FAZLEE SONS (PVT.) LTD. vs FEDERATION OF PAKISTAN Ss — 2025 PTD 1609 KARACHI-HIGH-COURT-SINDH

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FAZLEE SONS (PVT.) LTD. VS FEDERATION OF PAKISTAN Ss. 2(68), 74, 177(1), 214C & Second Schedule, Pt. IV, Clause (105A)---Audit proceedings, exemption from---"Tax year"---Scope---"Preceding four tax years"---Scope---Taxpayer's audit for Tax Year 2018 had been completed on 28.06.2024---Taxpayer assailed notice for conducting audit for Tax Year 2023 (impugned notice )---Plea of the petitioner / taxpayer was that the impugned notice was illegal as the petitioner was entitled to the benefit conferred vide clause (105A) of the Second Schedule, (Part IV) of the Income Tax Ordinance, 2001 ('the Ordinance 2001') ; hence the petitioner could only be audited for future tax year(s) after 28.06.2028---Validity---Clause (105A) of the Second Schedule - (Part IV) of the Income Tax Ordinance, 2001 ('Clause (105A)') was provided under the chapter of exemptions from applicability of certain provisions---Clause (105A) reflected that it was a kind of concession or benefit and provided that Ss. 177 & 214C of the Ordinance 2001 shall not apply to a person whose income tax affairs had been audited in any of the "preceding four tax years" ; it was clearly provided that said exemption or concession was only available, if the taxpayer had been audited in any of the preceding four tax years---The use of the word "tax year" was of pivotal importance ; it did not refer to a date on which audit had been completed (as contended by the petitioner)---In the present matter, the petitioner was selected for audit for tax year 2018 and such audit had been completed on 28.06.2024; which would not mean that the period of preceding "four tax years " must be calculated from said date (28.06.2024)--- It was the audit of a particular tax year (2018) and not the date or year (2024) in which the audit was completed; which could never be the intention of said provision because otherwise use of the words "tax year" would become redundant---Redundancy cannot be attributed to the legislature---If the contention of the petitioner was accepted as correct, then there was no requirement to mention the words "preceding four tax years" and instead use of the words "preceding four years" would have sufficed---It was also of relevance to note that tax-year had been defined in S.2(68) read with S. 74 of the Income Tax Ordinance, 2001, that it shall be a period of twelve months ending on the 30th day of June and shall, subject to subsection (3) be denoted by the calendar year in which the said date falls---Therefore, petitioner's selection of audit for tax year 2018 (notwithstanding its completion in 2024) would be of tax year 2018 and not of tax year 2024 to claim any benefit of Clause 105A---It was immaterial as to when the audit was completed as it will remain an audit for a particular tax year, and it was only that tax year (2018 in the present matter) which was relevant for calculating the period of concession under Clause 105A, i.e. next audit could be done in respect of tax-year 2023 which was exactly what the respondents / department had done by issuing the impugned notice---The reference to a tax year in clause 105A was not without any rationale; rather it specified it ;otherwise, use of the word "calendar year" would have sufficed---Therefore, said difference had an important bearing on as to when the next audit was to be done--- The concession was that audit was to be done once in four years, whereas petitioners contends that it could only be done in 2028, meaning thereby it could only be done after 10 years ; said contention was bereft of any valid or justifiable logic and if accepted, would defeat the intent of the legislature---Resultantly, by this interpretation an audit could first be prolonged by the taxpayer (as was the case in hand as selection of audit for 2018 was made in 2022, and the petitioner never responded and finally in 2024 the amended assessment order was passed) and then once it was done belatedly, a protection could be claimed in terms of Clause 105A---Said approach would in fact defeat the very purpose of audit, notwithstanding the exemption so provided under clause 105A---Constitutional Petition, being misconceived and non-maintainable, was dismissed in limine.

FAZLEE SONS (PVT.) LTD. vs FEDERATION OF PAKISTAN Ss — 2025 PTD 1609 KARACHI-HIGH-COURT-SINDH

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