ISLAMABAD: The Supreme Court held that Section 140 of the Tax Ordinance, 2001 does not permit immediate coercive recovery in the absence of a date set in the notice.
“Section 140 of the Ordinance expressly provides that the party holding money on behalf of the taxpayer must be afforded a notice with a due date to discharge its liability,” said a judgment, authored by Justice Ayesha.
A three-judge bench, headed by Justice Munib Akhtar and comprising Justice Ayesha A Malik and Justice Shahid, on Monday, delivered a judgment. Justice Shahid found reasons of Justice Ayesha meticulously articulated with clarity and precision, but to further enhance the understanding of these reasons, wrote his additional note.
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The judgment said the section requires the Commissioner to set a date in the notice for recovery purposes, hence, the requirement of the Rule 210 C (3) of the Income Tax Recovery Rules, 2002 for immediate recovery is against the scheme of Section 140 of the Ordinance, adding “Rule 210C is contrary to the requirements of Section 140 of the Ordinance.”
The judgment further stated; “It is settled law that rules are subordinate or delegated legislation, framed under a statute and, therefore, subservient to the statute itself and must yield where there is any inconsistency.”
The Court observed that the language of Section 140 of the Ordinance does not envisage immediate or mechanical recovery rather the provision contemplates that the Commissioner will issue notice and will give a reasonable timeframe for the purpose of recovery. “The requirement of notice before recovery is not merely statutory but reflects the broader guarantees of due process and fair trial under Article 10A of the Constitution, as well as the right to dignity under Article 14.”
The judgment said that the courts have consistently upheld that even in fiscal matters, recovery must be carried out in a manner that respects the individual’s dignity and legal safeguards. “Consequently, even where the law allows coercive recovery, it must be carried out in a way that preserves the dignity of the taxpayer.”
The Respondent in CPLA No.3578 of 2024 is Pakistan LNG Limited whose income tax return for the year 2020 was amended in terms of order dated 15.03.2021 under Section 122(5A) of the Income Tax Ordinance, 2001, raising a demand of Rs2,928,517,260 for recovery of tax due. On the same date, notice under Section 137(2) of the Ordinance was issued informing the taxpayer of the amount due.
The Respondent challenged the amended assessment order before the Commissioner Inland Revenue (Appeals) (CIR Appeals) which appeal was decided on 09.03.2022 and subsequently uploaded on the web portal of the FBR (i.e., IRIS) at 3:28 pm. On the same date, at 4:00 pm, notice under Section 140 of the Ordinance was issued for immediate recovery in terms thereof.
The Respondent in CPLA No.4598 of 2024 is Serene Air Private Limited who is a withholding agent and who statedly did not fulfill its obligations for the tax year 2020. Resultantly, proceedings in terms of Section 161 read with Section 205 of the Ordinance were decided on 31.03.2022. On the same date, notices under Section 137(2) of the Ordinance were issued raising a demand of Rs1,883,917,790 for recovery of withholding tax.
The respondent filed an appeal before the CIR Appeals which was decided on 11.05.2023 at 1:56 pm. On the same date, notices under Section 140 of the Ordinance were issued to the banks for immediate recovery at 10:30 pm.
Copyright Business Recorder, 2025
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