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. 137, 138 & 140---Tax recovery proceedings, execution of---Terms "amount payable" and "tax due"---Principles/distinction---Assessment order, passing of---Tax demand through issuance of notice under Section 137(2)---Appeal against assessment order, filing of---Dismissal of appeal---Outstanding tax amount, recovery/remitting of---Appropriate course of action---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---Whether a fresh notice under Section 137(2) was warranted; whether a notice under Section 138(1) should be issued, or if proceedings could be initiated under Section 140 of the Income Tax Ordinance, 2001---Held: Section 137(2) explicitly refers to the "amount payable" as delineated in the assessment order or assessment order or any other order, indicating that until this "amount payable" is settled within the stipulated period, it cannot be classified as "tax due" within the sphere of Sections 138 and 140---Said distinction is crucial because it establishes that the mechanisms provided under Sections 138 and 140, which are designed for tax recovery, cannot be set in motion until such time as the initial obligation to pay has been met---Secondly, it must be noted that Sections 138 and 140 establish two independent and distinct modes for tax recovery---Consequently, the procedures enacted under one section cannot be utilised to activate the process chalked out in the other---Thus, the petitioner-Revenue Department remained unable to substantiate the validity of the notice under Section 140 of the Ordinance, 2001, consequently, no disturbance in the acceptance of the taxpayer's (respondent's) writ petitions and dismissal of the petitioner's (Revenue's) Intra-Court Appeals were made out---Appeals, filed by Department, were dismissed. Ss. 129(4), 137, 138 & 140---Constitution of Pakistan, Arts. 4, 10-A & 14---Adverse order passed by the Commissioner Inland Revenue-Appeals---Immediate coercive recovery of tax from third parties holding money on behalf of the taxpayer---Scope---Right to a fair trial/ due process and inviolability of dignity of taxpayer---Scope---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---Record revealed that on the very day the appeal order was issued, the Commissioner, without first confirming that the appellate order, as stipulated in Section 129(4) of the Income Tax Ordinance, 2001 ('the Ordinance 2001'), had been duly served on the taxpayer (respondent), rushed to issue a notice under Section 140 of the Ordinance 2001 to the Bank demanding an immediate payment by the close of that same day---Said notice was fundamentally flawed for several reasons: firstly, it was issued prematurely, as the Commissioner (Appeals) was required to serve his decision on the taxpayer (respondent) before any such notice could be sent out---Secondly, any recovery actions against a taxpayer (respondent) could not be initiated without providing them with a reasonable timeframe to settle the "amount payable" specified in the appellate order---Thirdly, failing to afford the taxpayer/respondent) sufficient time to pursue further legal options regarding the appeal was manifestly unjust---Fourthly, it caused an injury to the dignity of the taxpayer(respondent); it is important to emphasize that the right to dignity is the most central of all fundamental rights, as it is the source from which all other rights are derived; the Ordinance 2001 aims to strike balance between ensuring tax recovery and upholding taxpayer dignity; the recovery process executed in present cases disregarded said balance---Fifthly, the failure to verify whether the "amount payable" had been classified as "tax due" before declaring the taxpayer (respondent) as a defaulter and subsequently issuing a direct payment notice to the person holding money on behalf of the taxpayer (respondent) amounted to discrediting the taxpayer (respondent) within its community and negatively affecting its business reputation---All of these factors strongly suggested that the pursuit of tax recovery took precedence over the protections afforded to the taxpayer (respondent) within a legal framework that upholds fundamental rights, such as the right to a fair trial, access to justice, dignity, and due process---No legal standards can justify this culture of authoritative dominance in tax recovery, as it fundamentally undermines the core principles of justice---This creates an imbalance between the need for efficient tax recovery and the protection of taxpayer's rights---Thus, the petitioner -Revenue Department remained unable to substantiate the validity of the notice under Section 140 of the Ordinance, 2001, consequently, no disturbance in the acceptance of the taxpayer's (respondent's) writ petitions and dismissal of the petitioner's (Revenue's) Intra-Court Appeals were made out---Appeals, filed by Department, were dismissed.

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

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