MUHAMMAD IJAZ KHAN, J. Through this single judgment, we intend to decide the instant as well as following connected writ petitions, as in all these petitions common question of law and facts is involved: i. WP No. 1140-A/2021.
Pakistan Accumulators (Pvt) Limited.
Versus Additional Commissioner Inland Revenue & others. ii. WP No. 1143-A/2021.
Pakistan Accumulators (Pvt) Limited.
Versus Additional Commissioner Inland Revenue & others. iii. WP No. 1144-A/2021.
Pakistan Accumulators (Pvt) Limited.
Versus Additional Commissioner Inland Revenue & others.
2. Precisely, the facts of the case are that the petitioner is a private limited company, who is engaged in manufacturing of batteries and is a tax payer and as such it has submitted its tax returns for the tax years 2016, 2017, 2018 and 2019 which is deemed to be an "assessment" within the meaning of section 120 of Income Tax Ordinance, 2001 (hereinafter referred to as "Ordinance of 2001"). After submission of aforesaid tax returns-cum-assessment, the respondent No.1 through the impugned show cause notices has required from the petitioner some detailed explanation and documents under section 122(5A) read with section 122(9) of the Ordinance of 2001, and as such the grievance of the petitioner is that through the impugned show cause notices, the respondent No.1 has declared his assessm ent filed under section 120 (2) of Ordinance of 2001 as erroneous and prejudicial to the interest of revenue and thus has shown his intention to amend the aforesaid assessm ent filed by the petitioner, which issuance of show cause notice and initiation of proceedings has offended its right and are thus unlawful and against the mandate of Ordinance of 2001, therefore, he has approached to this Court with the following relief: It is therefore, respectfully 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 lawful authority, without any lawful jurisdiction, void-abinitio, without any basis, have no legal effect, both the mandatory conditions (i.e erroneous and prejudicial to the interest of revenue) are not met, declaring that the amendment made through Finance Act, 2021 is applicable retrospectively consequently making the proceedings without lawful jurisdiction, set aside and/or grant any other relief which is fit to compensate the petitioner.
3. When these cases were taken up for hearing, notices were issued to the respondents, and they were also directed to file their parawise comments, which they have accordingly submitted. Today arguments of learned counsel for both the parties, as well as learned DAG were heard in considerable detail and record perused with their able assistance.
4. The main argument of learned counsel for petitioner was that infact, the impugned show cause notices issued under section 122(5A) of the Ordinance of 2001 have wrongly been issued by the respondent, as such notices could only be issued if a tax payer is subject to a complete audit as mandated under section 177 of Ordinance of 2001 but in the present case, the respondents have pre-supposed by declaring their intention to stamp the declaration-cum-assessment of petitioner as erroneous and prejudicial to the interest of revenue. His other argument was that unless and until the two conditions: firstly: declaration being erroneous and secondly: the same being prejudicial to the interest of revenue, do not co-exist such as assessment could not be declared as such, therefore, his stance was that the impugned show cause notices have been issued to the petitioner without having any legal backing, however, under the theme and scheme as provided under the Ordinance of 2001, where a tax payer furnishes tax return as required under section 114 of Ordinance of 2001 regarding its income for a tax year with respect to the taxable income and tax due of that tax year, then, such detail of the tax payer shall be deemed as assessment under section 120 of the Ordinance of 2001 and as such if the competent authority consider that some chargeable income has escaped assessment or the total income has been left unassessed or assessed but at the low rate or excessive relief or refund has been claimed or any amount under a head of income has been misclassified, then the commissioner cannot unilaterally amend such assessm ent and before passing any order with respect to amendment in the assessment, he is required to provide an opportunity of hearing to the tax payer so as to confront him regarding the deficiency(ies) in the assessm ent so submitted 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 assessment filed by the petitioner filed under section 114 read with section 120 of Ordinance of 2001, have been highlighted and it has tentatively opined that the assessm ent is prima facie erroneous and prejudicial to the interest of revenue.
Since, the whole controversy in all these cases revolves around the interpretation of section 122 of Ordinance of 2001, therefore, it would be relevant to reproduce the same: Sec:
122. Amendment of assessments:- -(1) Subject to this section, the Commissioner may amend an assessment order treated as issued under section 120 or issued under section 121 by making such alterations or additions as the Commissioner considers necessary.
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(5) An assessment order in respect of tax year, or an assessment year, shall only be amended under sub-section (1) and an amended assessment for that year shall only be further amended under sub-section (4) where, on the basis of [audit or on the basis of definite information] the Commissioner is satisfied that N any income chargeable to tax has escaped assessment; or
(ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or
(iii) any amount under a head of income has been mis-classified.
(5A) Subject to sub-section (9), the Commissioner may amend, or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue.
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(8) For the purposes of this section "definite information" includes information on sales or purchases of any goods made by the taxpayer, [receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under this Ordinance,]and on the acquisition, possession or disposal of any money, asset, valuable article or investment made or expenditure incurred by the taxpayer.
(9) No assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard.
[Provided that order under this section shall be made within one hundred and [eighty] days of issuance of show cause notice or within such extended period as the Commissioner may, for reasons to be recorded in writing, so however, such extended period shall in no case exceed ninety days. This proviso shall be applicable to a show cause notice issued on or after the first day of July, 2021 Provided further that any period during which the proceedings are adjourned on account of a stay order or Alternative Dispute Resolution proceedings or agreed assessment proceedings under section 122D or the time taken through adjournment by the taxpayer not exceeding sixty days shall be excluded from the computation of the period specified in the first proviso.] The aforesaid provision of law un-mistakenly show that the commissioner may amend an assessm ent filed under section 120 or issued under section 121 of the Ordinance, 2001 by making necessary alteration and addition, however, such amendment or alteration could be made subject to certain conditions. Sub section 5 of 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 assessm ent shall provide an opportunity of hearing to the tax payer, whereas, section 5-A stipulates that such amendment in the assessment can only be made if he consider that the assessm ent so made by the tax payer is erroneous and prejudicial to the interest of revenue, so in other words it declares that before holding an assessment filed 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 confront the tax payer with the deficiency(ies) in declaration-cumassessment so furnished by a tax payer, which was exactly done in the case of petitioner. We failed to understand the reasons and logic so furnished by the learned counsel for petitioner during the course of arguments that the assessm ent could only be termed as erroneous or prejudicial to the interest of revenue, if a tax payer has been made subject to audit as required under section 177 of the Ordinance of 2001. We understand that the object, spirit and purpose of section 122 as well as of section 177 of Ordinance of 2001 is one and the same as both these provisions require and mandate to keep the record of a tax payer as per his income and expenditures and both sections of law is mandated to have a check on the assessment so furnished by a tax payer at the initial stage or at the later stage, as the case may be. It further stipulates that if in the opinion of the Commissioner the assessm ent so furnished by the tax payer has escaped the assessment of chargeable income or he has made under assessment or has assessed at low rate or he has made excessive relief or refund or he has misclassified his various heads of income then in order to inquire and investigate such deficiency(ies) & mis-statement and if the competent authority prima facie believe that the assessm ent so made by the tax payer needs amendment and variation, then a show cause notice has to be issued to the tax payer and opportunity of hearing has to be provided to him. The law has also put a clog on power of authority for making necessary amendment in the assessm ent, to the effect that it must be done within five years from the end of financial year in which the assessm ent is made.
5. If the aforesaid plain and simple language of section 122 of the Ordinance 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 petitioner, as stated herein above, appears to be misconceived as the respondents have not yet declared the assessm ent of the petitioner as erroneous and prejudicial to the interest of revenue, rather in the opening sentences of the impugned show cause notice they have shown their apprehension on the basis of their definite information that the assessment so furnished by the petitioner requires some inquiry and as such as a first step has issued the impugned show cause notices highlighting the deficiency(ies) and is thereby provided an opportunity to the petitioner to explain its position and produce the required documents, and thus, on the face of available record respondent has neither exceeded its authority nor with any or mala fide rather have subjected the petitioner to the due process of law and as such they have acted within its domain and in accordance with the mandate of law. It is settled since long that when language of the statute is clear then its plain and ordinary meaning is to be given. Similarly, it is also an established principle of interpretation of statute that it must be interpreted in such a manner so as to advance the cause of justice instead of defeating the same. In the case of "Govt: of Khyber Pakhtunkhwa through Chief Secretary Peshawar & others v/s Intizar Ali & others" reported as 2022 SCMR 472 it was held by the Apex Court that in a number of judgments, the superior courts of the country have held that when meaning of a statute is clear and plain language of statute requires no other interpretation then intention of Legislature conveyed through such language has to be given full affect. Plain words must be expounded in their natural and ordinary sense. Intention of the Legislature is primarily to be gathered from language used and attention has to be paid to what has been said and not to that what has not been said. Similarly, in the case of "Govt: of Khyber Pakhtunkhwa & others v/s Abdul Manan reported as 2021 SCMR 1871 the Apex Court has reiterated the aforesaid rational by observing that when the intent of the legislature is manifestly clear from the wording of the statute, the rules of interpretation required that such law be interpreted as it is by assigning the ordinary English language and usage to the words used, unless it causes grave injustice which may be irremediable or leads to absurd situations, which could not have been intended by the legislature. Likewise, in the case of "J.S Bank Limited v/s Province of Punjab throne' Secretary Food Lahore & others" reported as 2021 SCMR 1617, the Apex Court has declared that for the interpretation of statutes purposive rather than a literal approach is to be adopted and any interpretation which advances the purpose of the Act is to be preferred rather than an interpretation, which defeats its objects.
6. During the course of arguments, learned counsel for petitioner was also confronted that what prejudice has been caused to it due to issuance of the impugned show cause notice and when respondent has not yet altered or varied or amended the assessment of the petitioner, his reply was that infact, it strongly apprehends that its assessment has to be declared as erroneous and prejudicial to the interest of revenue, however, we may clarify that no writ can be issued firstly on the basis of apprehension, presumption and presupposition of the petitioner and secondly a writ petition would not be maintainable when respondent has only issued a show cause notice requiring the petitioner to justify its claim of tax credit for its alleged investment in plant and machinery. In a case titled Commissioner Inland Revenue and others-Vs-Jahanghir Khan Tareen and others reported as 2022 SCMR 92 and also reported as 2023 PTD 232, it is held that at this point of time, the respondent has only been issued a show-cause notice to submit the reply which does not mean or pre-empt that the issuance of show cause will entail or lead to an adverse order or action against the respondent No.1 . It is most commonly noticed that whenever a show- cause notice is issued by the hierarchy provided under the tax laws calling upon the taxpayer to submit the reply, they immediately challenge the show-cause notice in writ jurisdiction with the presumption or presupposition that the show-cause notice means an adverse order against them, so in our considerate appraisal, abstinence from interference at the stage of issuance of show- cause notice in order to relegate the parties to the proceedings before the concerned authorities must be the normal rule. The challenge to show cause notices in writ jurisdiction at premature stages and tendency to bypass the remedy provided under the relevant statute is by and large deprecated and disapproved in many dictums laid down in local and foreign judgments in which courts have considered the interference as an act of denouncing and fettering the rights conferred on the statutory functionaries specially constituted for the purpose to initially decide the matter.
Similarly, in the case of Messrs Chaudhri Wire Rope Industries Ltd.v.Sales Tax officer, Special Circle-I, Lahore reported as 1988 SCMR 1934, it is held that apart from issuing notices to the appellant no further proceedings had been taken by the Sales-tax Officer before the appellant moved the constitutional jurisdiction of the High Court. In the circumstances of this case the petition before the IIigh Court was clearly premature and the learned Single Judge was right in dismissing it on this ground. In another case identical to the case of petitioner title Messrs Ocean Pakistan Ltd. r. Federal Board of Revenue, Islamabad and others reported as 2012 PTD 1374 in which the show-cause notice dated 12.10.2011 issued under section 122(9) read with section 122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner Inland Revenue, Islamabad was under challenge and it was held that we are of the considered opinion that since all the legal arguments referred to in the preceding paras, raised on behalf of the petitioner-company, are similarly raised before the competent forum, which has issued show-cause notice to the petitioner-company, any finding on any of the legal objections by this Court is likely to cause prejudice to the case of the petitioner-company before the Income Tax hierarchy. In an another case title Deputy Commissioner of Income Tax/Wealth Tax, Faisalabad and others v. Messrs Punjab Bevera'e Company (PVT.) Ltd reported as 2007 PTD 1347 which case is also reported as 2008 SCMR 308), where it was held by the apex Court that the tendency of by-passing the remedy provided under law, and resort to Constitutional jurisdiction of High Court was deprecated. The petitioner instead of rushing to the High Court and consuming sufficient time should have submitted reply before invoking the jurisdiction of the High Court. Such practice is to be deprecated because if merely on the basis of show-cause notice proceedings are started then in such position department would never be in a position to proceed with the cases particularly the recovery of revenue etc.
7. It is also relevant to mention here that during the course of arguments we also confronted the learned counsel for petitioner that as to whether he alleged any ill-will or mala fide on the part of respondents or any allegation of abuse of process of law or lack of their lawful authority, his reply to the extent of 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 detail of deficiency(ies) which could not be done in proceedings under section 122 of the Ordinance of 2001 rather such detail inquiry could be done in proceedings under section 177 Ordinance, 2001, however, as stated hereinabove, we do not agree with this interpretation of learned counsel for petitioner and thus only for this reason we cannot set-aside the impugned notices. It may he 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 or mala fide, or the same is the result of abuse of process of law or if the issuing authority lacks its lawful authority, however, none of these grounds were neither pressed by the petitioner nor the same attract to the case of petitioner, therefore, this Court could not strike down the impugned show cause notices in its writ jurisdiction. It is also relevant to mention here that the respondents have only issued show cause notices asking the petitioner to explain the deficiency in his statement pertaining to the various tax years and the petitioner instead of submitting any reply to the respondents for the same has rushed to this Court by challenging the aforesaid notices through the instant writ petitions and thus, by now the respondents have not passed any order qua to make any amendment in the assessment of the petitioner and thus, all these writ petitions are for the time being pre-mature. It may he clarified that under the doctrine of ripeness a notice/show cause notice could not be challenged when on the basis of same no conclusive and adverse order has been passed, therefore, on this ground too these writ petitions are not maintainable being pre- mature. In the case title Virasat Ullah-Vs-Bashir Ahmad, Settlement Commissioner (Industries) and another reported as 1969 SCMR 154, the Hon'ble Supreme Court of Pakistan has deprecated the filing of a Constitutional Petition against mere issuance of notice by the Settlement Commissioner asking the petitioner to justify benefits emanating out of settlement. Similarly, In Khalid Mahmood Ch. and others v. Government of the Punjab throukh Secretary, Livestock and Dairy Development reported as 2002 SCMR 805, the Hon'ble Supreme Court of Pakistan has ruled that issuance of notice was a preliminary stage and therefore, premature for the purpose of invoking Constitutional jurisdiction and Muhammad Mahmood Ali v. Pakistan through Secretary, Ministry of Finance reported as 1984 CLC 142 holds to the same effect. In a celebrated judgment Muhammad Akhtar Sherani and 35 others v. The Punjab Textbook Board, Lahore and 4 others reported as 2001 PLC (CS.) 939 the High 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 Mughal-e-Azam Banquet Complex through Managing Partner v. Federation of Pakistan through Secretary and 4 others reported as 2011 PTD 2260 at page 2263 the llon'ble Court explains the rationale behind the doctrine of ripeness. It declares and compares prematurity or lack of ripeness to apprehensions or mere speculation. It declares that there had to be a concrete or tangible context for the Court to act. Likewise, in the case Messrs Chakwal Textiles Mills Limited, Rawalpindi Road Chakwal and another v. Director Social Security, Rawalpindi and 2 others reported as 2012 PLC 270 holds to the same effect. In case titled Abdul Raheem Khan, Executive Manager (Operation) MEPCO 1st Division, D.G. Khan v. Managing Director PEPCO, WAPDA House, Lahore and 2 others reported as 2011 PLC (C.S.) 1551 a Division Bench has also deprecated the filing of a Constitutional Petition against mere issuance of notice.
Furthermore, in a case titled Mst. Zahida Shama v. Secretary Education and other reported as PLJ 2002 Lahore 1479, the stage of a notice to appear and answer allegations has been 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 the above discussion and exposition of law on the subject, this and all connected petitions being meritless are hereby dismissed. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.