Tahir Munir (Deceased) etc. vs Cir Multan

Stereo. H C J D A-38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, MULTAN BENCH,

MULTAN

JUDICIAL DEPARTMENT

ITR No.175 of 2025

Tahir Munir (deceased) through his Legal Heirs Versus

The Commissioner Inland Revenue, Multan Zone RTO, Multan & others

JUDGMENT

Date of hearing: 22.09.2026.

Applicants by: Mr. Furqan Ahmad Khan, Advocate. Respondents by: Mr. Iftikhar Majid, Advocate vice Mr. Muhammad Suleman Bhatti, Advocate.

MUHAMMAD SAJID MEHMOOD SETHI, J.:- Through instant Reference Application under Section 133 of the Income Tax Ordinance, 2001 (“the Ordinance of 2001”), following questions of law, urged to have arisen out of impugned order dated 20.08.2025, passed by learned Appellate Tribunal Inland Revenue, Single Bench, Multan (“Appellate Tribunal”), have been pressed and argued for our opinion:-

1.Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal Inland Revenue (ATIR) was justified in dismissing the appeal of the appellant without adjudicating upon the issue that under Section 182 of the Income Tax Ordinance, 2001, no penalty is prescribed for non-filing of reply to a notice issued under Section 122(5A)?

2.Whether on the facts and in the circumstances of the case, the learned ATIR was justified in dismissing the appeal of the appellant by ignoring the mandate of Article 77 of the Constitution of the Islamic Republic of Pakistan, which provides that no tax shall be levied except by or under the authority of law?

2.Brief facts of the case are that proceedings under Section 122(5A) of the Ordinance for Tax Year 2018 were initiated against

I.T.R. No.175 of 2025

late Tahir Munir. During the proceedings, the Additional Commissioner Inland Revenue (“Additional CIR”) requisitioned certain record and documents, which, according to the Department, were not furnished. Consequently, a notice under Section 182(2) was issued on 17.01.2024 and penalty of Rs.25,000/- was imposed vide order dated 26.01.2024. The CIRA upheld the penalty vide order dated 27.02.2024. In appeal, the taxpayer contended, inter alia, that Section 182 did not prescribe any penalty for non-compliance with a notice or requisition issued under Section 122(5A). The Tribunal dismissed the appeal, despite observing that the penalty was not justified and that the taxpayer’s record may have been produced but was not considered by the Additional CIR. The Tribunal, however, did not adjudicate the specific legal question regarding the statutory authority for imposition of the penalty. The taxpayer has since passed away and the present Reference Application is being prosecuted by his legal heirs.

3.Learned counsel for the applicant-taxpayers submits that Section 182 contains a specific table identifying the defaults which attract penalty and the corresponding penalties. He adds that non- compliance with a notice or requisition issued during proceedings under Section 122(5A) does not constitute any of the defaults specified in the table. He argues that the provision which could possibly be relied upon by the Department relates to proceedings under Section 177 and cannot be extended to proceedings under Section 122(5A). He further contends that the penalty of Rs.25,000/- was imposed without statutory authority. In support, he has relied upon Article 77 of the Constitution and, additionally, upon the FBR Circular No.7(2)DT-14-94 dated 01.02.1994 regarding the opportunities to be afforded before imposition of penalty.

4.Conversely, learned Legal Advisor for the resondent- department supports the orders of the authorities below and submits that the taxpayers failed to comply with repeated requisitions and notices and that the department was consequently justified in taking

I.T.R. No.175 of 2025

action. He adds that the machinery provisions should receive liberal construction so that the effective enforcement of the tax law is not frustrated.

5.Arguments heard. Available record perused.

6.The controversy essentially turns upon a short but important question: whether the Department possessed statutory authority under Section 182 of the Ordinance to impose a penalty of Rs.25,000/- for the alleged failure to comply with a requisition issued during proceedings under Section 122(5A). The answer must be found from the language and scheme of Section 182 itself. Section 182(1) provides that a person committing an offence specified in column (2) of the Table shall be liable to the penalty mentioned against that offence in column (3). The provision, therefore, does not confer an unstructured or general power to impose a penalty for every instance of non-compliance with the Ordinance. The default, the statutory obligation to which it relates, and the corresponding penalty must fall within the framework expressly prescribed by the legislature.

7.The department was therefore required to identify the particular entry in the Table that renders the alleged default punishable with the penalty imposed. The proceedings here were admittedly under Section 122(5A), whereas the entry relied upon by the department pertains to the statutory obligation arising in Section 177 proceedings. The two provisions operate in different fields. No entry has been identified before this Court, nor was any identified by the Additional CIR, the CIR(A) or the Appellate Tribunal, that prescribes a penalty of Rs.25,000/- for failure to furnish a reply to, or comply with, a requisition issued in proceedings under Section 122(5A). This omission is decisive because a provision entailing a penal consequence, whether criminal or civil, must be construed strictly. This rule is an application of the fundamental principle nulla poena sine lege, that no one may be penalized except for a default already defined by law and with a penalty clearly prescribed by law. The Supreme Court in Sunni Ittehad Council and another v. Election

I.T.R. No.175 of 2025

Commission of Pakistan and others (PLD 2025 Supreme Court 67) has reiterated the principle against doubtful penalisation, holding that no person can be subjected to a penalty except under clear authority of law and that no penal consequence can be added by inference or assumption. The act attracting the penal consequence must fairly and squarely fall within the plain words of the law. Courts are not to stretch or enlarge the language of a penal provision through liberal construction and, where such provision is susceptible to two reasonable constructions, the construction which does not extend the penalty is to be adopted.

8.Examined in this light, the Department was required to identify the particular entry in the Table to Section 182 which rendered the alleged default punishable with the penalty imposed. The proceedings in the present case were admittedly under Section 122(5A), whereas the entry relied upon by the Department pertains to the statutory obligation arising in the context of Section 177 proceedings. The two provisions operate in different fields. No specific entry has been identified before this Court, nor was any identified by the Additional CIR, the CIR (Appeals) or the Tribunal, which prescribes a penalty of Rs.25,000/- for failure to furnish a reply to, or comply with, a requisition issued in proceedings under Section 122(5A).

9.The distinction is material. A penalty prescribed for a particular statutory default cannot, merely because the nature of the obligation may appear similar, be transplanted to another proceeding for which the legislature has not prescribed such consequence. The statutory description of the default and the corresponding penal consequence must be respected. In Commissioner Inland Revenue (Cantt. Zone) Regional Tax Office, Rawalpindi v. Messrs D-WATSON, Chaklala Scheme-III, Rawalpindi and another (2025 PTD 1509), the Lahore High Court, while examining the scope of a machinery provision in the context of a fiscal statute, emphasized that such provision must operate within the express confines of the substantive statutory liability and cannot be expanded to create or recover a penal liability

I.T.R. No.175 of 2025

which the legislature has not conferred. The Court further held that the Department must establish clear statutory authority for the imposition and recovery of each element of a penalty and that penal consequences cannot be extended by administrative construction or implication. The principle is equally applicable here: an entry in the Table to Section 182 applicable to one statutory obligation cannot, by implication, be extended to a different obligation arising under Section 122(5A).

10.The reasoning by the CIR (Appeals) that machinery provisions of a fiscal statute are to be liberally construed, does not answer this objection. The principle of liberal construction of machinery provisions is intended to make the statutory mechanism for assessment and collection workable; it cannot be invoked to create, enlarge or extend a penal liability. As observed by the Lahore High Court in D-WATSON’s case supra, a machinery provision may facilitate the implementation or recovery of a liability already created by law, but cannot itself supply a jurisdiction or penal consequence which the legislature has not expressly provided. A fortiori, Section 182 cannot be liberally construed so as to impose a penalty for a default which has not been shown to fall within any of the offences specified in its Table.

11.The conclusion is reinforced by the principle generalia specialibus non derogant. Where the legislature has specified a particular statutory default and prescribed a corresponding penal consequence, the Court cannot resort to a general or otherwise differently situated provision to extend that consequence to a default for which no such penalty has been prescribed. This principle assumes greater force where the consequence sought to be imposed is penal in character. The Department was consequently required to demonstrate precise correspondence between the alleged default, the statutory provision creating the obligation, and the particular entry in the Table to Section 182 prescribing the penalty.

I.T.R. No.175 of 2025

12.Section 2(63) of the Ordinance defines “tax” and expressly includes within that expression “any penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance.” Article 77 of the Constitution embodies the requirement that a tax for the purposes of the Federation shall be levied only by or under the authority of an Act of Parliament. Consequently, where a monetary penalty is sought to be recovered under the Ordinance, its imposition must have a clear foundation in the statutory scheme. Invocation of Section 182(2), by itself, cannot dispense with the requirement of establishing that the alleged default corresponds to an offence specified in column (2) of the Table and attracts the particular penalty prescribed in column (3).

13.No such statutory foundation has been demonstrated. The penalty of Rs.25,000/- was imposed without first establishing that the alleged default fell within an offence specified in the Table to Section 182. The defect, therefore, is not a mere irregularity in the exercise of an otherwise existing power; it goes to the very authority to impose the penalty. In the absence of clear statutory authority, the penalty cannot be sustained. The impugned order of the Tribunal suffers from a further and independent infirmity. Ground No.4 before the Tribunal specifically raised the legal objection that no penalty was prescribed under Section 182 for failure to comply with a notice issued in proceedings under Section 122(5A). This was a pure question of law going to the root of the penalty proceedings. The Tribunal was, therefore, required to determine the statutory basis of the penalty before dismissing the appeal. The impugned order, however, contains no determination identifying the relevant entry in Section 182 or explaining how the alleged default attracted the penalty imposed.

14.More significantly, the learned Appellate Tribunal itself recorded that the penalty imposed by the Additional CIR was not justified. It further noticed that the taxpayer’s record may have been produced but was not considered by the Additional CIR. Having recorded these findings, the Tribunal could not, without assigning a

I.T.R. No.175 of 2025

reasoned explanation, proceed to dismiss the appeal against the penalty. Its operative conclusion is thus inconsistent with its own observations and cannot be sustained as a reasoned adjudication.

15.The additional objection regarding the opportunities afforded to the taxpayer also deserves notice. The record, as placed before the Court, shows issuance of the notice under Section 182(2) on 17.01.2024 followed by the penalty order on 26.01.2024. The Applicants rely upon FBR Circular No.7(2)DT-14-94 dated 01.02.1994 in support of their contention that the prescribed opportunities were not afforded. Since the penalty itself is found to lack statutory foundation, it is unnecessary to finally determine this procedural objection. Suffice it to observe that the manner in which the penalty proceedings were concluded constitutes an additional circumstance which militates against sustaining the impugned order.

16.In view of the foregoing discussion, the proposed questions are answered in the negative, in favour of the applicant-taxpayers and against the respondent-department.

17.Consequently, this Reference Application is allowed and the impugned order of the learned Appellate Tribunal, to the extent it sustains the penalty, is set aside. The penalty of Rs.25,000/- imposed upon the applicant-taxpayers is accordingly deleted.

18.Office shall send a copy of this judgment under the seal of the Court to the learned Appellate Tribunal in terms of Section 133(8) of the Income Tax Ordinance, 2001.

(Sultan Tanvir Ahmad) (Muhammad Sajid Mehmood Sethi) Judge Judge

APPROVED FOR REPORTING

Judge Judge

*A.H.S.*