2012 P T D 1374 [Supreme Court of Pakistan] Before Mian ...

Direct Tax Case Law Updates 

Email # 192 18/08/2012 

2012 P T D 1374 

[Supreme Court of Pakistan] 

Before Mian Shakirullah Jan and Tariq Parvez, JJ 

Messrs OCEAN PAKISTAN LTD. 

versus 

FEDERAL BOARD OF REVENUE, ISLAMABAD and others 

Civil Petition No.773 of 2012, decided on 23rd May, 2012. 

(On appeal from the judgment/order dated 16-4-2012 passed by Islamabad High 

Court Islamabad in Writ Petition No.2959 of 2011). 

Income Tax Ordinance (XLIX of 2001)--- 

----Ss. 120 & 122(5A), (9)---Constitution of Pakistan, Art. 185(3)---Sale of working 

interest by Oil Exploring Company---Issuance of show-cause notice by Authority 

proposing to re-open finalized assessment of petitioner for not having offered itself for 

tax liability on gain earned from such sale---Dismissal of constitutional petition by High 

Court---Validity---Petitioner had submitted reply to impugned notice raising therein all 

objections raised in constitutional petition---Findings on any such objections, if given by 

Supreme Court, would prejudice petitioner's case before Income Tax hierarchy--- 

Authority would yet decide whether such sale fell outside domain of agreement and 

applicable law---Petitioner could raise all possible factual and legal objections before 

competent authority, which had sought its explanation by issuing impugned notice--- 

Supreme Court declined to grant leave to appeal in circumstances. 

Al-Ahram Builders v. Income Tax Appellate Tribunal 1993 SCMR 29; Deputy 

Commissioner of Income Tax/Wealth Tax v. Punjab Beverage Co. (Pvt.) Ltd. 2007 PTD 

1347; Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 

1279; Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) PLD 1992 SC 847; 

Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 and Commissioner Income 

Tax v. Shaw Wallace and Co. AIR 1932 Privy Council 138 ref. 

M. Akram Sheikh, Sr. Advocate Supreme Court and Mehmood A. Sheikh, 

Advocate-on-Record for Petitioners. 

M. Bilal, Sr. Advocate Supreme Court and Baber Bilal, Advocate Supreme Court 

for Respondents Nos.2. 

JUDGMENT 

Not represented for Respondents Nos. 1 and 3. 

Date of hearing: 23rd May, 2012. 

1 Pak Law Publication 

Office # 05, Ground Floor, Arshad Mansion, Near Chowk A.G Office, 

Nabha Road Lahore.Ph. 042-37350473 Cell # 0300-8848226



TARIQ PERVEZ, J.---This petition for leave to appeal has been filed against the 

judgment dated 16-4-2012 passed by Islamabad High Court, Islamabad whereby Writ 

Petition filed by the petitioner-company has been dismissed. 

2. Show-cause notice dated 12-10-2011 issued under section 122(9) read with section 

122(5A) of the Income Tax Ordinance, 2001 (hereinafter referred to as 'the Ordinance, 

2001') by the Additional Commissioner Inland Revenue, Islamabad to Messrs Ocean 

Pakistan Ltd. (the petitioner) is under challenge in this petition by impugning the 

judgment passed by the learned Single Judge in Chambers of the Islamabad High Court, 

Islamabad was dismissed on 16-4-2012. 

Through the show-cause notice, which is addressed to the Principal Officer of the 

petitioner-company, it has been pointed out to the petitioner-company that during the 

period of relevant tax year, the company had sold out its "working interest" in Mirpur 

Khipro Oil and Gas Fields and LPG Plant to Messrs B.P. Pakistan through a joint 

memorandum dated 17-9-2009, but gain on this account had not been offered for tax 

liability; show-cause notice also contained different statutory provisions, conveying the 

mind of the Additional Commissioner Inland Revenue in its last para, which is 

reproduced herein below for the sake of convenience:-- 

"In view of the foregoing, the undersigned intends to amend under section 

122(5A) the assessment of your company finalized under section 120 of the 

Income Tax Ordinance, 2001. If you have any objection/reservations to this 

proposed action, the same may please be communicated to the undersigned on or 

before 24-10-2011. Prescribed notice under section 122 is enclosed." 

3. Learned counsel appearing for the petitioner has argued that the petitionercompany 

entered into Petroleum Concession Agreement and by virtue of the Regulation 

of Mines and Oil-Field and Mineral Development (Government Control) (Amendment) 

Act, 1976 (amending the Regulation of Mines and Oil-Field and Mineral Development 

(Government Control) Act, 1948) (hereinafter referred to as 'the Act, 1976'); particularly 

section 3B of the Amending Act of 1976 read with Schedule to section 3B, the petitionercompany 

enjoys freezing of income tax in respect of exploration, etc. and, according to 

him, if at all any taxable liability is to be imposed upon the petitioner-company, it should 

be in terms of the Income Tax Ordinance, 1979 (hereinafter referred to as 'the Ordinance, 

1979') and not the Ordinance, 2001 for the reason that when the agreement was executed 

between the President of Pakistan and the petitioner-company, the Ordinance, 1979 was 

in holding the field and was in vogue. 

He submits that Article XXIX of the agreement, under the heading 

"Miscellaneous" clearly stipulates that the terms of this agreement shall remain and 

continue in force and shall be binding upon each of the parties through out its duration 

without any amendment, revision or alteration, except as may hereafter be mutually 

agreed; and that the Rules, the Ordinance, 1979, the Act of 1948 and other laws as in 

force on the effective date i.e. the date on which the agreement was signed, shall remain 

applicable, whether or not they are subsequently amended or revised. 

Learned counsel further submits that in view of clear terms and conditions, 

recorded in the agreement between the President of Pakistan and the Company, case of 

the petitioner-company has to be decided within the scope of the Ordinance, 1979, 






therefore the show-cause notice issued under section 122(9) read with section 122(5A) of 

the Ordinance, 2001 is ultra vices, void, illegal and inoperative against the petitionercompany. 

He next submitted that the show-cause notice has been issued to the petitionercompany 

under the signatures of Additional Commissioner Inland Revenue (Audit-I, 

Islamabad, who was not authorized to do so under the Ordinance, 2001 because under 

section 122(5A) of the Ordinance, 2001, it is the Commissioner, who may amend or 

further amend the assessment order, if he considers that the assessment order is erroneous 

in so far it is prejudicial to the interest of revenue. He has added that since no authority 

was vested in the Additional Commissioner Inland Revenue, therefore, show-cause notice 

on this ground is to be struck clown. 

4. At the commencement of the submissions of the learned counsel for the petitionercompany, 

learned counsel appearing for respondent No.2 has raised preliminary objection 

qua the maintainability of the present petition; so much so, he has stated at the bar that the 

present petition has become infructuous because subsequent to passing of the impugned 

judgment, by the learned High Court, the petitioner-company has already filed its reply to 

the show-cause notice, meaning thereby that it has submitted to the jurisdiction of the 

Additional Commissioner Inland Revenue. 

Another objection has been raised by the learned counsel for the respondent that 

under the Income Tax hierarchy, there is a provision providing right of appeal against any 

order; but, according to him, the petitioner-company has bypassed such remedy by 

approaching the learned High Court through invoking its Constitutional Jurisdiction. 

To fortify his above submissions, the learned counsel has relied upon the case of 

Al Ahrain Builders v. Income Tax Appellate Tribunal (1993 SCMR 29), wherein this 

Court has held that tendency to bypass the remedy provided under the relevant statute and 

to press into service Constitutional jurisdiction of the High Court has to be deprecated. 

According to the learned counsel, this view has further been endorsed by this Court in the 

case of Deputy Commissioner of Income Tax/ Wealth Tax v. Punjab Beverage Co. 

(Pvt.) Ltd. (2007 PTD 1347). 

5. Besides raising above two preliminary objections i.e. first qua the maintainability 

of the petition on the ground that the statutory remedy had been bypassed by the 

petitioner-company by invoking the Constitutional jurisdiction of the High Court; and 

second that the petitioner has already submitted to the jurisdiction of Income Tax 

hierarchy by filing its reply to the show-cause notice, the learned counsel for the 

respondent has next argued that freezing of income tax liability under the Act of 1976, 

whereby amendment was brought in the Act of 1948 through section 3B of the Act, 1976 

read with its Schedule, is only available in respect of operational working of the 

petitioner-company qua exploring petroleum etc. and it will not include any other activity 

like leasing out the working interest to a third person. He has referred to Article XXIV of 

the agreement, under the heading 'Taxation' wherein item 14.3 clearly stipulates that the 

income tax liability is on gain derived from the operations or part of the operations and 

will not cover any gain obtained by the petitioner-company through any non-operational 

activity, which in the instant case is selling out the working interest to a third person. 

6. Since the objection is raised upon the competency of the Additional Commissioner 






Inland Revenue to issue the subject show-cause notice, the learned counsel for the 

respondent has referred to section 210 of the Ordinance, 2001, which provides that the 

Commissioner may, by an order in writing, delegate all or any of his powers or 

functions to the officer mentioned therein. In particular the learned counsel has referred 

to section 210(1A) of the Ordinance, 2001, which reads as under:-- 

"210. (1A).---The Commissioner shall not delegate the powers of amendment of 

assessment contained in subsection (5A) of section 122 to an officer of Inland 

Revenue below the rank of Additional Commissioner Inland Revenue." 

He submits that in this case show-cause notice has been issued by the Additional 

Commissioner Inland Revenue, which is covered within the provisions of section 210 of 

the Ordinance, 2001; he has also placed on record a copy of the notification dated 8-3- 

2011, wherein the Commissioner Inland Revenue, while exercising its powers under 

section 210(1A) of the Ordinance, 2001 has delegated its powers in respect of amendment 

of assessment under section 122(5A) of the Ordinance, 2001 to the Additional 

Commissioner Inland Revenue. 

7. Learned counsel for the petitioner, when confronted with the preliminary 

objections raised by the learned counsel for the respondent, has relied upon the case of 

Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009 SCMR 

1279) and read out para-56 from the judgment; the substance of para-56 is that this Court, 

while discussing the observation made earlier in the case of Commissioner of Income 

Tax v. Hamdard Dawakhana (Waqf) (PLD 1992 SC 847) i.e., "tendency to bypass the 

remedy provided in the relevant statute and to press into service constitutional jurisdiction 

of the High Court was to be discouraged though in certain cases invoking of such 

jurisdiction instead of availing the statutory remedy was justified" has approved the sane 

by further holding that "when the impugned order/action was palpably without 

jurisdiction and/or mala fide, forcing the aggrieved person in such a case to approach the 

forum provided under the relevant statute, may not be just and proper"; it is further held 

in the judgment (supra) that "where a statutory functionary acted in mala fide or in a 

partial, unjust and oppressive manner, the High Court in exercise of its writ jurisdiction 

had power to grant relief to aggrieved party." 

In this regard, reference has also made by the learned counsel for the petitioner to 

the cases of Edulji Dinshaw Ltd. v. Income Tax Officer (PLD 1990 SC 399) and 

Commissioner Income Tax v. Shaw Wallace and Co. (AIR 1932 Privy Council 138). 

8. We have heard the learned counsel for the parties and have also gone through the 

impugned judgment carefully. 

9. As noted hereinabove, the learned counsel for the respondent while raising 

preliminary objections, has placed on record a copy of the reply to show-cause notice 

filed by the petitioner-company before the Additional Commissioner Inland Revenue, 

Islamabad; it is dated 16-5-2012 whereas on 15-5-2012 a letter was addressed to the 

Principal Officer of Messrs Ocean Pakistan Ltd. referring to original show-cause notice 

dated 12-10-2011 and the petitioner-company was asked to file its reply. 

A bare perusal of the reply reveals that all objections with regard to application of 

law i.e. the Ordinance, 1979 or the Ordinance, 2001; the question of liability of the 






petitioner-company, including challenge to the competency of the Additional 

Commissioner Inland Revenue to issue show-cause notice have been raised therein. 

10. In above view of the matter, irrespective of what has been argued before us by the 

learned counsel for the petitioner, we are of the considered opinion that since all the legal 

arguments referred to in the preceding paras, raised on behalf of the petitioner-company, 

are similarly raised before the competent forum, which has issued show-cause notice to 

the petitioner-company, any finding on any of the legal objections by this Court is likely 

to cause prejudice to the case of the petitioner-company before the Income Tax hierarchy. 

Even the learned Single Judge in Chambers of the High Court has left it open for the 

Additional Commissioner Inland Revenue to decide the issues whether the sale of 

'working interest' falls outside the perview of agreement and consequent to the sale, the 

petitioner is to be governed by the Ordinance, 2001. 

In view of the facts noted herein above i.e. filing of reply to show-cause notice by 

the petitioner-company wherein all objections raised before us, noted hereinabove, have 

been duly raised before the competent forum, and that there is no final determination by 

the competent authority on the issues involved in the matter, coupled with the fact that the 

petitioner can raise all possible factual and legal objections before the authority, which 

has sought its explanation by issuing show-cause notice, we intend to agree with the 

findings recorded by the learned Single Judge in Chambers of the High Court by means of 

the impugned judgment; as such this petition is dismissed being devoid of merits. Leave 

declined. 

S.A.K./O-1/SC 

Petition dismissed

2012 P T D 1374 [Supreme Court of Pakistan] Before Mian ...

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