Summary: Anti-Money Laundering Act, 2010—Ss. 3, 4, 21(1)(a), 22, 2(xxvi), 2(xxviii) & Schedule-I, Entry XIIA—Income Tax Ordinance, 2001—Ss. 192, 192A & 199—Code of Criminal Procedure, 1898—Ss. 173 & 498—Constitution of Pakistan, 1973—Art. 185(3)—Pre-arrest bail—Money laundering prosecution founded on alleged tax evasion—Need for prior determination of tax liability—Predicate offence—The Supreme Court held that where an FIR under the Anti-Money Laundering Act, 2010 is founded on allegations of concealment of income, tax evasion, and non-reconciliation of wealth statement with bank entries, but no prior determination of tax liability has been made through the process of assessment or adjudication under the Income Tax Ordinance, 2001, initiation of criminal proceedings is prima facie illegal. The Court observed that, in the present case, the FIR alleged concealment of income during Tax Years 2017 and 2018 and tax sought to be evaded on that basis, yet the prosecution had proceeded straightaway under AMLA, 2010 without first establishing the tax liability through the legally prescribed fiscal process. It was further held that, unless the amount allegedly evaded is first determined and it is thereafter shown that any asset acquired therefrom constitutes “proceeds of crime” relatable to a predicate offence under the Schedule to AMLA, the ingredients necessary to attract Ss. 3 and 4 of AMLA, 2010 are not prima facie made out. The Court, therefore, found that the very basis of the FIR and initiation of criminal proceedings stood substantially impaired. Taxation and criminal liability—Assessment proceedings under tax law distinguished from criminal prosecution—Direct resort to criminal process deprecated—The Supreme Court held that matters pertaining to concealment of income and evasion of tax are, in the first instance, to be addressed through the assessment, adjudicatory, and recovery mechanisms provided under the tax laws and before the specialized forums constituted thereunder. Although a fiscal dispute may, in a proper case, also attract criminal liability where dishonest conduct and statutory ingredients are established, the criminal process cannot be invoked in disregard of the foundational requirement of prior determination of liability where the alleged money laundering claim itself depends upon tax evasion as the predicate offence. In the present case, the Court found that no such pre-trial legal exercise had been properly exhausted before resort was made to registration of the FIR under AMLA, 2010. Pre-arrest bail—Documentary prosecution case—Custodial interrogation unnecessary—Further inquiry—The Supreme Court held that where the prosecution case rests primarily on documentary material such as tax record, bank accounts, and bank statements, no useful purpose is ordinarily served by taking the accused into custody, particularly when there is no real likelihood of tampering with such evidence. The Court reiterated that criminal law should not be used as a tool of harassment or as a substitute for lawful recovery proceedings in matters essentially grounded in documentary fiscal disputes. In the circumstances of the case, the allegations required deeper examination, the case called for further inquiry, and the possibility of false implication and mala fide on the part of the prosecution could not be ruled out at the bail stage. The petitioner was, therefore, held entitled to the extraordinary relief of pre-arrest bail. Effect of subsequent tax adjudication—Foundation of prosecution shaken—Annulment by Appellate Tribunal Inland Revenue—The Supreme Court took note of the admitted position that, subsequent to registration of the FIR, the tax liability determined by the tax authorities against the petitioner had been annulled by the Appellate Tribunal Inland Revenue through order dated 30.06.2025. The Court held that where the criminal case is premised upon alleged tax liability, annulment of that liability by the competent fiscal forum materially weakens, at least for the time being, the foundation of the criminal proceedings. This circumstance constituted a strong consideration in favour of grant of pre-arrest bail. Investigation—Earlier placement in column No. 2—Subsequent change of stance by prosecution—Relevance at bail stage—The Supreme Court further noted that, after registration of the FIR, the first Investigating Officer had not found the petitioner guilty and had mentioned his name in column No. 2 of the report under S. 173, Cr.P.C., but in a subsequent investigation the petitioner had been found guilty on the same allegations. The Court treated this shift in investigative position as a relevant circumstance, which, when read with the documentary nature of the case and the unsettled state of the alleged tax liability, reinforced the conclusion that the matter called for further inquiry and that arrest of the petitioner was not warranted at that stage. Case references—The Court expressly referred to and relied upon Directorate of Intelligence & Investigation-FBR, through its Director and others v. Taj International (Pvt.) Ltd. & others (PLD 2025 SC 633), holding that in the absence of determination of tax liability through assessment or adjudication, registration of FIR or initiation of criminal proceedings is illegal; Muhammad Asif v. The State etc. (2016 PTD 2393), wherein pre-arrest bail was granted in a tax-related prosecution after the underlying fiscal determination had been set aside; Aqeel Ahmed Khan v. The State (2025 SCMR 1955); Ali Anwar Paracha v. The State (2024 SCMR 1596); Noman Khaliq v. The State (2023 SCMR 2122); and Abdul Rasheed v. The State and another (2023 SCMR 1948), all cited in support of the proposition that where a case is primarily based on documents and custodial interrogation serves no useful purpose, relief in bail jurisdiction may be justified. Petition converted into appeal and allowed—Impugned order set aside—Pre-arrest bail confirmed—The Supreme Court converted the criminal petition into an appeal, allowed the same, set aside the impugned order of the Lahore High Court refusing pre-arrest bail, and confirmed the ad-interim pre-arrest bail already granted to the petitioner, subject to furnishing fresh bail bonds in the sum of Rs.500,000/- with one surety in the like amount to the satisfaction of the learned Trial Court.

Summary: Punjab Sales Tax on Services Act (XLII of 2012)--- ----Ss. 3(3), 11, 24, 52 & 67-A---Reference---Taxable services---Territorial jurisdiction---Applicant / company was withholding agent and was aggrieved of show cause notice issued by Authorities for non-deducting of sale tax on the services---Plea raised by applicant / company was that taxable services were provided in other province and tax could not be charged only for the reason that head office was registered in the Province of Punjab---Validity---Mere residency of a company in Punjab or its classification as a prescribed withholding agent does not, by itself, create a substantive tax liability under Punjab Sales Tax on Services Act, 2012---Liability to sales tax under Ss. 11, 24 & 52 of Punjab Sales Tax on Services Act, 2012 was fastened exclusively upon a registered person providing taxable services---Punjab Revenue Authority was competent to initiate withholding tax proceedings on the basis of undisputed audited accounts showing composite amounts paid for services; final determination of withholding tax liability could not be made on aggregated figures alone---Each individual transaction was to be reconciled and examined to ascertain whether it had constituted a taxable service, the applicable rate of tax, and the obligation to deduct and deposit tax---Burden was upon the withholding agent to explain nature of transactions and justify non-deduction of tax---Once documentary evidence was produced before Appellate Tribunal, it was incumbent upon the Tribunal, as the final fact-finding authority, to scrutinize and reconcile each transaction and determine taxability accordingly---Appellate Tribunal’s failure to undertake such exercise amounted to non-application of judicial mind, warranting annulment of its order and remand of the matter for fresh decision in accordance with law---High Court declared that the show cause notice was issued without any legal foundation and Appellate Tribunal had erred in upholding initiation of proceedings under S. 52 of Punjab Sales Tax on Services Act, 2012 against applicant / company, despite absence of any statutory authority permitting such proceedings against a service recipient---Appellate Tribunal wrongly placed reliance on Withholding Rules, 2015, as subordinate legislation could not enlarge or create a substantive tax liability not contemplated by the parent statute---High Court set aside order passed by Appellate Tribunal as well as Order in-Original and show cause notice, as the Appellate Tribunal fell in error by sustaining proceedings and by affirming jurisdiction of Punjab Revenue Authority against applicant / company---Reference was allowed in circumstances. Nagina Silk Mill, Lyallpur v. The Income Tax Officer, Award Lyallpur and others PLD 1963 SC 322; Messrs Dewan Cement Ltd. v. Collector of Customs and Sales Tax and another 2009 SCMR 1126; Federation of Pakistan through Secretary, Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd. and others 1992 SCMR 1898; Pak Gulf Constructions (Pvt.) Limited v. Government of Punjab and others 2025 PTD 255; Fauji Cement Company Limited v. Government of Punjab and others 2025 PTD 864; Additional Commissioner Inland Revenue, Audit Range, Zone-I and others v. Messrs Eden Builders Limited and others 2018 PTD 1474; Collector of Customs, Sales Tax (West), Karachi v. Messrs K&A Industries, Karachi 2006 PTD 537; M/s Khawaja Tanneries (Pvt.) Ltd. v. Commissioner Punjab Revenue Authority and others Tax Reference (PRA) No.03 of 2025; M/s Jawa Pharmaceuticals (Pvt.) Ltd. v. Commissioner Punjab Revenue Authority and others Tax Reference (PRA) No.60652 of 2021 and Rahat Café, Rawalpindi v. Government of Punjab through Secretary Finance and others 2024 PTD 898 ref. Barrister Saad M. Hashmi, Advocate Supreme Court, Yawar Mukhtar, Muhammad Abdul Sajjad and Shahid Razzaq for Appellant. Muaz ul Mulk with Ms. Nadia Murad, Legal Officer, Punjab Revenue Authority. Barrister Raja Hashim Javed, Assistant Advocate General. Khudayar Khan for Respondent. Date of hearing: 28th January, 2026.

Summary: (a) Income Tax Ordinance (XLIX of 2001)--- ----S. 4B [as inserted by Finance Act 2015] & First Schedule, Part I, Division IIA---Constitution of Pakistan, Arts. 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---Super tax, vires of---Principle of intelligible differentia---Applicability---Fiscal matters, judicial interference in---Dispute pertained to insertion of Section 4B in Income Tax Ordinance, 2001 vide Finance Act, 2015 for raising revenue for internally displaced persons for tax year 2015---Validity---Provision of Section 4B of Income Tax Ordinance, 2001 is intra vires the Constitution and has to be applied as enacted for tax year 2015 and onwards at the rates prescribed in Division IIA, Part I, of First Schedule to Income Tax Ordinance, 2001---High Courts had expounded correct position in law by holding that Section 4B of Income Tax Ordinance, 2001 was validly enacted as a “tax”---Provisions of Section 4B of Income Tax Ordinance, 2001 are neither discriminatory nor they create any unreasonable or hostile classification among persons forming the same class upon whom the charge is imposed---Such classification introduced under Section 4B of Income Tax Ordinance, 2001 is income-based, rests on an intelligible differentia, and bears a rational nexus with the object sought to be achieved---Provision of section 4B of Income Tax Ordinance, 2001 does not suffer from any inherent lack of legislative competence, nor does it, on its face, transgress any fundamental right in a manner sufficient to warrant its invalidation---Any perceived inequities or hardships arising from the operation of Section 4B of Income Tax Ordinance, 2001 fall primarily within the Legislative domain and do not, by themselves, justify judicial interference in fiscal matters---Provision of Section 4B of Income Tax Ordinance, 2001 squarely falls within Entry 47, Part-I of Fourth Schedule, to the Constitution, namely, ‘taxes on income’---Legislature was fully competent to impose, abolish, remit, alter, or regulate such tax through a Finance Act, as part of a Money Bill under Article 73(2)(a) of the Constitution---Federal Constitutional Court declared Section 4B of Income Tax Ordinance, 2011 (as inserted by Finance Act, 2015) to be intra vires the Constitution---Matter was disposed of accordingly. (b) Constitution of Pakistan--- ----Art. 187 [as amended by Constitution (Twenty-seventh Amendment) Act (XXXII of 2025)]---Federal Constitutional Court---Inherent powers---Complete justice---Federal Constitutional Court has inherent power to transpose a party, should it be necessary for just and proper adjudication of a matter before it. (c) Income Tax Ordinance (XLIX of 2001)--- ----S. 4C [as inserted by Finance Act 2022] & First Schedule, Part I, Division IIB---Constitution of Pakistan, Arts. 25, 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---High Earning Persons---Super tax, imposing of---Legislative competence---Reading down, principle of---Principle of intelligible differentia---Applicability---Dispute pertained to insertion of Section 4C in Income Tax Ordinance, 2001 vide Finance Act, 2022 on High Earning Persons and income arising to oil exploration and petroleum companies---Validity---Provision of Section 4C of Income Tax Ordinance, 2001 is intra vires the Constitution and applies as enacted for tax year 2022 and onwards at the rates prescribed in Part-I of Division IIB, First Schedule to Income Tax Ordinance, 2001---Legislature has plenary power to enact laws with retrospective and prospective effect subject to such laws not effecting past and closed transactions---There was no provision in Income Tax Ordinance, 2001 whereby closing of accounts of a tax year qualified as an event which had precluded imposition of fresh charge where none existed before, particularly when returns of income for tax year 2022 were yet to be filed---Federal Constitutional Court set aside the judgments passed by Division Benches of three High Cou2rts to the extent they held Section 4C of Income Tax Ordinance, 2001 not to apply retroactively to tax year 2022---Rates in Part I of Division IIB, First Schedule to Income Tax Ordinance, 2001 amended through Finance Act, 2023 was to apply for tax year 2023---Federal Constitutional Court further set aside judgment of Islamabad High Court to the extent it held the rates in amended Part I of Division IIB, First Schedule to Income Tax Ordinance, 2001 not to apply retroactively to tax year 2023---Definition of “income” for purposes of Section 4C of Income Tax Ordinance, 2001 in so far as it includes income from all sources is validly enacted---Federal Constitutional Court also set aside judgments of Islamabad High Court to the extent they read down Section 4C of Income Tax Ordinance, 2001---Federal Constitutional Court further set aside the direction issued by Islamabad High Court, to Federal Board of Revenue to issue circular to implement judgment in question across Pakistan, as such direction was beyond its jurisdiction---Federal Constitutional Court declared that Classification of sectors through inclusion in First Proviso to Division IIB of Part I of First Schedule to Income Tax Ordinance, 2001 and taxable under Section 4C of Income Tax Ordinance, 2001 at the rate of 10% for the tax year 2022 was reasonable; the differentia was intelligible and was permissible under Article 25 of the Constitution---Federal Constitutional Court set aside the judgments of three High Courts to the extent they declared contents of the first proviso to be discriminatory---Matter was disposed of accordingly. The Attock Oil Company Limited v. Federation of Pakistan and others 2019 PTD 934; Pakistan Tobacco Company Limited v. Federation of Pakistan and others 2022 PTD 1730; D.G.Khan Cement Company Limited v. Federal Board of Revenue and others 2018 PTD 287; D.G.Khan Cement Company Limited v. Federation of Pakistan and others 2020 PTD 1186 and HBL Stock Fund and others v. Additional Commissioner Inland Revenue and others 2020 PTD 1742 rel. (d) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 4, 4B, 4C, 37A & Eighth Schedule---Constitution of Pakistan, Art. 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---Super tax---Legislature, competence of---Super tax is a tax on income independent of tax levied under Section 4 of Income Tax Ordinance, 2001---Parliament is competent under Entry 47, of Part I of the Fourth Schedule tothe Constitution, to levy “taxes on income”---Insofar as levy of super tax is concerned, Section 4C of Income Tax Ordinance, 2001 is a self-contained provision and is a standalone tax on income---Provision of Section 4C of Income Tax Ordinance, 2001 as it applied to capital gains under Section 37A and Rules of the Eighth Schedule, Income Tax Ordinance, 2001 was held to be applicable thereto, as it was within the ambit of Section 4C(2)(i) and (iv) of Income Tax Ordinance 2001. (e) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 4B, 4C, 53, Second Schedule & Fifth Schedule, Rr. 4AA & 4AB---Constitution of Pakistan, Arts. 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---High Earning Persons---Super tax, imposing of---Legislative competence---Dispute pertained to insertion of Sections 4B, 4C and Rules 4AA and 4AB into Fifth Schedule to Income Tax Ordinance, 2001 on income arising to oil exploration and petroleum companies---Validity---Provisions of Section 4B and Section 4C, by virtue of Rules 4AA and 4AB of Fifth Schedule to Income Tax Ordinance, 2001 would only apply to the income arising to oil exploration and petroleum (E&P) companies if it did not result in exceeding the aggregate rate of taxes provided in Fifth Schedule to Income Tax Ordinance, 2001 and their respective Petroleum Concession Agreements (PCAs)---Departmental determination / assessment of each PCA was to be undertaken by placing respective terms and conditions in juxtaposition with Regulation of Mines and Minerals (Government Control) Act, 1948 and applicable taxing law governing their respective PCAs, whether it was Income Tax Act, 1922, Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001---Provision of Section 4C of Income Tax Ordinance, 2001was not to apply to E&P companies to the extent that its application would result in taxation exceeding the threshold stipulated in Rule 4 of Fifth Schedule to Income Tax Ordinance, 2001---Legislative intent underlying Rule 4 of Fifth Schedule to Income Tax Ordinance, 2001 was to provide a sector-specific framework recognizing the unique nature, risks, and investment requirements of petroleum and exploration industry---Imposing a super tax beyond prescribed threshold would effectively override such Legislative safeguard, impose excessive and disproportionate burden, and frustrate the purpose for which special provisions were enacted---In absence of clear and express intention of Legislature to abrogate or modify such sectoral thresholds, Section 4C of Income Tax Ordinance, 2001 could not be construed so as to operate in a manner inconsistent with Rule 4 of Fifth Schedule to Income Tax Ordinance, 2001---Matter was disposed of accordingly. (f) Income Tax Ordinance (XLIX of 2001)--- ----S.4C [as inserted by Finance Act, 2022]---Constitution of Pakistan, Art. 175F---Federal Constitutional Court---Appellate jurisdiction---Super tax, imposing of---Banking Companies---Scope---In case of banking companies, Section 4C of Income Tax Ordinance, 2001 would apply to them as enacted vide Finance Act, 2022 for tax year 2023 and onwards, at the rates applicable to tax year 2023 as amended by Finance Act, 2023---Matter was disposed of accordingly. (g) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 4C, 53, Second Schedule & Ninth Schedule---Constitution of Pakistan, Arts. 73(2)(a), 175F & Fourth Schedule, Part I, Entry 47---Federal Constitutional Court---Appellate jurisdiction---Super tax, imposing of---Legislative competence---Benevolent and Provident Funds---Dispute pertained to insertion of Section 4C to Income Tax Ordinance, 2001 on income arising to Benevolent and Provident Funds---Validity---Provision of Section 4C of Income Tax Ordinance, 2001 would not apply to the income, particularly to the benevolent funds enjoying exemption from tax under Section 53, read with Second Schedule to Income Tax Ordinance, 2001---Such funds constituted a distinct class expressly exempted by the Legislature in furtherance of recognized charitable and welfare objectives---Subjecting such funds to a super tax would defeat the very purpose of statutory exemption and would be inconsistent with the legislative scheme of Income Tax Ordinance, 2001---In the absence of a clear and specific legislative intent to withdraw or curtail such exemption, Section 4C of Income Tax Ordinance, 2001 could not be construed so as to override the exemption granted to benevolent funds---Provident and benevolent funds whichheld valid exemption certificates under the Ninth Schedule read with the relevant entries in the Second Schedule to Income Tax Ordinance, 2001 were not liable to pay super tax under Section 4C of Income Tax Ordinance, 2001---Federal Constitutional Court directed such funds to furnish their exemption certificates issued for the relevant tax years to the concerned authorities of Inland Revenue,who would pass written orders absolving such funds of their liability to pay super tax under Section 4C of Income Tax Ordinance, 2001---Matter was disposed of accordingly. For the Taxpayers: Makhdoom Ali Khan, Senior Advocate Supreme Court [Assisted by: Haider Ali Khan, Hussain Ali Almani, Ms. Naila Irshad and Yawar Mukhtar, Advocates]. Salman Akram Raja, Advocate Supreme Court [Assisted by: Malik Ghulam Sabir; Asad Ladha and Moazin and Rashid, Advocates]. Khalid Javed Khan, Senior Advocate Supreme Court. Dr. Farogh Naseem, Advocate Supreme Court [Assisted by: Sardar Haseeb Iftikhar Ahmed, Advocate]. Sardar Ahmad Jamal Sukhera, Advocate Supreme Court [Assisted by: Sikandar Jamal Sukhera and Ms. Khadija Jamal Sukhera, Advocates]. Shehzad Ata Elahi, Advocate Supreme Court [Assisted by: Salman Sohail Khan, Advocate]. Sikandar Bashir Mohmand, Advocate Supreme Court [Assisted by: Ms. Shahkar Shahab, Khizer Hayat Khan, Hamza Azmat Khan and Abdullah Noor Advocates]. Ali Sibtain Fazli, Advocate Supreme Court. Malik Ahsan Mehmood, Advocate Supreme Court. Khurram Mumtaz Hashmi, Advocate Supreme Court. Umar Azad Malik, Advocate Supreme Court. Barrister Saad Hashmi, Advocate Supreme Court. Ch. Mumtaz-ul-Hassan, Advocate Supreme Court. Rashid Anwar, Advocate Supreme Court [Assisted by: Yousaf Khalid Anwar, Advocate High Court]. Abdul Aziz Nishtar, Advocate Supreme Court. Qazi Ghulam Dastagir, Advocate Supreme Court. Sajeel Shehryar Sawati, Advocate Supreme Court. Barrister Jahanzeb Awan, Advocate Supreme Court [Assisted by: Barrister Saif Mehmood Abbasi]. Mrs. Shireen Imran, Advocate Supreme Court. Umer Aslam Khan, Advocate Supreme Court. Umer Akram Sahi, Advocate Supreme Court [Assisted by: Khalil Khan Sahibzada, Advocate]. Shehryar Kasuri, Advocate Supreme Court. Waseem Ahmad Malik, Advocate Supreme Court. Rana Mohammad Afzal, Advocate Supreme Court. Barrister Haroon Dugal, Advocate Supreme Court. Ajmal Ghaffar Toor, Advocate Supreme Court. Ms. Samia Faiz Durrani, Advocate Supreme Court. Abid Hussain Shaban, Advocate Supreme Court. Rai Azhar Iqbal Kharral, Advocate Supreme Court. Ajmal Khan, Advocate Supreme Court. Barrister Yousuf Kausar, Advocate Supreme Court. Adnan Haider, Advocate Supreme Court [Assisted by: Muhammad Zulqarnain Hashmi, Advocate]. Taimoor Aslam Malik, Advocate Supreme Court. Ijaz Ahmed Zahid, Advocate Supreme Court. Omer Asad Malik, Advocate Supreme Court. Hafiz Munawar Iqbal, Advocate Supreme Court. Dr. Ikram-ul-Haq, Advocate Supreme Court. Mohsin Mumtaz, Advocate Supreme Court. Hassan Kamran Bashir, Advocate Supreme Court. Mirza Mehmood Ahmad, Advocate Supreme Court [Assisted by: Ms. Zaria Adnan, Saadullah Tahir and Javaid Chohan, Advocates]. Nouman A. Farooqui, Advocate Supreme Court. Mirza Mehmood Ahmad, Advocate Supreme Court. Syed Ovais Ali Shah, Advocate Supreme Court. Qazi Umair Ali, Advocate Supreme Court. Naeem Suleman, Advocate Supreme Court. Syed Shahab Qutub, Advocate Supreme Court. Abdul Sattar Pirzada, Advocate Supreme Court. Qazi Umair Ali, Advocate Supreme Court. Muhammad Shoaib Rashid, Advocate Supreme Court [Assisted by: Zeeshan Shaukat, Advocate]. Isaac Ali Qazi, Advocate Supreme Court. Syed Rifaqat Hussain Shah, Advocate-on-Record. Tariq Aziz, Advocate-on-Record. Anis Muhammad Shahzad, Advocate-on-Record. Syeda B.H. Shah, Advocate-on-Record. Sheikh Mehmood Ahmed, Advocate-on-Record. Qazi Shehryar Iqbal, Advocate-on-Record. Naeem Ul Haq, Advocate High Court. Syed Jaffer Hussain, Advocate High Court. Shah Rukh Sheikh, Advocate High Court. Sardar Haseeb, Advocate High Court. Asad Zaman Tarar, Advocate High Court. Zeeshan Hashmi, Advocate High Court. Sheikh Aqeel Ahmad, Advocate High Court. Rana Usman Habib, Advocate High Court. Qaiser Amir [Legal Head, Frontier Foundry]. Ms. Rida Zahra [Legal Officer, Mari Petroleum]. Bilal Farrid Rana, [Head Legal, UBL]. Hafiz Bilal Bin Akbar [DD (L), DRAP]. For the Federation: Ch. Aamir Rehman, Addl. AGP [Assisted by: Miss Maryam Rashid, Advocate]. For the FBR: Mian Raza Rabbani, Advocate Supreme Court. Ms. Asma Hamid, Advocate Supreme Court [Assisted by: Mustafa Khalid, Faisal Khalid, Ms. Rabia Khan, Ms. Navail Haider and Ms. Zarwa Jamal, Advocates]. Dr. Shah Nawaz, Advocate Supreme Court [Assisted by: Ms. Sameena Mumtaz, Advocate]. Saalim Salaam Ansari, Advocate Supreme Court. Zeeshan Abdullah, Advocate Supreme Court. Muhammad Nasir Khan, Advocate Supreme Court. Malik Itaat Hussain Awan, Advocate Supreme Court. Muhammad Faisal Khalid, Advocate Supreme Court. Hafiz Ahsaan Ahmad Khokhar, Advocate Supreme Court. Ashtar Ausaf Ali, Senior Advocate Supreme Court. Dr. Farhat Zafar, Advocate Supreme Court. Ghulam Shoaib Jally, Advocate Supreme Court. Babar Bilal, Advocate Supreme Court. Riaz Azam Bhopera, Advocate Supreme Court/Advocate-on-Record. Ch. Zafar Iqbal, Advocate Supreme Court. Ibrar Ahmed, Advocate Supreme Court. Shehzad Ahmed Cheema, Advocate Supreme Court [Assisted by: Malik Abdullah Raza, Advocate]. Muhammad Yahya Johar, Advocate Supreme Court. Munawar Ali Memon, Advocate Supreme Court. Ch. Imtiaz Ahmad, Advocate Supreme Court. Dr. Abrar Ahmad, Advocate Supreme Court. Ms. Humaira Bashir, Advocate Supreme Court. Mrs. Misbah Gulnar Sharif, Advocate Supreme Court. Dr. Raana Khan, Advocate Supreme Court/Advocate-on-Record. Mrs. Kausar Iqbal Bhatti, Advocate-on-Record. Muhammad Amir Malik, Advocate-on-Record. Ms. Ruqiya Samee, Advocate-on-Record. Jawaid Masood Tahir Bhatti, Advocate-on-Record. Mir Badshah Khan Wazir, Member Legal. Dr. Ishtiaq Ahmed Khan, D.G. Law. Yousaf Khan, S.O I.R (Legal). Dates of hearing: 5th, 6th, 7th, 8th, 9th, 12th, 13th, 14th, 15th, 16th, 19th, 20th, 21st, 22nd, 23rd, 26th and 27th January, 2026. SHORT ORDER

Summary: Short order ---- Income Tax Ordinance, 2001—Ss. 4B & 4C—First Schedule, Part I, Division IIA & Division IIB—Fifth Schedule, Rules 4, 4AA & 4AB—Constitution of Pakistan, 1973—Arts. 25, 73(2)(a), 175F, 185(3)—Fourth Schedule, Federal Legislative List, Part I, Entry 47—Super tax—Constitutional validity—Nature of levy—Tax on income—The Federal Constitutional Court considered the vires of super tax imposed under S. 4B, introduced through the Finance Act, 2015 for raising revenue for internally displaced persons, and under S. 4C, introduced through the Finance Act, 2022 on high-earning persons. The Court held that both S. 4B and S. 4C were validly enacted taxes on income falling squarely within Entry 47 of Part I of the Federal Legislative List, and that Parliament was fully competent to impose, alter, regulate, or abolish such taxes through a Finance Act as part of a Money Bill under Art. 73(2)(a) of the Constitution. It was further held that super tax under S. 4B was a “tax” and not a “fee”, and that neither S. 4B nor S. 4C suffered from any inherent lack of legislative competence or facial constitutional infirmity warranting invalidation. Constitutional law—Fiscal legislation—Article 25—Classification—Income-based and sector-based distinctions—The Court held that the classification created under S. 4B was income-based, founded on intelligible differentia, and bore a rational nexus with the object sought to be achieved; therefore, it was neither discriminatory nor productive of unreasonable or hostile discrimination among persons similarly situated. Likewise, the classification of fifteen sectors in the First Proviso to Division IIB, Part I, First Schedule, subjected to a higher rate of super tax under S. 4C for tax year 2022, was held to be reasonable and constitutionally permissible under Art. 25 of the Constitution. Consequently, the judgments of the Sindh, Lahore and Islamabad High Courts, insofar as they had declared the said proviso discriminatory, were set aside. Taxation—Retrospective operation of fiscal statutes—Tax year 2022 and onwards—Past and closed transactions—The Court held that the legislature possesses plenary power to enact laws with retrospective as well as prospective effect, subject to the limitation that such laws must not operate upon past and closed transactions. Applying that principle, it was held that S. 4C validly applied to tax year 2022 and onwards, and that the closing of accounts for a tax year did not, in the scheme of the Income Tax Ordinance, 2001, constitute such an event as would preclude imposition of a fresh charge, particularly when returns for tax year 2022 were yet to be filed. On the same reasoning, the rates in Division IIB amended through the Finance Act, 2023 were held applicable to tax year 2023. Accordingly, the contrary findings of the Sindh, Lahore and Islamabad High Courts, which had held S. 4C inapplicable to tax year 2022, and the amended rates inapplicable to tax year 2023, were set aside. Income Tax Ordinance, 2001—S. 4C(2)—Meaning of “income”—All sources of income—Capital gains on securities—The Court held that the statutory definition of “income” for purposes of S. 4C, insofar as it embraced income from all sources, was validly enacted. The judgments of the Islamabad High Court which had read down S. 4C were, to that extent, set aside. It was further held that super tax under S. 4C is a self-contained and standalone tax on income independent of the levy under S. 4 of the Ordinance, and, therefore, applies to capital gains falling under S. 37A and the Eighth Schedule, being within the ambit of S. 4C(2)(i) and (iv). Practice and procedure—Maintainability of appeals—Locus standi of CIR/FBR—Transposition of parties—The taxpayers raised a preliminary objection that appeals in the S. 4C matters were not maintainable because they had not been instituted by the Federation of Pakistan. The Court rejected the objection and held that it possessed inherent power to transpose a party where necessary for just and proper adjudication, and since the Federation was already before the Court as respondent, it could be transposed as appellant, which was accordingly done. The Court further noted that several connected matters had, in any event, been filed by the Federation itself in addition to the Commissioner Inland Revenue and Federal Board of Revenue; hence, the appeals were maintainable on that count as well. Exploration and petroleum companies—Fifth Schedule—Petroleum Concession Agreements—Aggregate tax ceiling—Super tax liability—The Court held that Ss. 4B and 4C, by virtue of Rules 4AA and 4AB of the Fifth Schedule, would apply to income arising to oil exploration and petroleum companies only to the extent that such application did not result in exceeding the aggregate rate of taxes provided in the Fifth Schedule and in their respective Petroleum Concession Agreements. In relation to S. 4C, the Court modified the Islamabad High Court judgment to the extent that the departmental determination of each Petroleum Concession Agreement was to be undertaken by juxtaposing its terms and conditions with the Regulation of Mines & Minerals (Government Control) Act, 1948 and the applicable tax law, whether the Income Tax Act, 1922, the Income Tax Ordinance, 1979, or the Income Tax Ordinance, 2001. The Court further held that S. 4C would continue to apply to other income of such companies from all other sources falling under S. 4C(2)(i), (ii) and (iii), but the concerned Commissioner Inland Revenue must first determine liability afresh and afford an opportunity of hearing before taking recovery measures. Special statutory regimes—Sector-specific protection—No implied override—The Court held that S. 4C could not be construed to operate in a manner inconsistent with Rule 4 of the Fifth Schedule, because that rule embodied a sector-specific framework recognizing the unique nature, risks and investment requirements of the petroleum and exploration industry. Imposition of super tax beyond the prescribed threshold would override that legislative safeguard, impose an excessive and disproportionate burden, and frustrate the very purpose for which the special provisions had been enacted. In the absence of a clear and express legislative intention to abrogate or modify those sectoral thresholds, S. 4C could not be interpreted so as to produce that result. Banking companies—Super tax—Tax year 2023 onwards—The Court held that S. 4C, as enacted through the Finance Act, 2022, applied to banking companies for tax year 2023 and onwards, and at the rates made applicable to tax year 2023 by the Finance Act, 2023. Exempt entities—Provident and benevolent funds—Statutory exemption—Super tax not chargeable—The Court held that, without prejudice to the foregoing declaration upholding S. 4C, the said provision would not apply to income, particularly of benevolent funds, enjoying exemption from tax under S. 53 read with the relevant provisions of the Second Schedule to the Ordinance. Such funds constituted a distinct class expressly exempted by the Legislature in furtherance of recognized charitable and welfare objectives, and subjecting them to super tax would defeat the statutory exemption and be inconsistent with the legislative scheme. In the case of provident and benevolent funds before the Court, it was held that those holding valid exemption certificates under the Ninth Schedule read with the relevant entries in the Second Schedule were not liable to pay super tax under S. 4C. The Court directed such funds to furnish their exemption certificates for the relevant tax years to the concerned Commissioners Inland Revenue within fifteen days, whereupon written orders absolving them of liability were to be passed within seven days. Constitutional transition—Transfer of pending matters—The Court noted that, owing to the complexity of the issues and the large number of pending cases concerning Ss. 4B and 4C for multiple tax years, the Supreme Court had, by order dated 12.03.2025 under the erstwhile Art. 186A of the Constitution, directed that all such cases pending in various High Courts and the Supreme Court be transferred and clubbed for final adjudication. Upon the coming into force of the Twenty-Seventh Amendment, all such cases stood transferred to the Federal Constitutional Court by virtue of Art. 175F of the Constitution. Appeals, petitions and transfer cases disposed of—The Federal Constitutional Court upheld S. 4B as intra vires and applicable for tax year 2015 and onwards; upheld S. 4C as intra vires and applicable for tax year 2022 and onwards; upheld the amended rates for tax year 2023; sustained the statutory definition of income and the sectoral classification under the First Proviso; declared S. 4C applicable to capital gains on securities and to banking companies for tax year 2023 onwards; limited the application of Ss. 4B and 4C to exploration and petroleum companies in accordance with the Fifth Schedule and their Petroleum Concession Agreements; protected exempt provident and benevolent funds from liability under S. 4C; set aside the contrary findings of the High Courts to the extent indicated; and disposed of all appeals, petitions and transfer cases accordingly.

Summary: Income Tax Ordinance (XLIX of 2001)--- ----S. 175---Power to enter and search premises---Scope and conditions for exercise---Pending proceedings, necessity of---Interpretation of taxing statute--- Petitioner challenged validity of raid conducted by tax authorities under S.175 of the Income Tax Ordinance, 2001, contending that said provision could only be invoked where some proceedings were already pending against taxpayer and that prior notice issued under S.176 of the Ordinance could not by itself justify raid---Federal Constitutional Court examined plain language of S.175 and held that provision expressly authorized Commissioner, or officer authorized by him in writing, to enter and search premises, without prior notice, in order to enforce any provision of the Ordinance, including for purpose of audit of taxpayer or survey of persons liable to tax---Court held that no requirement of pre-existing or pending proceedings could be read into statute when legislature had not imposed any such limitation in express terms---Interpretation adopted in Agha Steels Industries v. Directorate of Intelligence and Investigation (2019 PTD 2119), to effect that there must be pending proceedings and search was measure of last resort, was respectfully disagreed with as such gloss was unsupported by statutory text and amounted to diluting clear legislative command---However, Court further clarified that power under S.175 was not unlimited or unfettered, but conditional in nature, since term “enforce” necessarily postulated breach or occasion for enforcement, and there must therefore be clear written statement identifying provision of Ordinance sought to be enforced and reasons for invoking coercive power so as to guard against abuse---In present case, impugned judgment of High Court upholding raid did not suffer from legal infirmity warranting interference---Leave to appeal was refused and petition was dismissed. Agha Steels Industries v. Directorate of Intelligence and Investigation (2019 PTD 2119); K.K. Oil and Ghee Mills Pvt. Ltd. v. FBR (2016 PTD 441); Khurram Shahzad v. Federation of Pakistan (2019 PTD 1124); Edwards v. Edwards (1876) 2 Ch.D. 291 rel. (a) Interpretation of statute---Plain meaning rule---Application--- Where words of statute are clear, plain and unambiguous, Court must give effect to their ordinary meaning and cannot import into provision restrictions, qualifications or conditions not chosen by legislature---Primary duty of Court is to ascertain intention of legislature from language actually employed in enactment. (b) Section 175, Income Tax Ordinance, 2001---Pending proceedings---Whether prerequisite--- Section 175 authorizes Commissioner or duly authorized officer, without prior notice, to have access to premises, accounts, documents and computers in order to enforce any provision of the Ordinance, including for audit or survey---Nothing in text of provision makes pendency of proceedings against taxpayer a condition precedent for exercise of such power---Such requirement cannot be judicially engrafted into statute. (c) Search and raid under S.175---Whether last resort--- View that search under S.175 may be resorted to only as last measure where there is obstruction in pending proceedings was not borne out by statutory language---Courts are not competent to dilute or rewrite a clear taxing provision on ground of perceived severity, such matter being within legislative domain. (d) Section 175---Nature of power---Conditional, not unfettered--- Although existence of pending proceedings is not necessary, power under S.175 is nevertheless not absolute---Use of expression “in order to enforce any provision of this Ordinance” signifies that power is linked with enforcement of law and therefore presupposes some breach or legally cognizable occasion requiring enforcement---Authorities must clearly identify, in writing, provision of Ordinance sought to be enforced and reasons for such action, failing which power may be open to abuse. (e) Notice under S.176---Effect on power under S.175--- Mere fact that information or documents had earlier been sought under S.176 did not, by itself, negate or exclude subsequent exercise of power under S.175, where competent authority considered enforcement action necessary within meaning of statute. (f) High Court judgment---Interference in leave jurisdiction---Scope--- Where impugned judgment did not suffer from any legal infirmity in light of proper construction of S.175 and surrounding facts, no case for interference in leave jurisdiction was made out. Leave refused; petition dismissed.

Summary: After examining the discrepancies forming basis of the show cause notice issued by the Commissioner while exercising jurisdiction under sub-sections (5A) and (9) of section 122 of the Ordinance, we are of the considered view that in the circumstances, Commissioner was precluded to exercise his powers under sub-section (5A) of section 122 of the Ordinance. The Commissioner, at the most, should have resorted to sub- section (5) of section 122 of the Ordinance, if he intended to amend the assessment order of the Assessing Officer. 39Objection Case (Writ)-Civ. 100-26 MUHAMMAD SHAFIQ VS GOP ETC Mr. Justice Muzamil Akhtar Shabir 21-01- 2026 2026 LHC 36

Summary: Following questions of law have been put before this Court for opinion: 1. Whether in the facts and circumstances of the case, the learned Appellate Tribunal Inland Revenue Multan Bench, Multan ("the Tribunal") was justified in upholding the order of the learned Commissioner Inland Revenue (Appeals) ["CIR(A)"] wherein the learned CIR(A) has reduced the turnover of the taxpayer for charging of advance tax under Section 236H of the Income Tax Ordinance, 2001 ("the Ordinance") upto 33% of the total turnover without quoting any provision of the Income Tax Ordinance, 2001? 2. Whether in the facts and circumstances of the case, the learned Tribunal was justified in mechanically validating the order of the learned CIR(A) who relied on an earlier judgment of CIR(A) for restricting application of Section 236H of the Ordinance only to the extent of 33% of the total turnover?thereby relying on another case which was decided in violation of the existing legal provisions and for which no rationale or evidence existed? Held that the tax law requires determination of liability to be based on actual verifiable transaction, and not arbitrary percentages, more so, when the law does not prescribe such percentage/formula, therefore, the CIR(A) as also the Tribunal erred in applying the said percentage. At the same time, we find force in argument of learned counsel for the respondent-taxpayer inasmuch as the Assessing Officer also failed to discharge its duties to make the assessment based on facts and record presented by the respondent-taxpayer. It was obligatory on the Assessing Officer to assess the record and see whether the portion of sales by the respondent-taxpayer went directly to the end users/consumers and should not be subjected to the withholding tax under Section 236H of the Ordinance for the purpose of advance tax. Further held that if the sales are made directly to the end users/consumers, the same do not fall under the ambit of sales to the retailers. Section 236H of Ordinance primarily deals with sales to the retailers and in cases where the distributor claims direct sale to the general consumer against gross sales/receipts, the Assessing Officer shall examine the nature of transaction for the purpose of advance tax, as the case may be. 47Crl. Misc.- Post- arrest Bail 10529- B-25 AMIR VS STATE ETC Mr. Justice Ch. Sultan Mahmood 13-01- 2026 2026 LHC 913

Summary: (a) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 177 & 214-A---Constitution of Pakistan, Art. 199---Constitutional petition---Audit after expiry of limitation---Condonation of delay---Scope---Petitioner / company was aggrieved of extension in time by authorities to initiate audit proceeds beyond period prescribed for the purpose---Validity---Federal Board of Revenue and its officers are duly authorized under S. 214-A of Income Tax Ordinance, 2001 to condone delay in performance of any act or thing for which a period has been prescribed under Income Tax Ordinance, 2001 and audit essentially is an act or thing to be done---Purpose of S. 214-A of Income Tax Ordinance, 2001 is to give a separate overriding power to the Board to permit any act or thing to be done under the statute within such time period as it may deem appropriate, which is independent of any other provision of Income Tax Ordinance, 2001 that provides a time frame and an audit is plainly such an act---Federal Board of Revenue has the power under S.214-A of Income Tax Ordinance, 2001 to grant condonation---Show cause notice was to be issued within the prescribed five-year period, and such outer limit was absolute and could not be breached---Only five-year limit did not matter and delay after a timely notice had invalidated the proceedings---Additional statutory time limits, such as the time prescribed for issuing the order-in-original after a valid show cause notice were also mandatory and not merely directory but had created multi-layered, mandatory protections for taxpayers---Delays were not caused by any external or unavoidable impediment and Federal Board of Revenue could have proceeded within the statutory period---Benefit of such conduct rebounds entirely to taxpayer, not by operation of law but through the Authority’s own failure to discharge its obligations with diligence and integrity---If the Authority was genuinely committed to proper discharge of its functions, it could have attributed liability when called for---High Court declared condonation of time by authorities as void---High Court restrained the authorities from seeking further information pertaining to Tax Year 2019 in pursuance of such condonation of time limit---High Court declared audit proceedings under S. 177 of Income Tax Ordinance, 2001 as time barred---Constitutional petition was allowed accordingly. Collector of Sales Tax, Gujranwala and others v. Super Asia Mohammad Din and others 2017 SCMR 1427, 2017 PTD 1756; WAK Limited and others v. Collector Central Excise and Sales Tax 2025 PTD 1179; Commissioner of Inland Revenue v. Messrs Allah Din Steel and Rolling Mills and others 2018 SCMR 1328; Additional Collector of Customs, Faisalabad v. Messrs Fatima Enterprises, Multan and another (2025 SCMR 1929; Federal Board of Revenue v. Abdul Ghani 2021 SCMR 1154; Commissioner Inland Revenue, Zone-IV, Lahore v. Messrs Panther Sports and Rubber Industries (Pvt.) Ltd. and others 2022 SCMR 1135; Sabre Travel Network Pakistan Limited v. Pakistan and others (2025) 131 Tax 456 and Dowell Schlumberger (Western) S.A in W.P. No. 1183 of 2018 rel. (b) General Clauses Act (X of 1897)--- ----S. 24-A---Recording of reasons---Scope---Requirement to articulate reasons is neither a mere procedural formality nor an empty ritual rather it is a substantive safeguard designed to demonstrate that discretion has been exercised judiciously, objectively, and with due application of mind---Reasoned decision-making ensures that affected persons are apprised of the basis of the action taken, which facilitates meaningful judicial review, and acts as a restraint against arbitrariness or caprice. Additional Collector of Customs, Faisalabad v. Messrs Fatima Enterprises, Multan and another 2025 SCMR 1929 rel. (c) Constitution of Pakistan--- ----Art. 199---Constitutional jurisdiction of High Court---Judicial review---Institutional manipulation---Scope---High Court cannot and should not in the exercise of judicial review close its eyes if there is institutionalized manipulation apparent on the face of the record. Sardar Taimoor Aslam and Mudassar Abbas for Petitioner. Muhammad Asif Jadoon, A.A.G. for Respondent No.1. Osama Shahid for Respondent No.2. Assisted by: Muhammad Yahya Khan Niazi, Judicial Law Clerk. Date of hearing: 22nd October, 2025

Summary: Component of income, classified and taxed as final tax under final tax regime, could be further taxed under section 4B of the Ordinance. 89Writ Petition- Land- Demarcation 3790-19 AZRA BIBI ETC VS FAZAKAT HUSSAIN ETC Mr. Justice Mirza Viqas Rauf 04- 12- 2025 2025 LHC 7336

Summary: Income Tax Ordinance (XLIX of 2001)--- ----S. 133---Limitation Act (IX of 1908), S. 5---Reference Application before the High Court, filing of---Limitation---Suf ficient cause, absence of---Scope and effect---Applicant-Department filed the reference application and the office raised objection that file was ‘totally incomplete’, and directed to resubmit after removal of objections within three days, however, the Applicant-Department, after removing the objections, re-filed the reference application after 347 days beyond the period granted for removal of the office objections---Held: Inordinate delay was fatal in absence of any explanation demonstrating “sufficient cause” as required under S.5 of the Limitation Act, 1908---In the present matter, the Applicant-Department had failed to furnish any justification, much less a satisfactory or legally sufficient cause, for the delay in re-filing the reference application---The prescribed period of limitation is not merely a procedural formality but a matter of substantive right---Once the limitation period commences, it runs inexorably and cannot be arrested or extended by administrative lapses or clerical omissions---The Court is duty bound to enforce limitation statutes with judicial rigour and restraint, regardless of whether limitation is raised as a defense---Further, the law aids the vigilant, not the indolent (leges vigilantibus non dormientibus subserviunt)---Ignorance of law, inadvertence, does not constitute valid grounds for condonation, which is not to be granted as a matter of right, but only upon establishing sufficient cause with due diligence---Reference application filed by the Department, being non-maintainable on the ground of limitation, was dismissed, in circumstances. Asad Ali and 9 others v. The Bank of Punjab and others PLD 2020 SC 736; Muhammad Faisal Prop., F.A. Traders. Lahore v. Commissioner Inland Revenue Zone-II RTO-II, Lahore 2025 SCMR 930 and Commissioner Inland Revenue, Faisalabad v. Messrs Al-Hamd Cotton Ginning Pressing Factory, Jhang (ITR No.256746 of 2018) ref. Khalil Ahmad Ali for Applicant-Department. Khubaib Ahmad for Respondent.