Law: Income Tax Ordinance, 2001

Section: 177, Second Schedule, clause 105(A)

Law: Constitution of Pakistan, 1973

Section: 199(1)(a)(ii)

The petition presented by the Petitioner sought a declaration under Article199(1)(a)(ii) The petition presented by the Petitioner sought a declaration under Article 199(1)(a)(ii) of the Constitution of Pakistan, asserting that the Income Tax audit for Tax Year 2023, initiated through a notice dated October 11, 2024, was unlawful. The Petitioner argued that they were entitled to an exemption under Clause (105A) of the Second Schedule of the Income Tax Ordinance, 2001, which states that individuals whose tax affairs have been audited in any of the preceding four tax years should not be subjected to audit under Section 177.The counsel for the Petitioner contended that since their audit for Tax Year 2018 was completed on June 28, 2024, they could only be audited for future tax years after June 28, 2028. However, the court found this interpretation flawed. The court emphasized that the relevant clause refers specifically to "tax years" rather than the completion date of audits. Consequently, it determined that the audit for Tax Year 2018 was relevant for assessing eligibility under Clause (105A), regardless of when it was concluded.The court also dismissed reliance on a circular from the Federal Board of Revenue (FBR) which suggested that completion of an audit in one tax year impacts the schedule for future audits. The court ruled that this interpretation contradicted established laws and was not binding.Ultimately, the petition was dismissed as misconceived and not maintainable, affirming that the impugned notice for auditing Tax Year 2023 was valid and lawful. of the Constitution of Pakistan, asserting that the Income Tax audit for Tax Year 2023, initiated through a notice dated October 11, 2024, was unlawful. The Petitioner argued that they were entitled to an exemption under Clause (105A) of the Second Schedule of the Income Tax Ordinance, 2001, which states that individuals whose tax affairs have been audited in any of the preceding four tax years should not be subjected to audit under Section 177.

The counsel for the Petitioner contended that since their audit for Tax Year 2018 was completed on June 28, 2024, they could only be audited for future tax years after June 28, 2028. However, the court found this interpretation flawed. The court emphasized that the relevant clause refers specifically to "tax years" rather than the completion date of audits. Consequently, it determined that the audit for Tax Year 2018 was relevant for assessing eligibility under Clause (105A), regardless of when it was concluded.

The court also dismissed reliance on a circular from the Federal Board of Revenue (FBR) which suggested that completion of an audit in one tax year impacts the schedule for future audits. The court ruled that this interpretation contradicted established laws and was not binding. Ultimately, the petition was dismissed as misconceived and not maintainable, affirming that the impugned notice for auditing Tax Year 2023 was valid and lawful.