SHAHID CHAUDHRY Versus The STATE through Special Prosecutor Customs Lahore

AQEEL AHMED ABBASI, J.--- Instant criminal petition for leave to appeal has been filed under Article 185 (3) of the Constitution of the Islamic Republic of Pakistan,1973 against the impugned order dated 15.01.2026 passed by the learned Judge-in-chambers of the Lahore High Court, Lahore in Crl.Misc.No.41430-B of 2025 whereby the petition filed by the petitioner to seek pre-arrest bail in FIR No.02 dated 10.02.2022 registered for offences under Sections 3,4,2 (xxvi), 2(xxviii) of the Anti-Money Laundering Act, 2010 read with section XIIA of Schedule-I to the Anti-Money Laundering Act, 2010 ( AMLA, 2010 ) and sections 192, 192 A and 199 of the Income Tax Ordinance, 2001 ( ITO, 2001 ) was dismissed.

2. Brief facts as recorded in the aforesaid FIR are that an information was received to the effect that accused Shahid Chaudhry was maintaining various personal and business bank accounts with different banks during the period relevant to Tax Year 2017 and 2018. The transactional pattern in the account during the period under consideration consisted of cash deposit and transfer of cheque . As per FIR, information available on IRS portal of Federal Board Revenue ( FBR ) demonstrates that the accused got himself registered with the Income Tax Department on 11.05.2016 at NTN:7227640-1 and for Sales Tax on 18.09.2017 at STRN:3277876139866, in the capacity of an Individual declaring Principal Activity as Import/Export and was also operating under the name and style of Messrs La Societe. The petitioner had further formed Messrs Damaan Construction (Pvt.) Ltd., in which he held 75% shareholding, and was also a partner in M/s Veranda Bistro. As per FIR, although the accused filed income tax returns for Tax Years 2017 and 2018 declaring total income of Rs. 7,313,500/- and Rs. 6,985,000/- respectively, scrutiny of his bank accounts from various banks revealed total credits amounting to Rs. 153,415,348/- for the period 01.07.2016 to 30.06.2017 and Rs. 246,106,305/- for the period 01.07.2017 to 30.06.2018. The difference between declared income and bank credits came to Rs. 146,101,848/- for Tax Year 2017 and Rs. 239,121,305/- for Tax Year 2018 according to the prosecution. It is alleged that multiple call-up notices under Section 22 of the Act of 2010 read with Section 160 of Code of Criminal Procedure,1898 ( Cr.P.C. ) were issued to the petitioner to explain the discrepancies; however, he failed to furnish satisfactory documentary evidence. The FIR further alleges that the accused deliberately concealed income totaling Rs. 385,223,153/- during the relevant period and converted the same into assets and business concerns. The tax sought to be evaded was calculated at Rs. 50,670,848/- for Tax Year 2017 and Rs. 83,343,506/- for Tax Year 2018. On these set of allegations, a criminal case was registered against the petitioner and the said business entities under Sections 3 and 4 of AMLA, 2010 read with Section 21(1)(a) and Section 22 thereof and relevant provisions of Cr.P.C.

3. Learned counsel for the petitioner has vehemently argued that the registration of FIR under the AMLA, 2010 is based upon the allegation that petitioner during Tax Year 2017 and 2018 has concealed his taxable income and evaded tax thereon amounting to Rupees 134,014,354 /- which allegedly constitutes the predicate offense under Section XIIA of the Schedule-I to the AMLA, 2010. Whereas, in the absence of determination of tax liability through process of assessment or adjudication, the petitioner is held liable to be arrested and prosecuted under section 21(1)(a) and section 22 of the AMLA, 2010 read with the relevant provisions of Cr.P.C. 1898. Per learned counsel, all the allegations as contained in the impugned FIR are based on surmises and conjunctures, whereas, no reasonable opportunity has been provided to the petitioner, nor petitioner has been confronted with any incriminating material which may otherwise connect the petitioner with the alleged offense. According to learned Counsel, petitioner has never defaulted towards payment of tax liability nor any proceedings under the ITO, 2001 were initiated against the petitioner therefore, the registration of FIR in the absence of determination of tax liability through process of assessment, is not only blatantly illegal and based on mala fide, but also in total disregard to a recent judgment of this court in the case of Directorate of Intelligence and Investigation-FBR, through its Director and others v. Taj International (Pvt) Ltd and others (PLD 2025 SC 633) . In addition to herein submissions, learned counsel for the petitioner has further submitted that legal course has not been adopted in the instant matter as no requisite permission was accorded by the Director General prior to initiate criminal proceedings. Similarly, no Notice under Section 176 of the ITO, 2001 was issued prior to registration of FIR. Learned counsel for the petitioner has also drawn our attention to the fact that earlier investigating officer submitted a report under section 173 Cr.P.C. wherein, the name of the petitioner was mentioned with red ink in column No.2. However, on the same set of allegations, the petitioner has now been challaned, therefore, the petitioner approached the Special Judge Customs, Taxation and Anti-smuggling, Lahore seeking pre-arrest bail under section 498 Cr.P.C, which was dismissed vide order dated 30.06.2025. Whereafter, petitioner approached the Hon ble Lahore High Court seeking similar relief, however, vide impugned order dated 15.01.2026 the ad-interim pre-arrest bail granted to the petitioner had been recalled without assigning any cogent reason. Learned Counsel for the petitioner submits that both the courts below have failed to appreciate that subsequent to lodgment of the aforesaid FIR the Appellate Tribunal Inland Revenue ( ATIR ) vide order dated 30.06.2025 has annulled the tax liability against the petitioner, therefore, petitioner was otherwise entitled to pre arrest bail in view of the judgment of this court reported as Muhammad Asif v. The State and others (2016 PTD 2393) . According to learned counsel the petitioner has also filed a petition seeking quashment of FIR in view of the judgment of this court in the case of Taj International ( supra ) however since the respondent is bent upon to destroy the honor and business of the petitioner by making his arrest therefore the petitioner has approached this court for seeking protection by grant of pre arrest bail.

4. Conversely, the learned Additional Attorney General ( AAG ) for the Federation of Pakistan assisted by learned counsel for the complainant and the Investigating Officer ( IO ) of the case has opposed the grant of pre-arrest bail to the petitioner on the grounds that the petitioner has been nominated in the FIR on the basis of tax record and the bank statement of the petitioner which are inconsistent with the declaration made by the petitioner in his tax returns for the Tax Year 2017 and 2018. It has been further contended by the AAG and learned counsel for the complainant that there is sufficient material available with the prosecution to establish that petitioner has concealed his income and evaded huge amount of tax therefore not entitled to pre-arrest bail.

5. Heard the learned counsel for the petitioner and learned AAG duly assisted by learned counsel for the complainant and the IO of the case, and perused the record with their able assistance. Admittedly, FIR No.2 of 2022 dated 10.02.2022 has been registered on the allegation of concealment of income and evasion of tax by the petitioner during the Tax years 2017 and 2018 however, without determination of tax liability sought to be evaded by the petitioner, through the process of assessment under the ITO, 2001 the FIR has been lodged. It has been observed that FIR under AMLA, 2010 is based on the allegation of concealment of income and evasion of income tax and also non-reconciliation of the wealth statement of the petitioner with the bank entries whereas, no reference to any act of committing an offence covered under Section 3 of AMLA, 2010 appears to has been made. Prima facie, the very basis of registration of FIR and initiation of criminal proceedings against the petitioner under the facts and circumstances of the instant case are in violation of a recent judgment of this Court in the case of Taj International ( supra ) wherein, it has been categorically held that in the absence of determination of tax liability through the process of assessment or adjudication, registration of an FIR or initiation of criminal proceedings is illegal. Moreover, it is yet to be determined as to whether assets acquired by the petitioner constitutes proceeds of crime . Without prejudice to hereinabove, it has transpired that subsequent to registration of FIR, the tax liability was determined by the tax authorities in the case of petitioner which has been annulled by the order of ATIR dated 30.06.2025, which fact has not been disputed by the AAG and learned counsel for the complainant or the IO present in Court. It has been further observed that FIR was registered on 10.02.2022 whereafter, the investigation was conducted by the IO who did not find the petitioner guilty of the alleged offence, and therefore, mentioned the name of petitioner in column No.2 of the challan. However, subsequently the petitioner has been found guilty in the subsequent investigation. Under similar facts and circumstances, this court in the case of Muhammad Asif ( supra ) has granted pre-arrest bail to the accused while observing as under: -

"2. After hearing the learned counsel for the parties and going through the record we have observed that the petitioner is a Director of a business concern and the allegation against him and his co-accused is that the record recovered from the petitioner's business premises disclosed huge discrepancies pointing towards a willful and deliberate evasion of the sales tax. It is not disputed that the order-in-original passed by the Deputy Commissioner, Inland Revenue, Lahore on 17.09.2014 fixing a liability upon the petitioner was partially set aside by the Commissioner, Inland Revenue, Lahore on 04.12.2014 and thereafter the said order-in- original was completely set aside by the Appellate Tribunal, Inland Revenue, Lahore on 31.08.2015. We have been informed that a Reference has already been filed before the Lahore High Court, Lahore in that connection and the said Reference is presently pending with no interim relief in favour of the Department. The present FIR was based upon a permission granted and a direction issued by the Director- General, Intelligence and Investigation, Inland Revenue, Islamabad which in turn was based upon the liability of the petitioner determined by the Department but if the said determination of the liability itself has been set aside then the foundation of the present criminal case appears to be shaken at present and in the absence of any determined or established liability of the petitioner insistence by the investigating agency upon arrest of the petitioner may smack of lack of bona fide on its part. Apart from that the allegations levelled against the petitioner surely require explanation of the record of the petitioner's business concern and the petitioner is likely to be handicapped in his defence if he is taken into custody. It goes without saying that even if the petitioner is admitted to bail by this Court he still has to keep on joining the investigation if and when required to do so by the investigating agency and if he fails to join the investigation then that may be considered to be a valid ground for seeking cancellation of the petitioner's bail. It may also be clarified that if the above-mentioned Reference presently pending before the Lahore High Court, Lahore is decided in favour of the Department and if the petitioner's liability is determined on the basis of the answer to the Reference even then the Department concerned may have a basis to apply for cancellation of the petitioners bail."

(Emphasis provided)

6. Cases pertaining to financial disputes, or allegations of Concealment of Income and evasion of tax or duty are primarily dealt by Civil Courts or the Specialized forums provided under the Tax laws for the purposes of determination of tax liability through the process of assessment or adjudication through the process of judicial determination of claims of litigant parties after recording evidence in accordance with law. However, there are exceptions according to which a civil dispute may attract criminal liability as well to curb the dishonest business practice and conduct of a party. In the case in hand, the petitioner has been charged with offence of concealment of Income and evasion of tax, which requires to be assessed and recovered through process of assessment under the ITO, 2001, whereas, the charge of Money Laundering is also dependent upon the amount of tax sought to be evaded by fraud or willful misdeclaration and also to determine that any asset acquired through such amount with dishonest intention is proceeds of crime and constitutes a predicate offence in terms of Section 2 (xxvi) of AMLA, 2010, the cognizance of which can be taken under Section 3 of AMLA, 2010 provided pre-trial steps have been exhausted and commission of a cognizable offence is made out. In the instant case no such exercise appears to have been taken, whereas, resort to direct initiation of criminal proceedings has been made out by Registration of an FIR under AMLA,2010. Courts have held that if case is primarily based on documents, Custodial interrogation is deemed unnecessary. It has been further held that Criminal law should not be used as a tool for recovery of money by causing harassment, as such matters belong to Civil Courts. We are of the considered view that no useful purpose shall be served if pre-arrest bail is declined to the petitioner, as the prosecution case is based on documentary evidence in the shape of tax record and Bank Accounts/Statements of the petitioner, hence there is no probability of tempering with the evidence and a case is made out for further inquiry. Reference can be made to the following reported judgments of this Court: 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) .

7. In view of hereinabove facts and circumstances of the case, we are of the view, that the petitioner has made out a case of further inquiry into the allegations made in the subject FIR, whereas, possibility of false implication of the petitioner in this case and mala fide on the part of the prosecution cannot be ruled out in the instant case at this stage, thus entitles the petitioner to be extended extra ordinary relief of pre-arrest bail, which was granted to him vide our short order dated 27.02.2026 in the following terms:-

For the reasons to be recorded later, this petition is converted into appeal and allowed. The impugned order is set aside. The ad-interim pre-arrest bail already granted to the petitioner by this Court vide order dated 12.02.2026, is hereby confirmed subject to his furnishing of 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.

Above are the reasons for such short order.

MH/S-16/SC Bail granted.