Pakistan Accumulators (Pvt) Limited Vs Additional Commission Inland Revenue & others

JUDGMENT SHBET

PESHAWAR HIGH COURT

ABI}OTTABAD I}ENCH

UuAiciat neoartmem

WP No. 960-A12021.

JT]DGMENT

Petitioner(s) [Pakistan Accumulators (Pvt) Limitedl by M/s. IIafiz Muhammad ldris and Syed l,-ctrid Ahmed Bukhari, Advocates.

Respondent(s) (Additional Commissioner lnland llevenue & others) by Mr. Waqar Orakzai, Advocate and (ltederation o/'l'}akistan) by Syed Shahid Mehhoob, As s is tant Atto r ney G en erctl.

I)ate o/' lteoring: 2 5. 05. 2 02 3

MUHAMMAD I,IAZ KHAN. J. '['hrough this single judgment, wc intcnd 1o dccide thc instanl as wcll as following conncctcd writ petitions, as in all thcsc pclitions comlnon clucslion of law and lacts is involved:

i. WP No. ll40-Al202l P u kis lanllccumu la to rs (Pvt) Li m i I ed. Versus ldditional Commissioner lnland lleyenue & others.

,7 ll. WI'}No. ll43-A12021.

Pakislan /cctnnulutors (|'}fl ) Limited. Versus lclclitional Commis,;ioncr Inland llevenue & others.

lu WI' No. 1144-A12021.

l)uki:;lon tlccuntululor.s ( l)vl ) Limiletl. Versus Additional Comntiss'ioner Inland llevenue & others.

2 Precisely, the facts of the case are that the petitioncr is a private lirnited company, who is engaged in manufacturing of batterics and is a tax payer and as such it has submitted its tax returns lor the tax ycars 2016,2017,2018 and 2019 which is decmed to bc an "assessment" within the meaning ol' section 120 o1' Income Tax Ordinance, 2001 (hereinafter re ferred to as "Ordinance of 2001"). Aftcr submission of aforesaid tax returns-cum-assessment, the respondent No.1 through the impugned show cause notices has rcquired from the petitioner some detailcd cxplanation and documents under section 122(5A) rcad with scction 122(9) of the Ordinancc of 2001, and as such the grievancc ol thc pctitioncr is that through the irnpugncd show cause notices, the rcspondent No.1 has dcclared his assessmcnt filcd under section 120 (2) of Ordinancc of 2001 as erroneous and prejudicial to thc intcrcst o1- revcnue and thus has shown his intention to amend the aforesaid assessment filcd by thc pctitioner, which issuance of show cause noticc and initiation ol proceedings has offcndcd its right and arc thus unlawltl and against thc mandatc ol'Ordinancc of 2001, thcreforc, hc has approached to this Court with thc fullowing relief:

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It is therefore, respect/ully prayed that an appropriate writ may graciously be issued by declaring notices u/s 122(5A) and 122(9) of Ordinance, 2001 as illegal, without law/ul authority, without any law/ul jurisdict ion, void-ab- initio, without any basis, have no legal e/fbct, both the mandatory conditions (i.e erroneous ctnd prejudicial to the interest o/ revenue) are not mel,

declaring that the amendment made

through liinance Act, 202I is applicable relrospectively consequenlly making the proceedings without law/ul jurisdiction, sel aside and/or grant any other relief yvhich Lr /it to compensate the petitioner.

3 When these cascs wcrc takcn up for hcaring, notices were issued to the respondents, and they wcre also directed to file their parawise commcnts, which they havc accordingly submitted. Today argumcnts of ry lcarncd counscl lor both thc partics, as wcll as lcarncd I)AG were heard in considcrable dctail and rccord peruscd with their ablc assistance.

4.'l'hc main argumcnt of lcarned counsel for pctitioner was that infact, thc impugned show causc ncrticcs issued under section 122(5A) of thc Ordinancc ol'2001 have wrongly bcen issued by thc rcspondent, as such notices could only be issued if a tax payer is subject to a complcte audit as mandatcd undcr section 177 of Ordinance ol 2001 but in thc present case, thc rcspondcnts havc prc-supposcd by dcclaring thcir intcntion to starnp the declaration-cum-asscsslrcnt ol- pctitioncr as crroneous and prcjudicial to the intcrcst of rcvcnuc. I Iis other argumcnt was that unlcss and until thc two conditions: /irstlv: declaralion being erroneous and secondly: the samc bcing prejudicial to thc intercst of rcvenue, do not co-exist such as assessment could not bc dcclared as such, thcrcfore, his stancc was that the impugncd show causc noticcs havc bccn issued to thc petitioner without having any legal backing, howcvcr, under thc themc and schcmc as providcd undcr the Ordinancc of 2001, whcre a tax paycr furnishes tax return as required undcr section 114 ol' Ordinancc of 2001 rcgarding its incomc for a tax year with rcspect to thc taxablc income and tax due of that tax ycar, thcn, such dctail of thc tax paycr shall bc deemed as assessment undcr section 120 of thc Ordinance of 2001 and as such if' thc compctcnt

authority consider that some chargeable income has escaped assessment or the total income has been left unassessed or assessed but at thc low rate or exccssive relief or refund has been claimed or any amount under a head of income has been misclassified, then the commlssloner cannot unilaterally amend such assessment and before passing any order with respect to amendment in the assessment, hc is required to provide an opportunity of hearing to the tax payer so as to confront him regarding the deficiency(ies) in the assessmcnt so subrnitted by the tax payer and it was in compliance of the aforesaid mandatory provision of law when the respondent issued the impugned notices to the petitioner, whereby, various deficiencies in the asscssmcnt filcd by thc pctitioncr filcd under scction 114 rcad with section 120 ol- Ordinancc o1'2001, havc been highlighted and it has tentatively opincd that the

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P/ assessrlent is prima lacic erroneous and prcjudicial to the interest of revenue. Since, the whole controversy in all these cascs revolves around the intcrpretation o1 section 122 of Ordinance of 2001, thereforc, it would be rclcvant to reproducc thc same :

Sec: 122. Amendment of assessments:- -(1) Subject to this section, the Commissioner may amend an assessment order treated as issued

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any goods made b), the taxpayer, [receipls oJ' the laxpayer Jiom services rendered or any olher receipls that may be chargeable lo tax under this Ordinance,Jand on lhe acquisition, possession or disposal oJ' any monq), assel, valuable arlicle or investment made or expendilure incurred by lhe taxpayer.

(9)Nrs assessmenl shall be amended, or further amended, under this seclion unless lhe laxpayer has been rtrovided with an opportunibt of being heard.

f Provided that order under lhis section shall be made wilhin one hundred and /eightyl days of issuance of show cause notice or wilhin such exlended period as lhe Commissioner may, /br reasons lo be recorded in wriling, so however, such extended period shall in no case exceed ninely days. This proviso shall be opplicable lo a show cause notice issued on or a/ier the /irst day of July, 202l

Provided further lhat any period during which the proceedings are adjourned on accoLtnl ofa slay order or Alternative Dispule Resolulion proceedings or agreed assessmenl fr7 proceedings under seclion l22D or lhe time taken through ad.journmenl by the taxpayer not exceeding sixly days shall be excluded from the computation of the period specified in the /irsl proviso.J

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'l'he aforesaid provision of law un- mistakenly show that the commissioner may amend an assessment filed undcr section 120 or issued undcr section l2l of the Ordinancc, 2001 by making necessary alteration and addition, however, such amcndmcnt or alteration could be made subject to certain conditions. Sub scction 5 o1 Ordinance, 2001 mandates that where incorrect assessment has been made by the tax payer, then under sub section 9, he before making any amendment in the assessment shall providc an opportunity of hearing to the tax payer, whcrcas, section 5-A stipulates that such amendment in the assessment can only be made if he consider that the assessment so made by the tax payer is erroncous and prejudicial to the interest of rcvcnue, so in other words it declares that bcfore holding an assessment filcd by a tax payer as erroneous and prejudicial to the interest of revenue, the Commissioner has to provide an opportunity of hearing and it has to confiont the tax payer with the deficiency(ies) in declaration-cum- v assessmcnt so furnished by u tax payer, u'hich was exactiy donc in the case of petitioner. We failed to understand the reasons and logic so fumished by thc lcarncd counscl lor petitioncr during thc coursc o1' arguments that the assessment could only be termed as

erroneous or prejudicial to thc intcrcst of revcnuc, if a tax payer has becn madc subjcct to audit as rcquired under section 177 of the Ordinance of 2001. We understand that the object, spirit and purposc of scction 122 as well as of section 177 of Orciinancc o1 2001 is one and the same as both these provisions require and mandatc to kccp the record of a tax paycr as pcr his income and expenditures and both sections o1'law is mandatcd tcl havc a chcck on thc asscssmcnt so furnishcd by a tax payer at thc initial stage or at thc later stage, as the case may bc. It further stipulatcs that if in the opinion of thc Commissioncr the assessmcnt so furnished by the tax payer has escaped thc assessment of chargeable incomc or hc has madc undcr assessment or has assessed at low rate or he has madc excessive reliel' or refund or he has misclassified his various hcads of income then in order to inquirc and investigatc such deficiency(ies) & mis-statemcnt and if thc cornpetcnt authority prima lacic believc that thc r asscssment so rnade by the tax paycr needs amendtncnt and variation, then a show cause notice has to be issued to thc tax paycr and opportunity of hearing has to bc providcd to him. 'I'he law has also put a clog on power of aulhority for making necessary amendment in thc assessmcnt, to the effect that it must be done within

five years from the end of financial year in which the assessment is made

5 If the aforesaid plain and simple language of section 122 of the Ordinancc of 2001 is applied to the facts of the case of the petitioner, then the interpretation as put forward by the learned counsel for the pctitioner, as statcd herein above, appears to be tnisconceived as the respondents havc not yct declared the assessment of the pctitioner as crroncous and prcjudicial to thc inrcrcsi ol rcvcnuc, rathcr in thc opening sentences of the impugncd show cause noticc they have shown their apprehension on thc basis of their definite information that thc assessment so fumished by the pctitioner recluires somc inquiry and as such as a first step has issucd the impugned show cause notices highlighting the deficiency(ics) and is thcreby provided an opporlunity to thc petitioncr to explain its position and produce the rcquired documents, and thus, on the facc ol- available rccord respondcnt has neither excccded its authority nor with any ill-will or mala fide rather have subjccted the -(r?

petitioner to the due process of law and as such they have acted within its domain and in accordance with the mandatc of law. It is scttled sincc long that when language of the statute is clear then its plain and

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ordinary meaning is to be givcn. Similarly, it is also an cstablished principlc ol interpretation of statute that it must bc interpretcd in such a manncr so as to advancc thc causc of justicc instead of clel'cating the samc. In thc casc ol "Govt: of'Khvber Pukhlunkltwu tltrough Chief'Secretarv Peshawor & otlters v/s Intiz,or Ali & otlrers" reported as 2022 SCMR 472 it was hcld by thc Apex Court that in a number ofjudgrnents, the superior courts ol the country havc held that whcn meaning of a statutc is clear and plain languagc ol'statute rccluircs no othcr interprctation then intcntion ol Lcgislaturc conveycd through such languagc has to be givcn lirll affect. I'}lain words must bc expoundcd in thcir natural and ordinary sensc. t_aleUtion rt' *e t,egis printarily to be gcrlhered fiom langulce usecl ctnd crtlention hcts to be rtajd to what hcrs been said anc{ nol lo thcrt what has not been said. Sirnilarly, in thc casc of "Govt: of Khvber Pskhtunkhwtr & others v/s Ahdul Munsn reported as 2021 SCMR 1871 the Apex Courl V has rciterated the alorcsaid rational by observing that when the intent of'the I lature is manifestlv clear from the wording qf the stcttute, the rules rtf inter prelation required that such law be inlerpr"eted cts it is by asstgn inp the ordinarv linclis h lansuase and usage lo the words used, unless it causes grqve

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iniustice which may be irremediable or leads tct absurd sitttcrlions, which could nol have been inlended bv lhe legis lctlure I-ikewise, in the case of "J.S Bank Limited v/s Province of' Puniah through Secretary Food Lqhore & others" reporled as 2021 SCMR 1617, the Apex Court has declared that for the interpretation of statutcs purposive rather than a litcral approach is to be adopted and any interpretation which advanccs the purpose of tl-re Act is to be prclbrrcd rathcr than an interprctation, which def'cats its objccts 6 During the course ol arguments, learned counsel lor petitioner was also confiontcd that what prejudice has been causcd to it due to issuancc ol'the impugncd show cause noticc and when rcspondcnt has not yct altered or varicd or amcndcd the asscssmcnt of the pctitioncr, his reply was that infact, it strongly apprehends that its asscssment has to bc declarcd as erroneous and prejudicial to the interest of revenue, however, we may clarify that no writ can be issued firstly on thc basis of apprehension, prcsurnption and presupposition of the petitioner and secondly a writ ry petition would not be maintainablc whcn respondcnt has only issued a show cause notice requiring the petitioner to justify its claim of tax credit lor its allcgcd investment in plant and machincry. In a case titled

Commissioner Inland Revenue and others-Vs- Jshongltir Khsn Tureen and others reportcd as 2022 SCMR 92 and also rcportcd as 2023 PTD 232 rt rs held that at this point of time, the respondent has only bccn issucd a show-cause noticc to submit thc rcply which docs not mean or pre-empt that the issuance of show cause will entail or lcad to an advcrsc ordcr or action against thc respondcnt No.l. It is most commonly noticed that whencvcr a show-causc noticc is issued by the hicrarchy providcd undcr thc tax laws calling upon thc taxpaycr to subrnit thc rcply, thcy immcdiatcly challcngc thc show-causc noticc in writ jurisdiction with thc prcsurnption or prcsupposition that the show-cause noticc rncans an advcrsc ordcr against thcm, so in our consiclcratc appraisal, abstinence from interfercnce at thc stagc of issuance of show-cause notice in ordcr to rclcgate thc parties to the proceedings bcl'orc thc conccrncd authorities must be the normal rulc. 'l'hc challcngc to show cause notices in writ iurisdiction at prctnaturc stages and tendency to bypass thc rcmedy provided undcr thc rclcvant statute is by and largc dcprccatcd and disapproved in many dictums laid down in local and foreign judgments in which courts havc considcrcd the interfercncc as an act ol'dcnouncing

and fcttering thc rights confcrrcd on the statutory functionaries spccially constitutcd for the purpose to initially decide the matter. Similarly, in the case of Messrs Chaudhri Wire Ro'pe Industri Ltd.v.Sales Tox oflic er. Sneciul I-alto rer eportcd as 1988 SCMII 1934, it is hcld that apart lrom issuing noticcs to the appcllant no further proceedings had bcen taken by thc Sales-tax Ol'llccr belorc the appellant moved thc constitr"rtional jurisdiction o1- thc I Iigh Court. In thc circumstanccs of this casc thc pctition beforc the I Iigh Court was clcarly prcrnaturc and thc learncd Single Judgc was right in dismissing it on this ground. In anothcr casc idcntical to thc casc of pctitioner titlc Messrs Oceun P'akistun Ltd. v. Federal Bourd of' Revenue Islumabsd und others repo rtcd as 2012 PTD in which the show-cause noticc dated 12.10.201 1 issued under section 122(9) rcad with section 122(5A) ol' thc Incomc 'l'ax Ordinance, 2001 by the Additional Commissioner Inland Itcvcnuc, Islamabad was undcr challcngc and V it was he ld that wc arc of the considcrcd opinion that SINCC all the legal arguments rcf'crrcd to in thc preccding paras, raised on behalf o1- the pctitioner- company, are similarly raised bcfore the competent ltrrun"r, which has issurcd show-caltsc noticc to tl-rc

petitioner-company, any finding on any of thc lcgal objections by this Court is likely to cause prcjudice to the case of the petitioner-company bcfore the Income fax hierarchy. In an another case title Dertutv Commissioner of' Income Tax/lVeahh Tax, Faisulabud and others v. Messrs Puniah Beveruge CorupqnL (PVT.L l-td reported as 2007 PTD 1347 which case is also reported as 2008 SCMR 308), where it was held by the apex Court that thc tcndency of by-passing the remedy provided under law, and rcsort to Constitutional jurisdiction of I.Iigh Court was dcprecated. 'I'he petitioncr instcad ol'rushing to the Fligh Court and consuming sulficient timc should have submitted reply be fore invoking the jurisdiction of the I'Iigh Court. Such practicc is to bc deprecated because if merely on the basis oI show-causc notice proceedings are started then in such position dcpartment would ncver bc in a position to procced with the cases particularly the recovery o1 rcvenuc q etc

7 It is also rclcvant to mention hcre that during the course of arguments we also conlronted the learned counsel for petitioner that as to whether he alleged any ill-will or mala fide on the part of rcspondcnts or any allegation of abuse of process of law or lack of their

lawful authority, his reply to the extent of ill-will and mala fide was in negative, however, the extent of authority of respondent, his reply was that they have issued the impugned notices with considerable dctail of deficiency(ies) which could not be done in proceedings under section 122 of thc Ordinancc oll2001 rather such detail inquiry could be done in proceedings under section 177 Ordinance, 2001, however, as stated hcreinabove, we do not agree with this interpretation of learned counsel for petitioner and thus only for this reason we cannot set-aside thc impugned notices. It may be clarified that a notice or show cause notice could be challenged in a writ petition, if the same is barred by law or if it is the result of any ill-will or mala fide, or the same is the result of abuse of process of law or if the issuing authority lacl<s its lawlul authority, however, none of these grounds were neither pressed by thc petitioner nor the same attract to thc case of petitioner, therefore, this Court could not strike down the impugned show cause notices in its writ

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jurisdiction. It is also relevant to mention here that the respondents have only issued show cause notices asking the petitioner to cxplain the deficicncy in his statement perlaining to the various tax years and the petitioner instead of submitting any reply to thc

respondents for the same has rushcd to this Court by challenging the aforesaid notices through the instant writ petitions and thus, by now thc rcspondents have not passed any order quct to make any amendment in thc assessment o1'the petitioner and thus, all these writ petitions are for the time being pre-mature. It may be clarified that under the doctrine qf ripeness a notice/show cause noticc could not be challenged when on the basis of same no conclusive and adversc order has bccn passed, thcrclorc, or-r this ground too thesc writ petitions are not maintainable bcing prc-rnaturc. In thc case title Viruscr! UIW-V;-Bqshir Ahmud, Settlement Commissioner (Industries) ancl unother reported as 1969 SCMR 154 thc I Ion'ble Suprcme Court of Pakistan has deprecated the filing of a Constitutional Petition against mere issuance of noticc by thc Scttlcrncnt Comrnissioncr asking thc pctitioncr to justify bcncfits entanating out o1' scttlement. Sirnilarly, In Khslid Muhmood Ch. und p/ others v. Government o f the Punisb throuch Secretarv, Livestock und Duirv Develooment rcported as 2002 SCMR 805, thc I lon'blc Suprcme Court of Pakistan has rulcd that issuancc of notice was a prcliminary stagc and thcrcforc, premature for thc purposc of invoking Constitutional jurisdiction

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and Muhammsd Mshmqod Ali v. Pakiston t Secretarv, Ministrv of' Finonce reported as 1984 CLC 142 holds to thc same cffect. ln a celebrated .judgm ent Muhctmmad Akhtsr Sherani and 35 others v. The Puniah Textbook Board, Lahore and 4 others reported as 2001 PLC (C.5.) 939 the Fligh Court has held that a mere notice to appear so as to answer allegations did not amount to an adverse order and a Constitutional Petition was therefore, not maintainable. In a case titled Mughul-e-Azqm Banquet Comolex through Munaging Purtner v.

Federalion of Pukistan throush Secretarv und 4 others reported as 2011 PTD 2260 al page 2263 the I'Ion'ble Court explains the rationale behind the doctrine of ripeness. It declares and compares prcmaturity or lack of ripcness to apprchcnsions or mere speculation. It declares that there had to bc a concrete or tangible contcxt lor the Court to act Likewise, in the case Messrs Chakwal Textiles Mills V Limited, Raw alpindi R oud Chukwcrl and another v.

Director Sociul Sec uritv, Ruwu t) indi snd 2 ot hers reoorted as 2012 PLC 270 holds to the same effect In oasc titlcd Abdul Ruheem n, Execul,ive Ma (Operuti od MEPCO lst DiYbion D.G.

Khan v. Munag, s Director PCO, WA

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House, Laho and 2 others rcportcd as 2011 PLC (C.S.l 1551a Division Bcnch has also dcprccated the filing of a Constitutional Petition against mere issuancc of notice. l"urthcrmorc, in a case titled MsL Zuhidu hama v. Secret Education un d other rcported as PL.[ Z00Z hnore tAZq, the stage of a notice to appear and answcr allcgations has bcen held to be not one where it could be said that some adverse action had been taken against the person approaching the Court.

8 In view of thc above discussion and cxposition of law on thc subjcct, this and all connccted pctitions being meritlcss are hcrcby dismissed Announced.

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