a valid appeal, in the presence of deficiencies/ objections pointed out by the office, it should be held to be hit by limitation if the objections/ deficiencies are remedied beyond the period of limitation.”

(Emphasis supplied)

The above principle of law has consistently been followed in later precedents, including Saleem Khan v. Mst. Zeenat and others (2023 CLC 1217) and Province of Punjab and others v. Muhammad Arif and Company (PLD 2022 Lahore 596), wherein it was reiterated that a case filed within limitation, but rendered defective shall not be deemed valid if the office objections are cured beyond limitation. The relevant excerpt of Saleem Khan’s case (supra) reads as under: “11. ... It is well established by now that in a case where certain objections are raised by the office it should be held to be time barred unless objections/deficiency, pointed out by the office are made good or removed within time specified by the office. If the objections are not removed within the given period and in the meanwhile the limitation expires, the petition would become barred by time. In this regard, reliance can be placed on the case reported as “Asad Ali and 9 others v. The Bank of Punjab and others" (PLD 2020 Supreme Court 736) relevant part whereof is reproduced as under:-

15.The said principle of law has repeatedly been laid down, followed, approved, affirmed and reiterated in a large number of judgments of this Court as well as the High Courts. Starting from the judgment of the Lahore High Court reported as Ghulam Hussain v. Bhadar (PLD 1954 Lahore 361) till judgment of this Court reported as Lahore Development Authority v. Muhammad Rashid (1997 SCMR 1224), there is consistency in the principle that if objections raised by the office are not removed during the period allowed by the office and meanwhile the limitation period expires, the petition would become barred by time. There are two subsequent judgments of this Court reported as Mst. Sabiran Bi v. Ahmad Khan (2000 SCMR 847) and Farman Ali v. Muhammad Ishaq (2013 SC 392) which are incorrectly understood to have decided that so long as the initial institution is within the limitation period, removal of objection raised by the office after expiry of the limitation period does not render the petition to be barred by time. The said judgments have been rendered in a different set of

facts and circumstances, do not lay down the entire law on the subject and are distinguishable on points of law as well as facts.”

(Emphasis supplied)

12.The contention of learned counsel for the applicant that the applicant being a Government functionary was required to follow the prescribed departmental procedure for obtaining requisite approvals and sanctions prior to filing the Reference Application in this Court, therefore, any delay, if occurred, was neither deliberate nor intentional, but purely procedural in nature, cannot be accepted as a sufficient cause to exonerate the applicant from the obligation of filing the lis within the prescribed limitation period on two grounds: first it was not a case of the applicant in the CMA that time was consumed in obtaining departmental approvals/ sanctions, and second that while taking this stance, the applicant ignored the fact that it had already filed Reference, though incomplete, after taking departmental permission. Be that as it may, the principle governing condonation of delay has authoritatively been settled by the Hon’ble Supreme Court of Pakistan and followed by this Court in several binding pronouncements. In Regional Police Officer, Dera Ghazi Khan Region and others v. Riaz Hussain Bukhari (2024 SCMR 1021), the Apex Court held that mere administrative delay, inter- departmental correspondence, or internal approval processes cannot constitute a “sufficient cause” within the meaning of Section 05 of the Act. The Apex Court deprecated the growing trend of filing applications for condonation of delay as a matter of routine, terming such explanations as “mechanical, unpersuasive, and indicative of departmental inefficiency.” It was observed that every litigant, whether a government functionary or a private individual, is bound to adhere to the statutory limitation, and that the Government officers/officials cannot claim preferential treatment merely on the pretext of bureaucratic procedure. For ready reference, the relevant portion of the aforesaid precedent is reproduced hereunder:

“6. ... however, in the case of the Government or any of its departments, the party has at its disposal the assistance of its own legal department; the help and support of the Attorney General's Office, or the Advocate General's Office as the case may be. Therefore, immediately upon receiving a copy of the judgment/order, the Government departments may move for instructions rather than waiting for the lapse of the period of limitation provided for approaching the higher Courts” ... (Emphasis added)

Similarly, a Division Bench of this Court in M/s Sui Northern Gas Pipelines Limited v. M/s Bhatti Fabrics, etc. (2024 LHC 3160) reiterated that strict compliance with limitation law is a fundamental obligation, and any delay must be justified through an explanation of each day of delay, supported by evidence. General or vague references to administrative bottlenecks are legally insufficient and reflect a lack of due diligence.

Further reliance is placed on Government of Balochistan through Secretary Board of Revenue, Balochistan Quetta and others v. Muhammad Ali and 11 others (2007 SCMR 1574) and Muhammad Bashir and another v. Province of Punjab through Collector of District Gujrat and others (2003 SCMR 83), wherein the Hon’ble Supreme Court held that State institutions and public functionaries are equally bound by statutory time limits and are not entitled to any leniency in seeking condonation of delay. It was emphasized that limitation law applies, with equal force, to the Government and private persons, and any relaxation would defeat the legislative intent of finality and discipline in judicial proceedings.

13.In light of these precedents, the consistent judicial view is that delay cannot be condoned in a cursory or mechanical manner. Each day of delay must reasonably be explained through a substantiated cause reflecting bona fide conduct, absence of negligence, and prompt pursuit of legal remedy. Where such proof is absent, the vested right of the opposing party to finality of litigation cannot be disturbed. It is trite that if the original lis (dispute or cause of action) is barred by limitation, the court is

not required to examine or decide the case on merits, as a vested right accrues in favour of the opposite party by operation of law. Reference may be made to the recent order dated 8.10.2025 passed by the Apex Court in Civil Petitions No.1681 and 1829 of 2025 titled Commissioner Inland Revenue, Zone-III, Large Taxpayers Unit, Lahore v M/s Crescent Bahuman Limited, Lahore. The precedents relied upon by the learned counsel for the applicant, though cited in support of the plea for condonation of delay, rest upon distinct factual and legal foundations and, thus, are not attracted to the present case. In the cited authorities, condonation was granted in view of established bona fide administrative delays, supported by documentary evidence and demonstrable public interest, whereas in the instant matter, no such convincing explanation or corroborative material has been produced. It is a settled principle that each case must be decided on its own peculiar facts and circumstances, and precedents cannot be extended to situations where the factual substratum materially differs. Accordingly, the judgments so relied upon are distinguishable on facts and do not advance the applicant’s cause.

14.In view of what has been observed and discussed above, the CM No.1 of 2019 under Section 05 of the Act, seeking condonation of delay is dismissed. Consequently, the Reference Application, being barred by limitation, is also dismissed.

15.Office shall send a copy of this judgment under seal of the Court to the Tribunal as per Section 133(8) of the Ordinance.

(Khalid Ishaq) (Hassan Nawaz Makhdoom) Judge Judge

Approved for reporting.

Judge Judge Announced and dictated on 24.10.2025.

Prepared and Signed on 05.11.2025.

Tahir Noor