Retrospective tax penalties are ‘unlawful’: Supreme Court
• Says sanctions under ITO 2001 cannot apply to assessments governed by repealed law • Settles conflict between two previous rulings ISLAMABAD: The Supreme Court on Monday ruled that penalties imposed under the Income Tax Ordinance (ITO) 2001 for assessments completed before June 30, 2002 were illegal and legally unsustainable, emphasising that such penalties could not be applied retrospectively.…
The Supreme Court of Pakistan has ruled that penalties imposed under the Income Tax Ordinance (ITO) 2001 for past tax assessments are unlawful and cannot be applied retroactively. The ruling comes after a five-judge bench led by Justice Shahid Waheed settled a conflict between two earlier decisions. The court emphasized that such penalties cannot be applied retrospectively, ruling against the imposition of penalties under Sections 182, 184, and 186 of the ITO 2001.
The legal dispute arose over the property purchase by Khadim Hussain, leading to tax proceedings and an ex-parte assessment under the repealed ITO 1979. Despite compliance efforts, the respondent continued to ignore notices, resulting in penalties being imposed. The court emphasized that any penalties imposed under these sections are legally unsustainable due to the lack of clear legislative language for retrospective effect. Consequently, the penalties were deemed unlawful, and the case has been dismissed.
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