Validity of impugned notices | Judicial Review of Tax Assessment: A Case Study Analysis |
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| High Court set aside the impugned notices and directed the Punjab revenue. authority to conduct a proper inquiry |
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| High Court set aside the impugned notices and directed the Punjab revenue. authority to conduct a proper inquiry |
Title: Judicial Review of Tax Assessment: A Case Study Analysis
The recent judgment delivered by Justice Jawad Hassan in W.P. No. 4290 of 2023 sheds light on the legal intricacies surrounding the issuance of show cause notices under the Punjab Sales Tax on Services Act, 2012 ("the Act"). The case, along with connected petitions, presents a significant examination of the vires of show cause notices issued by the Punjab Revenue Authority, Government of Punjab, under Section 24(2) of the Act.
The petitioners, taxpayers subject to the impugned notices, contested their validity on several grounds. They argued that the estimates provided by the authority were based on assumptions contrary to the data already submitted in their tax returns under Section 35 of the Act. Additionally, they contended that the notices were issued without prior issuance of notices under Section 52 of the Act, which is a prerequisite for the recovery of tax not levied or short levied.
In response, the respondents defended the notices, citing concealment of sales and short payments of tax as justifications for their issuance.
Justice Jawad Hassan meticulously analyzed the provisions of the Act, particularly Section 24, which governs the assessment of tax liability. He emphasized that the authority must afford taxpayers an opportunity to represent their case and be heard before making any assessment. However, the impugned notices failed to consider the objections raised by the petitioners or provide them with a fair opportunity to be heard, as mandated by law.
Furthermore, Justice Jawad Hassan highlighted the constitutional guarantees of fair trial and due process enshrined in Article 10-A of the Constitution of Pakistan. He underscored the importance of adherence to legal procedures and principles to safeguard the rights of taxpayers.
Drawing from established legal precedents, including a recent Supreme Court judgment, Justice Jawad Hassan ruled in favor of the petitioners. He set aside the impugned notices and directed the authority to conduct a proper inquiry, consider the objections raised by the petitioners, and provide reasoned decisions within a specified timeframe.
The judgment serves as a reminder of the judiciary's role in ensuring the fair and lawful exercise of governmental powers, particularly in matters concerning taxation. It reaffirms the principle that no citizen should be deprived of their rights without due process of law, and underscores the importance of upholding constitutional guarantees of justice and fairness.
عنوان: ٹیکس کی تشخیص کا عدالتی جائزہ: ایک کیس اسٹڈی تجزیہ
ڈبلیو پی میں جسٹس جواد حسن کا حالیہ فیصلہ۔ 2023 کا نمبر 4290 پنجاب سیلز ٹیکس آن سروسز ایکٹ، 2012 ("ایکٹ") کے تحت وجہ بتاؤ نوٹس جاری کرنے سے متعلق قانونی پیچیدگیوں پر روشنی ڈالتا ہے۔ کیس، منسلک درخواستوں کے ساتھ، ایکٹ کے سیکشن 24(2) کے تحت، پنجاب ریونیو اتھارٹی، حکومت پنجاب کی طرف سے جاری کردہ شوکاز نوٹسز کی ایک اہم جانچ پیش کرتا ہے۔
درخواست دہندگان، ٹیکس دہندگان نے غیر قانونی نوٹس کے تابع، کئی بنیادوں پر اپنی درستی کا مقابلہ کیا۔ انہوں نے استدلال کیا کہ اتھارٹی کی طرف سے فراہم کردہ تخمینہ ایکٹ کے سیکشن 35 کے تحت ان کے ٹیکس گوشواروں میں پہلے سے جمع کردہ اعداد و شمار کے برعکس مفروضوں پر مبنی تھے۔ مزید برآں، انہوں نے استدلال کیا کہ نوٹس ایکٹ کے سیکشن 52 کے تحت پیشگی نوٹس جاری کیے بغیر جاری کیے گئے، جو ٹیکس کی وصولی کے لیے ایک شرط ہے جو ٹیکس نہیں لگایا گیا یا کم لگایا گیا ہے۔
جواب میں، جواب دہندگان نے نوٹسز کا دفاع کیا، سیلز کو چھپانے اور ٹیکس کی مختصر ادائیگی کو ان کے جاری کرنے کے جواز کے طور پر بتایا۔
جسٹس جواد حسن نے ایکٹ کی دفعات کا بغور تجزیہ کیا، خاص طور پر سیکشن 24، جو ٹیکس کی ذمہ داری کے تعین کو کنٹرول کرتا ہے۔ انہوں نے اس بات پر زور دیا کہ اتھارٹی کو ٹیکس دہندگان کو اپنے کیس کی نمائندگی کرنے کا موقع فراہم کرنا چاہیے اور کوئی بھی تشخیص کرنے سے پہلے ان کی سماعت کی جائے۔ تاہم، متضاد نوٹسز درخواست گزاروں کے اعتراضات پر غور کرنے یا انہیں سننے کا ایک منصفانہ موقع فراہم کرنے میں ناکام رہے، جیسا کہ قانون کے ذریعہ لازمی ہے۔
مزید برآں، جسٹس جواد حسن نے آئین پاکستان کے آرٹیکل 10-A میں درج فیئر ٹرائل اور مناسب عمل کی آئینی ضمانتوں پر روشنی ڈالی۔ انہوں نے ٹیکس دہندگان کے حقوق کے تحفظ کے لیے قانونی طریقہ کار اور اصولوں کی پابندی کی اہمیت پر زور دیا۔
سپریم کورٹ کے حالیہ فیصلے سمیت قائم شدہ قانونی نظیروں سے اخذ کرتے ہوئے، جسٹس جواد حسن نے درخواست گزاروں کے حق میں فیصلہ دیا۔ انہوں نے غیر قانونی نوٹسز کو ایک طرف رکھ دیا اور اتھارٹی کو ہدایت کی کہ وہ مناسب انکوائری کرے، درخواست گزاروں کے اعتراضات پر غور کرے اور ایک مقررہ وقت کے اندر معقول فیصلے کرے۔
یہ فیصلہ حکومتی اختیارات کے منصفانہ اور قانونی استعمال کو یقینی بنانے میں عدلیہ کے کردار کی یاددہانی کے طور پر کام کرتا ہے، خاص طور پر ٹیکس سے متعلق معاملات میں۔ یہ اس اصول کی توثیق کرتا ہے کہ کسی بھی شہری کو قانون کے مناسب عمل کے بغیر ان کے حقوق سے محروم نہیں کیا جانا چاہئے، اور انصاف اور انصاف کی آئینی ضمانتوں کو برقرار رکھنے کی اہمیت کو اجاگر کرتا ہے۔
CJ DA 38
JUDGMENT SHEET
IN THE LAHORE HIGH COURT,
RAWALPINDI BENCH, RAWALPINDI
JUDICIAL DEPARTMENT
Writ Petition No.4290 of 2023
Rahat Café, Rawalpindi
V/S
Government of Punjab and
Punjab Revenue Authority etc.
J U D G M E N T
Date of hearing
18.03.2014, 01.04.2024
Petitioner(s) by
M/s Hafiz Muhammad Idris, ASC with Syed
Farid Ahmed Bukhari, Faizan Ahmed Mirza,
Hassan Askari Kazmi, Bilal Kayani and
Faisal Khurshid Awan, Advocates in this
petition and connected W.P.No.751 of 2024.
M/s Ch. Naeem ul Haq, ASC with Ch. Imran
ul Haq and Ch. Faheem ul Haq, Advocates in
connected W.P.Nos.3957, 3958, 3959, 3961,
4102, 4103, 4104, 4104, 4106, 4107, 4198,
4199, 4200, 4255, 4256 of 2023, 76, 77, 79,
81, 82, 243, 301, 446, 447, 448, 449,
450,451, 606, 607 and 851 of 2024.
M/s Syed Farid Bukhari, Faisal Khurshid
Awan and M. Bilal Bukhari, Advocates in
connected W.P.No.4228 of 2023.
Mr. Muhammad Musawar Gill, Advocate in
connected W.P.Nos.4244 of 2023 and 123 of
2024.
Mr. Nasir Muhammad Malik, Advocate in
connected W.P.Nos.129, 130, 131, 141 of
2024.
Malik Muhammad Aslam, Advocate in
connected W.P.No.214 of 2024.
Ghazala Nazir Qureshi, Advocate in
connected W.P.Nos.361, 362, 363, 364, 365
of 2024.
Mr. Muhammad Taimur Malik, ASC in
connected W.P.Nos.385, 386, 387 of 2024.
Mr. Khalid Jamshed Khattak, Advocate in
connected W.P.No.453 of 2024.
2
M/s Atif Waheed and Ahmad Shahzad,
Advocates in connected W.P.Nos.569, 570
and 571 of 2024.
Respondent(s) by
M/s Hassan Kamran Basheer, ASC with
Abdul Wakeel,
Advocate for the
Respondent/PRA
in connected
W.P.Nos.3958, 3959, 4104 and 4256 of
2023, 77 and 130 of 2024 with Ms. Nadia
Murad, Legal Officer, PRA and Finance
Department, Government of Punjab, Lahore.
Mr. Zeeshaan Zafar Hashmi, Advocate for
the Respondents-PRA in W.P.Nos.3150,
3151 of 2022, 4153 and 4228 of 2023, 76,
84, 129, 301, 363, 385, 449, 450, 570 and
606 of 2024.
Mr. Asim Waqar, Advocate for the
Respondents in connected W.P.Nos.4198,
4199, 4200, 4244 of 2023, 141, 364, 387,
446 and 571 of 2024.
Mr. Muhammad Hussam, Advocate for the
Respondent-PRA
in connected
W.P.Nos.4105, 4106, 4107, 4255 of 2023.
Raja Umair Mustafa, Advocate for the
Respondent-PRA in connected
W.P.Nos.3961, 4102 and 4103 of 2023.
M/s Muhammad Baqir Hussain and Nauman
Ali Malik, Advocates for the RespondentPRA in connected W.P.Nos.123, 243, 362,
447, 453 and 569 of 2024.
Malik Amjad Ali, Additional Advocate
General with Mr. Abid Aziz Rajori,
Assistant Advocate General.
Mr. Arshad Mahmood Malik, Assistant
Attorney General.
Mr. Rashid Mehmood, Research Officer,
Lahore High Court, Rawalpindi Bench,
Rawalpindi.
JAWAD HASSAN, J. This judgment will also decide the
connected petitions listed in Schedule-A beside this petition, as
common questions of law and facts are involved in all these
JAWAD HASSAN, J. This judgment will also decide the
connected petitions listed in Schedule-A beside this petition, as
common questions of law and facts are involved in all these
constitutional petitions.
2.
The Petitioner in the instant petition and in the connected
petitions (hereinafter would be referred as the “Petitioners”) have
W.P.No.4290 of 2023
3
challenged the vires of show cause notices (the “impugned notices”)
under Article 199 of the Constitution of Islamic Republic of Pakistan,
1973 (the “Constitution”) issued under Section 24(2) of the Punjab
Sales Tax on Services Act, 2012 (the “Act”) by the Respondent
No.3/Additional Commissioner Punjab Revenue Authority, Finance
Department, Government of Punjab.
3.
Learned counsel for the “Petitioners” inter alia argued that
the “Petitioners” are taxpayers and have regularly been paying taxes
but the estimate given by the Respondent No.3 in the “impugned
notices” is based on assumptions which is contrary to data already
provided by the “Petitioners” in their returns under Section 35 of the
“Act”; that a notice in terms of Section 52 of the “Act” was to be
issued before the “impugned notices” for the purpose of recovery of
tax not levied or short levied; that the “impugned notices” have not
been issued by a competent authority.
4.
Learned counsel for the Respondents, on the other hand, filed
report and parawise comments and defended the “impugned notices”
by stating that the same have been issued due to concealment of sales
and short payments of tax due.
5.
Arguments heard. Record perused.
6.
The question that looms large before the Court is whether the
Respondent No.3 can straightaway issue notice under Section 24(2) of
the “Act” to the taxpayer in connection with not levied or short levied
tax. The procedure for the assessment of tax liability is laid in Section
24 of the “Act” which reads as:
24. Assessment of tax.– (1) Where on the
basis of any information acquired during an
audit, inquiry, inspection or otherwise, an
officer of the Authority is of the opinion that a
registered person has not paid the tax due on
taxable services provided by him or has made
short payment, the officer shall make an
assessment of the tax actually payable by that
person and shall impose a penalty and charge
W.P.No.4290 of 2023
4
default surcharge in accordance with sections
48 and 49.
(2) No order under sub-section (1) shall be
made unless a notice to show cause is given to
the person in default within [eight] years from
the conclusion of the tax period to which the
assessment relates specifying the grounds on
which it is intended to proceed against him
and the said officer shall take into
consideration the representation made by
such person and provide him with an
opportunity of being heard if the person so
desires.
(3) An order under sub-section (1) shall be
made within one hundred and twenty days of
issuance of the show cause notice or within
such extended period as the officer may, for
reasons to be recorded in writing, fix
provided that such extended period shall
ordinarily not exceed sixty days.
(4) In computing the period specified in subsection (3), any period during which the
proceedings are adjourned on account of a
stay order or proceedings under section 69 or
the time taken through adjournments by the
person shall be excluded.
(5) An order passed by an officer under subsection (1) may be further amended as may be
necessary when on the basis of any additional
information acquired during an audit, inquiry,
inspection or otherwise, the officer is satisfied
that–
(a) any tax has been under-assessed
or assessed at a low rate; or
(b) any taxable service provided by the
person has escaped assessment.
(6) The provisions of sub-sections (2), (3) and
(4) shall be applicable to an order passed
under sub-section (5).
.
Section 24(1) of the “Act” empowers an officer of the authority
to make an assessment of the tax liability on the basis of any
information acquired during an audit, inquiry, inspection or otherwise,
if he draws opinion that a registered person has not paid the due tax or
he has made a short payment on account thereof. Significant to
W.P.No.4290 of 2023
5
mention here that, in course of such assessment, assessing officer
under Section 24(2) of the “Act” was obliged as well to afford the
“Petitioners” with opportunity of making a representation as well as
hearing. Though, admittedly the “impugned notices” were issued by
the Respondent No.3 under Section 24(2) of the “Act”, but according
to learned counsel for the “Petitioners”, the objections taken up by
the “Petitioners” in their respective replies have not even been
considered nor have the “Petitioners” been afforded opportunity of
hearing and huge amount of sales tax have been assessed against
them. Moreover, it is quite considerable that the alleged information
supplied to the Respondent No.3 by the Punjab Revenue Authority
has not been conveyed to the “Petitioners” in black and white
enabling them to counter, repel and falsify such information. Learned
counsel for the “Petitioners” has also stressed hard that no notice is
served upon the “Petitioners” as was required under Section 52 of the
“Act”, which reads as follows:
52. Recovery of tax not levied or short-levied.–
(1) Where by reason of inadvertence, error,
misconstruction or for any other reason, any
tax or charge has not been levied or has been
short levied, the person liable to pay such
amount of the tax or charge shall be served
with a notice, within [eight] years of the
relevant tax period requiring him to show cause
for payment of the amount specified in the
notice.
(2) Where by reason of some collusion,
abetment, deliberate attempt, mis-statement,
fraud, forgery, false or fake documents–
(a) any tax or charge has not been paid
or is, short paid, the person liable to pay
such tax shall be served with a notice
within [eight] years of relevant tax
period, requiring him to show cause for
non-payment of such tax; and
(b) any amount of the tax is refunded
which is not due, the person obtaining
such refund shall be served with a notice
W.P.No.4290 of 2023
6
within [eight] years of the receipt of such
refund to show cause for recovery of
such refund.
(3) The officer shall, after considering the
objections of the person served with a notice
under sub-sections (1) or (2) or if the objections
are not received within the stipulated period,
determine the amount of the tax or charge
payable by him and such person shall pay the
amount so determined.
(4) Any order under sub-section (3) shall be
made within one hundred and twenty days of
issuance of the notice to show cause or within
such extended period as the officer may, for
reasons to be recorded in writing, fix provided
that such extended period shall not ordinarily
exceed sixty days.
(5) In computing the period specified in subsection (4), any period during which the
proceedings are adjourned on account of a stay
order or proceedings under section 69 or the
time taken through adjournments by the
petitioner not exceeding thirty days shall be
excluded.
Above reproduced Section 52(3) of the “Act” clearly
manifests that the officer concerned shall determine the tax liability
after considering the objections of the person served with notice,
which obligation cast upon the Respondent No.3 finds lacking in
connection with “impugned notices”. In addition thereto, for the
purpose of requisite inquiry for assessment of tax, the Respondent
No.3 has not set in field procedure laid down in Section 57 of the
“Act” requiring the relevant record for such assessment. The said
section reads as under:
57. Obligation to produce documents and
provide information.– (1) Notwithstanding
anything contained in this Act or any other
law, any person required to maintain any
record under this Act and the rules, shall, on
demand by an officer, [**] by notice in
writing, as and when specified in the notice–
(a) produce for examination, such
documents or records which the officer
W.P.No.4290 of 2023
7
considers necessary or relevant to the
audit, inquiry or investigation under this
Act;
(b) allow the officer to take extracts
from or make copies of such documents
or records; and
(c) appear before the officer and
answer any question put to him
concerning the documents and records
relating to the audit, inquiry or
investigation referred to in clause (a).
(2) An officer conducting an audit, enquiry,
investigation or otherwise for the purposes of
the Act or the rules may require in writing any
person to furnish any information as is held by
the person.]
(3) The Authority [or an officer authorized by
the Authority] may require, in writing, any
person, department, company or organization,
to provide any information or data held by that
person, department, company or organization,
which, in the opinion of the Authority, is
required for purposes of formulation of policy
or administering or implementing this Act and
the rules.
(4) Every person, department, company or
organization shall furnish the information
requisitioned by the Authority or the officer
under sub-sections (2) or (3), within the time
specified in the notice issued by the Authority.
Intent behind above-mentioned provision of law in connection
with requisite inquiry is to bring on record justified footings and
reasons for assessment of tax liabilities on basis of record, however,
the “impugned notices” clearly reflect to be bereft of a requisite
inquiry prescribed under umbrella of the “Act”. Under the tax laws,
a procedure for assessment of tax, information to be sought, and
recovery of tax has been provided in Income Tax Ordinance, 2001
(the “Ordinance”), the Sales Tax Act, 1990 (the “Act 1990”) and
the “Act”. A combined reading of aforesaid statutes especially the
provisions relating to assessment of tax (Section 122(5) of the
“Ordinance”, Section 11 of the “Act 1990” and Section 24 of the
W.P.No.4290 of 2023
8
“Act”), information to be sought (Section 176 of the “Ordinance”,
Section 38A of the “Act 1990” and Section 53 of the “Act”) and
recovery of tax (Section 137 of the “Ordinance”), Section 48 of the
“Act 1990” and Section 52 of the “Act”) shows that these sections
are identical and envisaging of assessment of tax liability , a (show
cause notice) notice to confront taxpayer with intended
assessment/information and to provide him an opportunity of
hearing. When confronted to learned counsel for the RespondentsPRA a recent judgment of Supreme Court of Pakistan in
“COMMISSIONER INLAND REVENUE, LAHORE Versus Messrs
MILLAT TRACTORS LIMITED, LAHORE and others” (2024
SCMR 700), holding that the taxpayer is to be confronted with the
information and the grounds applicable under Section 111(1)
through a separate notice under the said provision, and then the
proceedings are to be culminated through an appropriate order in the
shape of an opinion of the Commissioner. This then becomes
definite information for the purposes of Section 122(5), provided the
grounds mentioned in Section 122(5) are applicable, he could not
justify the situation in favour of the Respondents by even analogy of
similar sections of aforesaid tax laws and the settled principles of
Supreme Court of Pakistan enunciated from time to time. Recently,
the Division Bench of this Court in Income Tax Reference No.03 of
2023 titled “Zubair Khan Versus Commissioner Inland Revenue
Jhelum Zone etc” decided vide judgment dated 02.04.2024 also
affirmed the view of issuance of notice before passing any
assessment by relying on the judgments of Supreme Court of
Pakistan.
7.
Furthermore, the replies of the “Petitioners” filed with the
Respondent No.3 are still pending adjudication, contentions set forth
wherein have not been taken into consideration by the Respondent
No.3 nor the “Petitioners” have been afforded with opportunity of
hearing in relation thereto, which otherwise is requirement of law in
compliance to Article 10-A of the “Constitution”. Statutory
principle of law is that a thing should be done as it is
required to be done by law and not otherwise. This Court in case
“Shell Pakistan Limited Vs. Punjab through the Secretary
Ministry of Finance and others” (2020 PTD 1607), pertaining
issue under the “Act”, has held that “Article 10-A of the
Constitution provides and protects fundamental right of citizen to
have fair trial and due process and Courts are charged with duty
to protect those rights including the rights of tax payers.” In
another tax dispute, in case “Mubashir Yameen Vs.
Assistant/Deputy Commissioner Inland Revenue, RTO,
Rawalpindi and others” (2023 PTD 146), this court held that
“Under Article 4 of the Constitution, it is an inalienable right of
the citizen to be treated in accordance with law. Also the fair trial
and due process are the fundamental rights of the every citizen of
Pakistan under Article 10-A of the Constitution.” Moreover, it is
held in case “Mirpurkhas Sugar Mills Limited through Wasif
Khalid and 19 others Vs. Federation of Pakistan through
Secretary, Cabinet Division, Islamabad and 9 others” (PLD 2021
Sindh 418):
“8. At the very outset we note that any form of
corruption, tax evasion, money laundering,
illegal cartelization needs to be stamped out
with an iron hand but at the same time this
must be done in accordance with law and by
following due process as mandated by Article
10(A) of the Constitution so that every suspect
has a fair opportunity to clear his name and
position. Only through the executive following
the law, acting in accordance with the law
and treating every one equally before the law
and jealously guarding a suspects due process
rights and dignity as mandated by Articles 4,
25, 10(A) and 14 of the Constitution will the
rule of law and good governance be enhanced
.P.No.4290 of 2023
10
and peoples faith in the democratic system
grow.”
8.
As has been discussed above that “impugned notices” are
without the strength of due inquiry and the “Petitioners” have not
been afforded with opportunity of hearing as well as objections raised
by them in their respective replies have not been given due
consideration as held in case “COMMISSIONER INLAND
REVENUE, LAHORE” supra and the principles enunciated in abovereferred judgment by the Supreme Court of Pakistan has been
followed and is binding under Article 189 of the Constitution of
Islamic Republic of Pakistan, 1973. Therefore, the “impugned
notices” cannot be allowed to breath in field anymore. Consequently,
all the writ petitions are allowed and the “impugned notices” are
hereby set aside. The matter is remitted to the Respondent No.3 with a
direction to first conduct due inquiry in all the petitions in terms of
Section 57 of the “Act” after ensuring submission of replies by all the
“Petitioners” in relation
thereto,
to secure/receive the
record/documents from the “Petitioners”/relevant corners, if desired,
and then to decide objections raised by the “Petitioners” in their
respective replies through speaking orders. The said exercise shall be
done by the said Respondent within a period of thirty (30) days from
the receipt of certified copy of this judgment. The parties concerned
shall appear before the Respondent No.3 on 02.05.2024.
(JAWAD HASSAN)
JUDGE
APPROVED FOR REPORTING
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