COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD vs PAKISTAN LNG LIMITED — 2026 SCMR 227 SUPREME-COURT

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COMMISSIONER INLAND REVENUE (LEGAL), ISLAMABAD VS PAKISTAN LNG LIMITED. Ss. 127, 129(4), 137, 138(1), 140 & 146a(4)---'Demand of tax'---'Recovery of tax'---Distinction---Date set in the recovery notice, absence of---Immediate coercive recovery---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---argument of the Department was that the notice of demand issued under Section 137 of the Income Tax Ordinance, 2001 ('the Ordinance 2001') was the only requirement of notice---Held: Such argument / understanding is not in consonance with the law---The scheme of law envisions two distinct processes for the purposes of demanding the tax and for the purposes of recovery of tax---A demand notice is served under Section 137 of the Ordinance, 2001, whereby the taxpayer is informed of the amount due and is required to pay such tax by the due date set out in the notice---On receipt of notice, the taxpayer can either discharge the liability or challenge it in appeal under Section 127 of the Ordinance, 2001---If the liability is discharged the matter ends, however, in the event that an appeal is filed, the first proviso of Section 140 of the Ordinance, 2001 prescribes that the Commissioner shall not issue notice for recovery of tax due until the appeal is decided---Once the appeal is decided, the CIR appeals is required to inform the taxpayer by notice of the decision in appeal under Section 129(4) of the Ordinance, 2001---In the event that the taxpayer fails to make payment, the Ordinance, 2001 provides for the recovery of tax through the modes prescribed under Chapter X Part IV, Collection and Recovery, each mode being an independent mode of recovery which can be enforced separately or simultaneously in terms of Section 146a(4) of the Ordinance, 2001---Each mode for recovery provides for the procedure to be followed---Consequently, the Petitioners' contention that once the demand notice under Section 137 of the Ordinance, 2001 has been issued, coercive measures can be adopted for recovery purposes, ignores this scheme of law where the notice under Section 140 of the Ordinance serves the very specific purpose of recovery from a third party and the due process which the third party is to be afforded when recovery is required---Additionally, while the recovery must be preceded by notice and a reasonable opportunity to comply, yet Section 140 of the Ordinance, 2001 operates as an independent recovery mechanism---Where recovery is sought from third parties under Section 140 of the Ordinance, 2001, the requirement of notice and the setting of a future date are built into the provision itself ;it does not require prior invocation of Section 138(1) of the Ordinance, 2001, which governs direct recovery from the taxpayer---Hence, the specific requirement for Section 140 of the Ordinance, 2001 in the notice with a date set when 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 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 was 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 SCMR 227 SUPREME-COURT

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