C.M. No.6182 of 2025
This application seeks restoration of titled petition, dismissed for non-prosecution on 08.09.2025.
2. For the reasons pleaded, this application is allowed and main case is restored to its original number. Office to fix main case today, which is heard.
Nature of the relief claimed:
3. Petitioner has sought relief in following terms:-
The mode and manner in which jurisdiction has been exercised by the Respondent Assistant Commissioner Inland Revenue under Clause 72B Part IV Second Schedule of the Income Tax Ordinance, 2001 including issuance of the impugned Notices and the proceedings thereunder are all illegal, unlawful and without lawful authority and liable to be struck down accordingly.
During the pendency of the titled petition, the operation of the impugned Notice dated 17.09.2021 and the proceedings thereunder be graciously suspend / stayed and that the Respondents be directed to maintain status quo in this regard and / or the Respondents be restrained from taking any coercive / adverse measures against the petitioner.
4. Notice impugned is dated 17.09.2021, which was issued under Section 122(9) of the Income Tax Ordinance, 2001 (Ordinance), to amend the assessment, relating to Tax-Year 2016.
Factual narrative:
5. Petitioner, a taxpayer entity, was engaged in import of raw material and, at relevant time, was subject to the payment of advance tax in terms of Section 148 of the Ordinance. In or about July 2016, petitioner had sought and was granted exemption certificate, dated 22.07.2016, in terms of Sections 148 read with Section 159 of the Ordinance. Certificate was for Tax year 2017, having validity from 01-Jul-2016 to 30-06-2017. In terms of Clause 72B of the Second Schedule, Part-IV of the Ordinance ( Clause 72B ), Commissioner was obligated to conduct audit of taxpayer s accounts during the financial year, for which year certificate was issued in terms of Clause 72B taxpayer was treated to have been selected for audit under Section 214C of the Ordinance. Explicitly stated, audit was with respect to the consumption, production and sales of the latest year for which return has been lately filed - [in the case at hand latest year was Tax Year 2016 and tax return for said year was filed in December 2016].
Intent to conduct audit was conveyed by way of notice under
Section 177(1) of the Ordinance, dated 08.02.2017, followed by notices dated 07.03.2017 and 14.06.2017. Petitioner responded on 30.06.2017 [as per the documents attached with this petition], where it indicated submission of partial record and sought another 15 days for provisioning of remaining record / documents details of record provided was listed. Allegedly remaining documents were provided on 31.07.2017 after close of financial year 2016-2017. Case of the department is that notice under Section 177(6) of the Ordinance, seeking objections from taxpayer was issued on 20.05.2017 petitioner before us allegedly disputes that said notice was not pertaining to Tax Year 2016, however, no such concern was expressed in response(s) dated 30.06.2017 and 31.07.2017. Department vide notice of 02.07.2018 sought payment of penalty for non-compliance of notice under Section 177 of the Ordinance. Petitioner responded on same day and reiterated that compliance was carried out vide correspondences of 30.06.2017 and 31.07.2017. In follow-up, petitioner communicated through correspondence(s) dated 22.01.2019 and 31.03.2021 no concern was expressed or discrepancy identified with respect to notice under section 177(6) of the Ordinance. Thereafter, department issued another notice under section 177(6) of the Ordinance, dated 06.09.2021 [seeking compliance by 17.09.2017] wherein it was stated that some figures were misstated in previous notice under
Section 177(6) of the Ordinance, dated 20.05.2017. Nothing is available on record to show any concern raised or objections taken by the petitioner to subsequent notice under section 177(6) of the Ordinance. In follow-up proceedings, department issued notice under Sections 122(9) and 111(1) of the Ordinance dated 17.09.2021, when petitioner approached this Court through W.P No.15093/2021. Petition was disposed of vide order of 09.12.2021, with directions to decide representation of the petitioner. Representation was decided on 11.02.2022, whereafter petitioner filed revision and same was disposed of on 16.03.2022 even then concerns were invited by the department against the audit / report. Petitioner approached this court against notice of assessment, issued under sections 122(9) / 111(1) for Tax Year 2016.
Submissions:
6. Learned counsel for the petitioner submits that in terms of Clause 72B audit for Tax year 2016 must be completed within the financial year, in which exemption certificate was issued and emphasized that conduct of audit after 30.06.2017, any and all proceedings and subsequent actions, would be of no legal effect benefit of fifth proviso to Clause 72B is claimed. Following cases are cited, Commissioner of Inland Revenue, Sialkot and others v. Messrs Allah Din Steel and Rolling Mills and others (2018 SCMR 1328), Messrs SKF Pakistan (Pvt) Ltd through Managing Director and others v. Federation of Pakistan through Secretary (Law and Justice Division and others (2024 PTD 716), The Collector of Sales Tax, Gujranwala and others v. Messrs Super Asia Mohammad Din and Sons and others (2017 SCMR 1427), Abdul Ghani v. Federation of Pakistan and others (2019 PTD 764) and Nagina Silk Milk, Lyallpur v. The Income Tax Officer, A-ward Lyallpur and others (PLD 1963 Supreme Court 322).
With the assistance of the counsel, we have examined Clause 72B, which reads as under:-
(72B) The provisions of section 148 shall not apply to an industrial undertaking if the tax liability for the current tax year, on the basis of determined tax liability for any of the preceding two tax years, whichever is the higher, has been paid in the manner as may be prescribed and a certificate to this effect is issued by the concerned Commissioner.
Provided that the certificate shall only be issued by the Commissioner if an application for the said certificate is filed before the Commissioner, in the manner and after fulfilling the conditions as specified by notification in the official Gazette, issued by the Board for the purpose of this clause.
Provided further that the Commissioner shall be deemed to have issued the exemption certificate in cases where the certificate is automatically processed and issued by IRIS upon expiry of prescribed time period:
Provided also that the Commissioner may modify or cancel the certificate issued automatically by IRIS on the basis of reasons to be recorded in writing after providing an opportunity of being heard.
Provided further that the quantity of raw material to be imported which is sought to be exempted from tax under section 148 shall not exceed [125] per cent of the quantity of raw material imported and consumed during the previous tax year:
Provided also that the Commissioner shall conduct audit of taxpayer s accounts during the financial year in which the certificate is issued in respect of consumption, production and sales of the latest tax year for which return has been filed and the taxpayer shall be treated to have been selected for audit under section 214C;
Provided also if the taxpayer fails to present accounts or documents to the Commissioner or the officer authorized by the Commissioner, the Commissioner shall, by an order in writing, cancel the certificate issued and shall proceed to recover the tax not collected under section 148 for the period prior to such cancellation and all the provisions of the Ordinance shall apply accordingly.
Provided also that exemption certificate shall not be issued to an industrial undertaking importing raw materials, specified in sub-section (8) of section 148.
[relevant clauses highlighted]
Analysis and opinion:
7. We observe that petitioner had not approached the Commissioner for seeking exemption certificate under Section 148 of the Ordinance for Tax years 2018 and 2019 Clause 72B was omitted through Finance Act, 2020. Evidently, eligibility for claiming exemption certificate was dependent upon fulfillment of condition of payment of tax liability for current year, on the basis of determined tax liability for any of the preceding two tax years, whichever is higher it implies that for the purposes of issuing exemption certificate for Tax year 2018, tax liability for current year had to be paid, which have had to be determined on the basis of higher determined tax liability, for any of the preceding two years. And such liability has had to be determined upon conduct of audit conduct of audit and proceedings for amending assessment under Section 122 of the Ordinance are different. The emphasis, in the fifth proviso to Clause 72B, on the expression during the financial year in which certificate is issued . has to be understood in the context of determination of liability, payable by the taxpayer, before seeking exemption certificate for next tax year. Objective of conduct of audit during same financial year was to ensure continuity of concession to the taxpayer from complying with the obligation under Section 148 of the Ordinance. And if taxpayer was not inclined to seek exemption certificate for next tax year, why would same be least pushed for seeking determination of the liability. Hence, insistence that audit must be completed within the financial year, for which certificate was issued, is unjustified and misconceived. Conduct of the petitioner per se defies the construction proposed to Clause 72B [petitioner provided partial documents for audit on 30.06.2017 and remaining documents on 31.07.2017 and conversely, department had issued first notice under Section 177 of the Ordinance on 8.02.2017 [seeking compliance by 15.02.2017], which was followed by notices dated 07.03.2017 [seeking compliance by 15.03.2017] and 14.06.2017 [seeking compliance by 19.06.2017]. Department claimed that notice under section 177(6) of the Ordinance was issued on 20.05.2017, which assertion even if viewed skeptically - in wake of the misstating of figures from tax year 2014 extends no benefit to the petitioner because audit was conducted within the financial year, completion whereof lingered due to failing of the petitioner to convey concerns, as required under section 177(6) of the Ordinance, dated 06.09.2021 no concerns were raise to the audit expect a plea that it should be completed by 30.06.2017. Incidiently, no such construction could be attributed to Section 177 of the Ordinance, in particular to subsection (6) thereof, which manifests and envisages that concerns were invited on the audit report. And what does the failure to raise concerns against notice under Section 177(6) of the Ordinance would imply? Simply, that taxpayer had no objections qua the conduct of audit and preparation of report thereby. And in these circumstances, proceedings for audit would conclude to all intent and purposes, and stage to amend assessment of the latest tax year [Tax Year 2016] triggers. Department proceeded to issue notice under Sections 122(9) and 111(1) of the Ordinance no objection is raised before us that notice was beyond the limitation provided in section 122 of the Ordinance. There is no explanation that why response to notice dated 17.09.2021 was not filed and instead constitutional petition was instituted. We find no jurisdictional defect in issuance of Notice dated 17.09.2021. Judgments referred are distinguishable, having no application to the facts of the case at hand, where lack of cooperation / facilitation on the part of petitioner, to raise concerns to the audit report, is patently evident. No case for exercise indulgence under constitutional jurisdiction is made out.
8. Petition is devoid of merits and same is, hereby, dismissed.

Petition Dismissed