Law: Income Tax Ordinance, 2001

Section: 174(3), 174, 122(5)

Summary

The Supreme Court addressed whether a taxpayer is required to retain and produce tax records beyond the statutory period prescribed in Section 174(3) of the Income Tax Ordinance, 2001, particularly when legal proceedings are pending. The case arose after the Lahore High Court (LHC) had ruled that the taxpayer could not be compelled to produce records due to the expiry of the statutory retention period, even though audit proceedings could continue. The Supreme Court overturned this, holding that if any tax proceedings are pending (i.e., the case is sub judice), the taxpayer must retain records until the final decision, regardless of the standard six-year limit, provided the initial notice was issued within the prescribed timeframe.

Core Points

Statutory Retention Period: Section 174(3) of the Income Tax Ordinance, 2001, generally requires taxpayers to retain records for six years after the end of the relevant tax year123.

Proviso to Section 174(3): If any proceedings are pending before any authority or court, the taxpayer must maintain records until the final decision of those proceedings. "Pending proceedings" is broadly defined to include assessment, amendment, appeal, revision, reference, petition, prosecution, or ADRC proceedings245.