LAHORE: The Lahore High Court (LHC) has set aside notices sent by the Inland Revenue authorities to commercial banks seeking the account statements of taxpayers, holding that a power to gather information cannot be used to keep assessment proceedings alive that have become barred by limitation.
A division bench, comprising Justice Hassan Nawaz Makhdoom and Justice Muhammad Ajmal Zahid, allowed two constitutional petitions, including one filed by Syed Naved Amjad Andrabi, against notices issued to banks under Section 176 of the Income Tax Ordinance 2001.
The impugned notices had asked the banks to furnish details of accounts held by the petitioners.
Advocate Taffazul Haider Rizvi, representing the petitioners, said his clients had filed their returns up to tax year 2015 and discharged their tax liabilities in accordance with law. He said, although certain other taxpayers were selected by the respondent/assistant commissioner Inland Revenue for audit for tax years 2011 to 2014, their cases were not selected for audit. He alleged that the notices were issued with mala fide intent when no proceedings, inquiry or investigation was pending against the petitioners.
Notices had sought details of petitioners’ accounts
The counsel stated that the relevant bank statements had already been given to the tax authorities and in the absence of any pending proceedings, inquiry or investigation, the impugned requisitions were without lawful authority and liable to be set aside.
During the hearing, the bench asked the lawyer for the tax authorities whether the exercise was meant to facilitate proceedings under Sections 121, 122 or 124 of the Ordinance, or any other provision.
According to the judgment, the counsel could not identify any specific proceedings or lawful purpose for the notices and did not dispute the petitioners’ submissions.
Justice Zahid, the author judge, observed that the question was whether tax authorities might continue to use an information-gathering provision to support proceedings they were no longer legally competent to start because the limitation period had expired.
The judge held that sections 175, 176 and 177 of the Ordinance provide mechanisms for access to premises and records, requisition of information and audit, but do not give an independent power to ignore the conditions governing assessment jurisdiction.
Information obtained under Section 176 may be relevant to assessment, the judge said, but the power to obtain it cannot enlarge the jurisdiction conferred by sections 120, 121, 122 and 124.
“Limitation is not a mere procedural formality, it defines the temporal boundaries within which a statutory authority may lawfully exercise its jurisdiction,” the judge held.
The judge observed that where the legislature prescribed a period for initiating or completing a particular proceeding, the competent authority must act within that period, subject to any exclusion, extension or exception authorised by law. He said a Section 176 notice did not preserve, suspend or revive jurisdiction lost to limitation, and could not be used to do indirectly what the law bars the authorities from doing directly.
Justice Zahid maintained that the requisition of information cannot be treated as a substitute for the statutory proceedings through which the taxpayer’s liability might lawfully be determined.
The bench clarified that its conclusion was limited to the purpose for which these notices were issued and the expiry of limitation for one assessment did not by itself extinguish every other power under the Ordinance.
Finding that the respondents had shown no such purpose, the bench allowed the petitions and set aside the impugned notices.
Published in Dawn, October 16th, 2026
