Supreme Court of Pakistan (SCP) in a landmark judgment dated September 30, 2022 stopped the practice of taxpayers approaching courts for legal remedy in those cases where only show cause notices are issued provided no coercive action has been taken by tax authorities.
In a civil petition No. 1693-L of 2022, three-member bench comprising Justice Qazi Faez Isa, Justic Yahya Afridi and Justice Jamal Khan Mandokhail, the Commissioner Inland Revenue, Lahore as petitioner pleaded the apex court to set aside the judgment of Lahore High Court in writ petition No. 64… of 2021.
The council of the petitioner submitted that no order had been passed by the Inland Revenue against the taxpayer (respondent). The council further apprised the court that only a show cause notice (dated October 01, 2021) was issued, which the taxpayer assailed before the high court and did no, without even filing a reply to the said show cause notice.
The council of the petitioner stated that taxpayer was not an aggrieved party under Article 199 of the Constitution of Pakistan. The article can only be invoked when ‘no other adequate remedy is provided by law’, but in the instant case there was a remedy provided by law in case an order was passed against him (taxpayer).
The council for the taxpayer contented that the tax office issued the show cause in complete violation of the applicable procedure. This was the reason that taxpayer approached the high court. The council further declared the show cause as discriminatory.
Justice Qazi Faez Isa, wrote the order and disposed of the petition with following remarks:
“Inland Revenue may proceed on the basis of the show cause notice dated October 01, 2022 or substitute such notice with another, if it so deems necessary, however, in either eventually adequate time will be provided to the respondent No. 1 [taxpayer] to file a reply thereto, if he elects to do so, wherein he may take all available grounds including the ground of discrimination and an opportunity of a hearing shall also be provided to him whereafter the matter shall be disposed of in accordance with the law.”
According to the order, the petition was converted into an appeal and allowed by setting aside the impugned judgment of the high court dated February 28, 2022 and by directing that the matter be dealt with in the aforesaid agreed terms in accordance with the law.
The judgment of the apex court will help the tax officials to continue proceedings against taxpayers under relevant tax laws. It has become observed in many cases that taxpayers approach court where only show cause notices were issued and no further action was taken under the tax law.