COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD vs PAKISTAN LNG LIMITED — 2026 PTD 192 SUPREME-COURT

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COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD VS PAKISTAN LNG LIMITED. S. 140---Adverse order passed by the Department---Recovery of tax from third parties holding money on behalf of the taxpayer---Timeframe---Date set in recovery notice, absence of---Immediate coercive recovery---Scope and effect---Within a short span of time (of about eight and half hours), from the decision by the Commissioner Inland Revenue-Appeals and it being uploaded on the FBR's web portal, notice for immediate recovery from Bank was sought by the Department on the same date as the notice---Legality---Provision of Section 140 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') provides for recovery of tax from third parties holding money on behalf of the taxpayer---The Commissioner is required to issue notice in writing to such person to pay to the Commissioner the tax due as set out in the notice, by the date set out in the notice---A bare reading of Section 140(1) of the Ordinance, 2001 reveals the express condition to set a date for payment, in the notice on which the stipulated tax has to be paid---The use of the words by the date set out in the notice in Section 140(1) of the Ordinance, 2001 reflects the very clear requirement to provide for a future date in the notice on which the tax becomes payable, meaning that the Commissioner has to provide for a future date, being a date other than the date of the notice to make payment---Thus, the words to set a date mandates the Commissioner to set a date in the notice on which the tax liability has to be discharged by the third party such that the Commissioner, while issuing the notice, is conscious of the fact that the notice must contain a future date for payment---The act of setting a date in the notice is a substantive requirement of the Ordinance, 2001 which necessitates a legal timeline to come into effect for both the Commissioner as the enforcing authority and the third party as the person from whom recovery has to be effectuated---Said legal timeline serves a dual purpose whereby it gives the Commissioner a clear date on which recovery can be effected and it gives the third-party fair notice of the demand and the opportunity to act within the prescribed period---The condition of fixing a future date is in effect a legal safeguard which ensures that the process of recovery is protected from arbitrariness and undue haste, which gives legal certainty to the process of recovery, hence ensures that the process is conducted fairly, transparently and in a reasonable manner; this is necessary given that the mode of recovery from a third-party holding money on behalf of the taxpayer is an independent mode of recovery, that too coercive in nature, which measure should be exercised with great caution and due process---The legislative intent, therefore, is to regulate the discretion given to the Commissioner to recover tax on behalf of the tax payer where the taxpayer has failed to pay the tax---Consequently, the very act of setting a date mandates the Commissioner to plan for a future date and notify the third-party of the date when the recovery will be effected---Therefore, in view of the statutory framework and applicable Rules, Section 140 of the Ordinance, 2001 does not permit immediate coercive recovery in the absence of a date set in the notice---Section 140 of the Ordinance, 2001 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---In both present cases, the notices issued under Section 140 of the Ordinance, 2001 seek immediate recovery, thereby blatantly violating the requirements of Section 140 of the Ordinance, 2001, which is illegal---No case for interference is made out---As leave had already been granted, the Civil petitions were converted into appeals and dismissed.

COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD vs PAKISTAN LNG LIMITED — 2026 PTD 192 SUPREME-COURT

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