Federal Court Rules Tax Authorities Can Conduct Raids Without Pending Proceedings

By Shahzad Paracha :

The Federal Constitutional Court has delivered a landmark judgment affirming that tax authorities possess the power to conduct raids and searches of taxpayers’ premises under Section 175 of the Income Tax Ordinance 2001, even when no formal proceedings are pending against them.

A three-judge bench headed by Justice Aamer Farooq issued the ruling on Thursday while dismissing a petition filed by M/s Sceptre Pvt Ltd against a December 2025 Sindh High Court decision that had validated a tax raid on the company’s premises.

The Petitioner’s Challenge

The petitioner had challenged the raid conducted by tax authorities under Section 175, arguing that the provision should only be invoked when proceedings are ongoing against a taxpayer. The company further contended that a notice issued under Section 176, which requires production of certain documents and information, could not serve as justification for a raid.

The Sindh High Court had previously rejected these arguments, relying on precedent established in an earlier case involving Agha Steels. The petitioner then approached the Federal Constitutional Court seeking to overturn that decision.

Court’s Interpretation

In a detailed judgment authored by Justice Farooq, the court explained that Section 175 empowers the tax commissioner to act for the enforcement of any provision of the ordinance. The judgment emphasized that parliament deliberately used the word “enforcement” rather than “implementation” in drafting the provision.

The court reasoned that enforcement necessarily implies a breach of law. When a law is breached, it must be enforced. Had the legislature used the word “implement,” the interpretation would have been different, the judgment noted.

“Examination of Section 175 shows that the words used were very clear and simple, that this provision can be invoked for the enforcement of any provision of the law,” the judgment stated.

Rejection of Precedent

While the bench acknowledged that it did not agree with the view expressed in the Agha Steels case, it nonetheless concluded that the petition was liable to be dismissed. Justice Farooq observed that even if the requirements laid down in that previous case were not strictly followed, the fundamental fact remained that the tax commissioner or an authorized officer is empowered to act for enforcement of the law under Section 175.

The court found that the impugned judgment suffered from no infirmity warranting interference, given both the statutory provision and the factual aspects of the matter.

Principles of Statutory Interpretation

The judgment extensively discussed the cardinal rules of statutory construction, emphasizing that acts of parliament should be construed according to the intention expressed in the acts themselves. Justice Farooq noted that legislation is often drafted to address specific situations in clear and straightforward terms.

“In such instances, the words used are precise and are not intended to extend beyond their plain scope or to be expanded into broader contexts,” he added.

The court observed that the most appropriate and reliable method of ascertaining legislative intent is to commence with the ordinary and clear meaning of the words used. Justice Farooq posed a rhetorical question: “If the legislature says that a deed shall be ‘null and void to all intents and purposes whatsoever,’ how can a court of equity say that in certain circumstances it shall be valid?”

Application to Tax Law

Applying this reasoning to the present case, the judgment highlighted that parliament has expressly provided that the commissioner or any authorized officer will at all times and without prior notice have full and free access, including real-time electronic access, to any premises, place, accounts, documents, or computer systems.

The court concluded that it cannot read into the statutory provision a requirement that proceedings must be pending before Section 175 can be invoked. “Courts must be restrained from granting relief in a manner that runs contrary to clear and express statutory provisions,” the judgment stated.

Implications

The ruling provides tax authorities with broader powers to conduct searches and raids without the precondition of pending proceedings against taxpayers. Legal experts suggest the decision strengthens the enforcement capabilities of the tax department while emphasizing that courts cannot impose additional conditions not specified by the legislature.

The judgment clarifies that Section 175 serves as an independent enforcement mechanism rather than a provision contingent on ongoing proceedings, potentially expanding the scope of tax investigations in Pakistan.

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