Sec 109-A of Income Tax law challenged: FCC sets aside SHC CB’s May 5 order

ISLAMABAD: The Federal Constitutional Court (FCC) has set aside the order dated 5 May 2025 passed by the Constitutional Bench (CB) of the Sindh High Court (SHC), recalling the order of the SHC’s regular bench.

A two-judge bench of the FCC, comprising Justice Aamer Farooq and Justice Rozi Khan Barrech, heard a constitutional petition challenging the Sindh High Court Constitutional Bench’s order. The FCC allowed the petition and declared the impugned order to be without lawful authority.

The petitioner, Khalid Mehmood, had challenged the order passed on 05 May 2025 by the Constitutional Bench of the Sindh High Court constituted under Article 202A of the Constitution. Through that order, the Constitutional Bench had recalled an ad-interim stay earlier granted on 20 December 2023 by a Regular Bench of the Sindh High Court.

The impugned order was initially brought before the Supreme Court of Pakistan through a petition for leave to appeal under Article 185(3) of the Constitution, 1973. However, following the enactment of the 27th Constitutional Amendment Act, 2025, the matter stood transferred to the Federal Constitutional Court under Article 175F(1)(c).

Under the 2018 Amnesty Scheme, the petitioner submitted a declaration, paid the requisite amount, and disclosed ownership of a foreign company, Red Castle. Subsequently, the petitioner was issued a notice under Section 109-A of the Income Tax Ordinance, 2001, a provision introduced through the Finance Act, 2018.

Aggrieved, the petitioner filed Constitutional Petition No. D-6169 of 2023 before the Sindh High Court, challenging both the vires of Section 109-A and the legality of the notice on independent grounds.On 20 December 2023, a Regular Bench of the Sindh High Court passed an ad-interim order restraining the respondents from taking any final adverse action pursuant to the impugned notice. The case was later fixed before the Constitutional Bench on 05 May 2025, which recalled the earlier ad-interim order.

Before the FCC, the key questions were whether the order passed by the Regular Bench of the Sindh High Court was without jurisdiction under the erstwhile Article 202A of the Constitution, and whether an ad-interim order of the High Court could be interfered with by the Federal Constitutional Court.

The FCC held that although the scope of Article 202A had been expanded after the 27th Constitutional Amendment — granting Constitutional Benches exclusive jurisdiction over writ matters under Article 199 — the impugned order had been passed prior to the amendment. Therefore, its legality had to be examined under the former Article 202A, under which only Regular Benches were competent to entertain such matters.

The Court noted that the petitioner had challenged Section 109-A of the Income Tax Ordinance as being contrary to Entries 31 and 47 of the Federal Legislative List, in addition to challenging the notice issued thereunder on independent legal grounds. This, in substance, amounted to seeking relief under Article 199(1)(a)(ii) of the Constitution.

The ruling observed that if the High Court were to allow the petition, Section 109-A would be declared without lawful authority and of no legal effect, rendering the notice issued thereunder ineffective as a natural consequence. Even if the provision were upheld, the legality of the notice itself could still be independently examined by a Regular Bench.

In these circumstances, the FCC concluded that the Constitutional Bench of the Sindh High Court lacked jurisdiction from the outset to hear the matter and consequently, the interim order passed by it was without jurisdiction and liable to be set aside.

Copyright Business Recorder, 2025