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Official Citation: 2024 SHC 1418
Court / Jurisdiction: Sindh High Court
Year of Decision: 2025
Decision Date: 2025-01-13
Parties: M/s. ARY Communications Limited vs Abdul Qadir Shaikh, Commissioner (Audit) Inland Revenue-III, CTO, Karachi
Ruling Summary: This decision was rendered by the Sindh High Court on 2025-01-13, officially reported as 2024 SHC 1418. In this matter between M/s. ARY Communications Limited and Abdul Qadir Shaikh, Commissioner (Audit) Inland Revenue-III, CTO, Karachi, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024SHC1418
Court Name: Sindh High Court Judge(s): Muhammad Junaid Ghaffar, Muhammad Abdur Rahman Title:M/s. ARY Communications Limited vs Abdul Qadir Shaikh, Commissioner
(Audit) Inland Revenue-III, CTO, Karachi Case No.: High Court Appeal No. 324 of 2024 Date of Judgment:2025-01-13 Reported As: 2024 SHC 1418 Result: Order Accordingly Judgment
ORDER Muhammad Junaid Ghaffar, J :-- This High Court Appeal filed under Section 3 of the Law Reforms Ordinance, 1972 read with Section 15 of the Code of Civil Procedure (Amendment) Ordinance, 1980 has been preferred against an Order dated 30.08.2024, whereby, the plaint in Suit No.897 of 2022 filed by the present Appellant has been rejected under Order VII Rule 11 C.P.C. 2. Learned counsel appearing on behalf of the Appellant has contended that the learned Single Judge [on the original side] of this Court has erred in passing the impugned order as at best, the injunction application could have been dismissed, but the plaint could not be rejected summarily; that the present Appellant had specifically pleaded malafides on the part of the Respondents, as the impugned notices were issued for conducting audit of the tax affairs of the Appellant for consecutive years simultaneously; that the learned Single Judge has though rejected the plaint, but has not given any finding as to under what law it was barred; that the judgment of the Hon'ble Supreme Court of Pakistan in the case reported as Allah Din Steels[1] is not fully applicable on facts and, therefore, learned Single Judge has erred in placing reliance on the said judgment; that the plaint in the instant matter ought to have been read by the learned Single Judge as a whole and when there were several prayers regarding conduct of the Respondents, then it ought not to have been rejected; that time and again, Appellant has been subjected to discrimination by various departments of the Federal Government, as it runs a media house and as and when there is a change in the Government, the Appellant is singled out and discriminated for its independent
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and anti-government policy. In support of his submission, he has placed reliance upon various reported cases[2]. 3. Conversely, learned counsel appearing on behalf of Respondent No.2 has contended that insofar as the impugned notices are concerned, no jurisdictional defect has been pointed out, therefore, the suit was incompetent; that pursuant to judgment in Searle IV Solution[3] as directed by the Hon'ble Supreme Court of Pakistan, in fiscal matters a single judge on the original side of this Court has to exercise jurisdiction in such matters sparingly, and not as a matter of routine, therefore, any challenge to a notice of audit is impliedly barred under Section 227 of the Income Tax Ordinance 2001 ("Ordinance"); that a notice to conduct audit is by itself not an adverse order; rather it provides opportunity to a taxpayer to justify his self-assessment in respect of Annual Tax Return(s); that the impugned notices provide sufficient reasons to conduct audit and have been issued after thorough examination of the tax returns and, therefore, no malafide can be pleaded; that mere pleading malafide would not suffice, but specific attribution in alleging such malafide has to be stated in the plaint, which in the instant matter, is lacking; that notices are within limitation and have been issued by proper exercise of jurisdiction and, therefore, the impugned order is unexceptionable and instant appeal is liable to be dismissed. In support of his submission, he has placed reliance on various reported cases.[4] 4. We have heard learned counsel for the parties and perused the record. It reflects that the Appellant was issued separate notice(s) under section 177 of the Ordinance for conducting audit of its tax affairs for Tax Years 2017 to Tax Year 2021. The Appellant instead of submitting itself to the exercise of audit, has approached this Court by filing a Civil Suit under section 9 of the Civil Procedure Code before a learned Single Judge [on the original side] of this Court exercising original jurisdiction pursuant to Section 7 of the Civil Courts Ordinance, 1962 read with Sindh Amendment as applicable to the Districts of Karachi. It further appears that when no response was given and no documents were submitted pursuant to the notice(s) issued under section 177, ibid, Respondent issued further notice under section 176 of the Ordinance calling for various documents. However, immediately upon filing of instant Suit[5] an ad-interim order was passed by this Court on 09.06.2022 in the following terms: - "3. Learned counsel for the plaintiff submits that defendant Nos.2 and 3 have issued notices under section 177 of the Income Tax Ordinance, 2001 to the plaintiff for the last five years in one go. These letters are available between pages 45 to 85. Counsel contends that the FBR's Circular bearing C.No.4(36)ITP/2002 dated 05.10.2009 (Page 415) itself bars issuing notice under section 177 for multiple years aimed to cause undue harassment. He further contends that this Hon'ble Court in numerous cases has passed orders declaring that such exercise of powers is arbitrary, malafide and discriminatory. In support of his contentions he has placed reliance on the judgments of this Court dated 29.11.2021 and 20.12.2021 passed in C.P No.D-4729 of 2021 and C.P No.D-5107 of 2021. Issue notice to the defendants for 13.07.2022. In the meanwhile, operation of the impugned notices dated 31.05.2022 and 02.06.2022 (available at pages 45 to 85) to remain suspended till the next date of hearing." 5. Thereafter, the matter remained pending for a number of reasons and could not be taken up either for a final decision on the injunction application or the Suit for that matter. However, on 30.08.2024 the impugned order was passed in the following terms: "This suit essentially seeks to assail selection for audit notices, under section 177 of the Income Tax Ordinance, 2001, ostensibly predicated upon specified reasons cited therein1. Ad interim orders subsist herein from the inception hereof, whereby the notices were suspended. Learned counsel was confronted with respect to the maintainability hereof yesterday and per request the matter was adjourned till today. The counsel was specifically called upon to address
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the issue of maintainability in view of the Supreme Court judgment in Allahdin Steel. Respectfully, he remained unable to do so. This is no case of first impression and the controversy appears to have been comprehensibly determined by the Supreme Court in Allahdin Steel, wherein it was held that once a taxpayer was selected for audit and till such audit was completed the taxpayer was provided ample and multiple opportunities at every step to defend his position, support his returns and offer explanations for the information provided and entries made in the tax returns. Even if a discrepancy was discovered taxpayer was provided yet another opportunity to explain his position before his assessment was revised. In summation, the honorable Supreme Court has held that such selection-is not per se illegal. A Division bench of this Court has earlier dismissed a similar claim in the Pfizer. In pari materia circumstances another Division bench of this Court maintained in Dr. Seema Irfan that a mere notice seeking information is not necessarily adversarial and would not ipso facto give rise to an actionable cause. Similar findings were recorded by the august Supreme Court in the judgment in Jahangir Khan Tareen, approved recently in Judgment dated 15.09.2022 rendered in DCIR vs. Digicom Trading (CA 2019 of 2016). In consideration of the foregoing, it is observed that the plaintiff has failed to demonstrate an actionable cause of action. As has been observed in the Allahdin case, audit proceedings provided a forum and opportunity for consideration of any reservation of the plaintiffs. If any adverse order was passed in pursuance thereof the same would be appealable. Default by the plaintiff in submitting to the statutory hierarchy could not be demonstrated to denude the statutory forum of its jurisdiction; or confer the same upon this court. Similar views were taken by learned Single judges in order dated 27.09.2022 rendered in Suit 855 of 2015 and the judgments in Azee Securities and PPL. Even otherwise, it is not apparent as to how this Court could assume jurisdiction in this matter in view of the binding judgments delineated supra. In view hereof, and while applying the ratio articulated by the edicts delineated supra, the plaint herein is hereby rejected." 6. From perusal of the aforesaid order, it reflects that the attempt of the present Appellant to assail its selection for audit under section 177 of the Ordinance has been deprecated by the learned Single Judge and the Appellant's Counsel was confronted with respect to maintainability of the suit in view of the judgment of the Hon'ble Supreme Court in Allahdin Steel (supra). Though the learned Single Judge has observed that learned counsel for the appellant was unable to distinguish or assist the Court in any manner as to the above judgment, however, before us, learned counsel for the Appellant has seriously disputed this fact and has contended that various submissions were made as the said judgment is not relevant and there is an exception in the said judgment. This contention of the Appellant's Counsel cannot be adjudicated in these proceedings as for that a review of the said order is required for which it would be appropriate to approach the learned Single Judge. However, insofar as the impugned order is concerned, it appears that the learned Single Judge was of the view that since in the case of Allahdin Steel (supra) it has been held that a mere notice of audit is by itself not an adverse order; rather it provides ample opportunities to a taxpayer at every step to defend his position and the claim in the tax returns, and even if any discrepancy is discovered, taxpayer is further provided another opportunity to explain his position; and lastly that such selection in pari materia circumstances is not illegal and, therefore, it is a case whereby the Suit cannot be maintained for a number of reasons, including the case of no cause of action. The learned Single Judge was also persuaded to follow the judgment in the case reported as Dr. Seema Irfan[6] wherein it has been held that a mere notice seeking information is not necessarily adversarial and does not ipso facto give rise to an actionable cause. Finally, the learned Single Judge has been pleased to hold that in Allahdin Steel (supra) the Hon'ble Supreme
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Court has held that audit proceedings itself provide a forum and opportunity for consideration of any reservation of the taxpayers and if any adverse order to the interest of taxpayer is passed, same is always appealable, whereas any default of a taxpayer in submitting to the statutory hierarchy could not be demonstrated to denude the statutory forum of its jurisdiction; and even confer such jurisdiction on this Court. The learned Single Judge believed in these facts and circumstances of the case that the Court [on the original side] while exercising its civil jurisdiction cannot assume such jurisdiction in view of the binding judgment as noted in the impugned order and finally while concluding the order, plaint has been rejected suo moto under Order VII Rule 11 CPC. 7. Before us, there are two questions, which need to be addressed that whether in the given facts and circumstances of this case, mere dismissal of the injunction application would have sufficed on the basis of the judgment in the case of Allahdin Steel (supra) cited in the impugned order as alternatively contended by the Appellants Counsel; or whether it could have been held that the suit is barred in law, hence the plaint must be rejected. 8. Insofar as rejection of plaint within the contemplation of Order VII Rule 11 CPC is concerned, it is settled law that for that it is not mandatory that an application must always be filed for such purposes as the Court can always exercise such jurisdiction. The Court on its own can also, suo motu, reject a plaint if it concludes that the Suit is barred within the parameters provided under Order VII Rule 11 CPC. Therefore, the argument of Appellant's Counsel that the matter was not listed for any such purposes, including for rejection of plaint under Order VII Rule 11 CPC is misconceived and is unsustainable. It is pertinent to mention here that in view of Order VII Rule 11 C.P.C. it is the duty of the Court to reject the plaint if, on a perusal thereto, it appears that the suit is incompetent, the parties to the suit are at liberty to draw Courts' attention to the same by way of an application. The Court can, and, in most cases hear counsel on the point involved in the application meaning thereby that the Court is not only empowered but under obligation to reject the plaint, even without any application from a party, if the same is hit by any of the clauses mentioned under rule 11 of Order VII, C.P.C[7]. It is further settled that the opening words in Order 7 Rule 11 CPC indicate that it is mandatory on the court to reject the plaint if one or more of the four clauses is found to be applicable as this is made clear by the use of the word "shall" in the opening phase[8]. It may be noted that the legislative draftsman has gone out of his way not to use the more common phraseology and has instead used the word "appear" rather than "where it is established from the statements in the plaint that the suit is barred by any law" or, alternatively, "where it is proved from the statement in the plaint that the suit is barred by any law"; hence, an important inference can therefore be drawn from the fact that the word used is "appears"[9]. This word, of course, imports a certain degree of uncertainty and judicial discretion in contradistinction to the more precise words "proved" or "established"[10]. In other words, the legislative intent seems to have been that if prima facie the court considered that it "appears" from the statements in the plaint that the suit was barred then it should be terminated forthwith[11]. 9. As to the injunction application in question, we are of the considered view that since it has been held by the Hon'ble Supreme Court in the case of Allahdin Steel (supra) that mere selection for audit is not per se illegal and is not in and of itself an adverse action or order, the basic ingredients for grant of an injunction under Order 39 Rule 1 & 2 CPC i.e. prima facie case, balance of convenience and causing of irreparable loss are not available; hence, to the extent of dismissal of the injunction application no exception can be drawn. It may be of relevance to note that in absence of objection as to the jurisdiction being exercised by the officer concerned who has issued the impugned notices, the Appellant was required to submit to such notice and contest the same before the hierarchy as provided under the Ordinance. There wasn't any question of seeking a restraining order against such proceedings. Therefore, as to grant of an injunctive relief, we do not
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see any reason as to how the Appellant could have succeeded in getting permanent injunction against the impugned notice. Therefore, we hereby hold that as to injunction application in question is concerned, the same was to be dismissed even if the plaint could not have been rejected. We accordingly dismiss the injunction application in question. 10. Coming to the second issue that whether in view of the given facts and circumstances of the case the plaint itself could have been rejected or not, reference must be made to the case of Searle IV Solution (supra). This was a case before the Hon'ble Supreme Court of Pakistan wherein issue was that whether a civil suit is maintainable in respect of fiscal matters, including the Customs Act, 1969, Sales Tax Act, 1990 and so also the Ordinance in question, as all these taxing provisions contain an ouster clause, whereby, it has been provided that a suit is not maintainable. Though the matter which was dealt with by the Hon'ble Supreme Court pertained to an ouster clause under the Customs Act, 1969, but all the provisions are pari materia. It would be advantageous to refer to Section 217 of the Customs Act, 1969 and Section 227 of the Ordinance, which reads as under: - CUSTOMS ACT, 1969 217 Protection of action taken under the Act.-- [(1)] No suit, prosecution or other legal proceeding shall lie against the [Federal Government] or any public servant for anything which is done or intended to be done in good faith in pursuance of this Act or the Rules [and notwithstanding anything in any other law for the time being in force no investigation or enquiry shall be undertaken or initiated by any governmental agency against any officer or official for anything done in his official capacity under this Act, rules, instructions or directions made or issued thereunder without the prior approval of the [Board]]. [(2) No suit shall be brought in any civil court to set aside or modify any order passed, any assessment made, any tax levied, any penalty imposed or collection of any tax made under this Act.] INCOME TAX ORDINANCE, 2001 "227. Bar of suits in Civil Courts... (1) No suit or other legal proceeding shall be brought in any Civil Court against any order made [or any notice issued] under this Ordinance, and no prosecution, suit or other proceedings shall be made against any person for anything which is in good faith done or intended to be done under this Ordinance or any rules or orders made [or notices issued] thereunder. [Explanation.--For the removal of doubt, it is clarified that Civil Court includes any court exercising power of the civil court.] [(2) Notwithstanding anything contained in any other law for the time being in force, no investigation or inquiry shall be undertaken or initiated by any governmental agency against any officer or official for anything done in his official capacity under this Ordinance, rules, instructions or direction made or issued thereunder without the prior approval of the Board.] 11. The above provision provides that no suit or legal proceeding shall be brought in any Civil Court against any order made [or any notice issued] under this Ordinance, and no prosecution, suit or other proceedings shall be made against any person for anything which is in good faith, done or intended to be done, under this Ordinance or any rules or orders made [or notices issued] thereunder. Explanation provides that for the removal of doubt, it is clarified that Civil Court includes any court exercising power of the civil court. It is also relevant to note that such an ouster clause is also found in various laws and the consistent view of the Courts has been that such bar of a Suit and the ouster clause is not absolute. The Courts have further held that the jurisdiction of a Civil Court under Section 9 CPC is still available despite an ouster clause if the act of the executive or administrative officer or quasi-judicial or judicial tribunal is without jurisdiction and illegal; that Civil Courts jurisdiction cannot be taken away with respect to mala fides; that statutes ousting
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jurisdiction of Courts of general jurisdiction should be construed very strictly and unless the case falls with letter and spirit of barring section, no effect should be given thereto; that such provisions barring jurisdiction of Civil Court were only attracted when impugned action was found to be within four corners of a statute under which it has been taken and did not suffer from taint, mala fides or absence of jurisdiction[12]. Having said that, it is also of relevance to observe that despite all such judgments and precedents, the Hon'ble Supreme Court of Pakistan in Searle IV Solution (supra) has dealt with this issue regarding taxing statutes and the ouster clause(s), more specifically in relation to the original civil jurisdiction exercised by a Single Judge of this Court in terms of Section 7 of the Civil Courts Ordinance, 1962 and the relevant findings are as under: - "15. Obviously, a literal interpretation of section 217(2) would lead to the conclusion that only "civil courts" are barred from taking cognizance of civil suits arising out of disputes regarding the claim of entitlement to exemption from tax duties under the Customs Act. Had it been the intention of the Legislature to bar the cognizance of any court exercising civil jurisdiction, the language of the said provision would have used the words "civil original jurisdiction" and not simply used the term "civil courts". This approach can be grasped better when looked at with the rich history of this exercise of civil jurisdiction by the Single Bench of the High Court, an overview of which has been beautifully encapsulated in the judgment of Haji Razzaq's case (supra); the Legislature was aware of such exercise of special jurisdiction and thus had its intention been to place a complete bar on cognizance by any court exercising such jurisdiction, it would have used language that clearly reflected its intent. The question of the status of the Single Bench of the Sindh High Court at Karachi, stands conclusively decided in the judgment of Province of Sindh v. Haji Razaq judgment (supra) which relies almost entirely on Justice Waheeduddin Ahmed, J's judgment in Firdous Trading Corporation v. Japan Cotton and General Co. Ltd. (supra) wherein he had in unequivocal words stated that: "I have not the slightest doubt on the language of section 3 of Sindh Act, 1926 and the definition of "District" in section 2(4) of the Civil Procedure Code, that it was exercising District Court jurisdiction in contradistinction to the ordinary original civil jurisdiction of the High Court. In my opinion the mere fact that the Sindh Chief Court later on was included within the definition of High Court under section 219 of the Government of India Act, did not change the nature of this jurisdiction." This view, being the conclusive view of this Court ever since Haji Razzag's case (supra) as the settled law on the matter shall prevail. We therefore hold that the High Court of Sindh, is a 'High Court' and Art for reason, the Single Bench of the Sindh High Court was correct in for this res suits of the appellants to be maintainable. A statutory provision must be interpreted within the meaning that is attributed the by the language and specific words used by the Legislature, and the principles of law dictate that redundancy cannot be attributed to any word used therein. Section 217(2) therefore, only bars the cognizance of suit filed under the civil jurisdiction exercised by the civil courts, and this bar cannot be extended to include the exercise of the same jurisdiction by the Single Bench of the Sindh High Court at Karachi. As for the question regarding whether, Article 25 of the Constitution can be said to have been violated by allowing such special jurisdiction to the Sindh High Court while the same is not available to other Provinces is concerned, suffice it to say that such jurisdiction has been exercised by the Sindh High Court at Karachi as far back as the pre-partition era. Striking a careful balance between the fundamental right to be treated in accordance with the law under Article 4 of the Constitution and Article 25 thereof, the principles of justice would require that the litigants in Sindh High Court at Karachi are not deprived of this forum of grievance redressal which is limited to only Karachi, as this right to approach such forum has accrued to them over decades and the law mandates certainty in the judicial administration system. III. Whether the appellants are entitled to the relief sought?
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16. In the present appeals, the appellants have successfully been able to obtain interim injunctions some of which date back to as long as ten years ago, thus in the process the Federal Exchequer has been deprived of tax money worth millions of rupees. When this situation was pointed out to the learned counsel for the parties, the appellants counsel Mr. Khalid Anwar, was quick to respond and stated that in terms of monetary gains, filing of writ petitions and approaching the courts in fiscal matters is in fact more expensive for importers/appellants than it is to pay the required tax applicable under the law. However, he stated that if he were to today take a pebble and throw it at the Custom House/Department at Karachi, there is an 80% probability that it will hit a corrupt official. Corruption has become a plague in the Custom House/Department and no one has any faith in its officials. Secondly he submitted that as opposed to the High Court in Lahore where writ petitions are heard by a Single Bench, in Karachi writ petitions are heard by Division…
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