KARACHI: A two-member bench of the Sindh High Court (SHC) comprising Justice Irfan Saadat Khan and Justice Zulfiqar Ahmad Khan disposed of a constitutional petition with directions filed by M/s. Yunus Textile Mills Limited against Federation of Pakistan and the Chairman, Federal Board of Revenue, Chief Commissioner Inland Revenue, Commissioner Inland Revenue and Additional Commissioner Inland Revenue, respectively.
On 16 April 2022, bench announced a details judgment and observed in its order that “ the instant petition has been filed impugning the Show Cause Notice (SCN) issued under Section 122(9) read with Section 122(5A) of the Income Tax Ordinance, 2001 (the Ordinance-2001) on the ground that it was without jurisdiction, unconstitutional, illegal, mala fide and contrary to clause (b) of subsection (4) of Section 122 of the Ordinance-2001 relating to tax year 2013.
Briefly stated the facts of the case are that the assessee is a public unlisted company incorporated in 2007 under the Companies Ordinance, 1984, and is engaged in the business of manufacturing and export of knitted, weaved and stitched fabrics and other textile articles.
The petitioner received the impugned SCN on May 03, 2019 from the respondent No.5 mentioning therein that since their previous assessment made on 08.06.2016 was found to be erroneous insofar as prejudicial to the interest of revenue, therefore, they were required to furnish their reply in view of certain aspects warranting further amendment under the provisions of Section 122(5A) of the Ordinance. Though the reply to the above SCN has been given by the learned counsel for the petitioner, vide letter dated May 20, 2019, but since they were of the view that the department would ignore their reply and would make an assessment which, in their view, would be illegal, therefore, they filed the instant petition on 21.05.2019 and vide order dated 23.05.2019 got pre-admission notice issued to the respondents and also obtained an interim order that till next date no final adverse order may be passed against the petitioner pursuant to the impugned SCN.
Mr. Mushtaq Hussain Qazi, Advocate has appeared on behalf of the petitioner and stated that the SCN is without jurisdiction and illegal and is contrary to clause (b) of subsection (4) of Section 122 of the Ordinance-2001.
He then read out the above provisions of the law and stated that on the face of it the impugned SCN is time barred. He next stated that for initiating proceedings under Section 122(9) of the Ordinance-2001 if the previous assessment is found to be erroneous insofar as prejudicial to the interest of revenue, the department cannot initiate the said proceedings on the basis of change of opinion only.
He stated that in the instant matter from the SCN it is evident that the tax credit which was allowed by the department after examination is sought to be reopened on the basis of mere change of opinion that the said tax credit was not available to the petitioner.
He next stated that the said action of the department is also against the decision given by the Hon’ble Supreme Court of Pakistan in the case of Commissioner of Income Tax Vs. Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009 PTD 1392).
The upshot of the above discussion is that the petitioner is directed to pursue the matter with regard to the SCN issued by the department since a reply in the instant matter has already been filed by the petitioner to them.
The department is also directed to finalize the matter within one month’s time from the date of receipt of this order strictly in accordance with law, after providing opportunity of hearing to the petitioner.
Needless to state that the department is legally bound to consider the reply /replies already filed or would be filed subsequently by the petitioner and thereafter decide the matter through a well-reasoned and speaking order, strictly in accordance with law. With these directions the instant petition, along with listed /pending application(s), stands disposed of”.
