IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE MIAN SAQIB NISAR, HCJ 
MR. JUSTICE FAISAL ARAB 
MR. JUSTICE SAJJAD ALI SHAH 
 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 & 
22 OF 2015, 57 TO 59 OF 2015 
(On appeal against the judgments dated 12.11.2012, 11.02.2013, 13.11.2012, 06.05.2014, 
25.03.2014, 26.03.2014  passed by the Lahore High Court, Rawalpindi Bench in ITR Nos. 
14, 18, 19, 21, 22, 23, 24 to 34, 43, 69 to 72, 74, 75, 76 of 2012, 02, 03, 04, 05, 11, 15 & 
16 of 2013) 
 
S.No.   Parties’ names 
 Case No.  
 
1. 
  Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Khan 
CNG 
Filling 
Station, 
Rawalpindi and others 
 CAs 992, 997 & 
998/2013 
 
2. 
 
  
Commissioner 
Inland 
Revenue 
Zone-II, RTO, Rawalpindi Vs. M/s 
Badhan 
CNG 
Filling 
Station, 
Rawalpindi and others 
  
CA 993/2013 
 
3. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Zam Zam CNG Filling Station, 
Rawalpindi and others 
  
CAs 994 & 1010 of 
2013 
 
4. 
 
  
Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Techno Gas Service CNG Station, 
Rawalpindi and others 
  
CAs 995-996/2013 
 
5. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Khan Gee CNG Filling Station, 
Rawalpindi and others 
  
CAs 999 to 1001 of 
2013 
 
6. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Azizid and Alyees Associates CNG 
Station, Rawalpindi and others 
  
CAs 1002 & 1009  
of 2013 
 
7. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Rehman Associates CNG Station, 
Rawalpindi and others 
  
CAs 1003, 1206 & 
1207 of 2013 
 
8. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Rawal 
Gas 
Co. 
CNG 
Station, 
  
CA 1004/2013 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
2
Rawalpindi and others 
 
9. 
 
  
Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Rawal Gas Co. CNG Filling Station, 
Rawalpindi and others 
  
CA 1005/2013 
 
10. 
 
  
Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Gas 
Ways 
CNG 
Station, 
Rawalpindi and others 
  
CA 1006/2013 
 
11. 
 
  
Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Shaheen CNG Station, Rawalpindi 
and others 
  
CA 1007/2013 
 
12. 
 
  
Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Al 
Burhan 
CNG 
Station, 
Rawalpindi and others 
  
CA 1008/2013 
 
13. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Rizwan and Co. CNG, Rawalpindi 
and others 
  
CAs 1011 & 1012 
of 2013 
 
14. 
 
  
Commissioner 
Inland 
Revenue 
Zone-III, RTO, Rawalpindi Vs. M/s 
Goodluck 
CNG 
Filling 
Station, 
Rawalpindi and others 
  
CAs 1013 & 1014 
of 2013 
 
15. 
 
  
Commissioner 
Inland 
Revenue 
Zone-II, RTO, Rawalpindi Vs. M/s 
Fuel Power CNG Filling Station, 
Rawalpindi and others 
  
CA 1015/2013 
 
16. 
 
  
Commissioner 
Inland 
Revenue, 
RTO, Rawalpindi Vs. M/s Kaka 
Khel 
& 
Co. 
CNG 
Station, 
Rawalpindi and others 
  
CAs 1016 & 1017 
of 2013 
 
17. 
 
  
Commissioner 
Inland 
Revenue 
Zone-I, RTO, Rawalpindi Vs. M/s 
Mecca 
CNG 
Gas 
Enterprises, 
Rawalpindi and others 
  
CAs 21 & 22/2015 
 
18. 
 
  
Commissioner 
Inland 
Revenue 
Zone-II, RTO, Rawalpindi Vs. M/s 
Mak Gas Station, Rawalpindi and 
others 
  
CAs 57 & 58/2015 
 
19. 
 
  
Commissioner 
Inland 
Revenue 
Zone-II, RTO, Rawalpindi Vs. M/s 
Raja CNG, Gujar Khan and others 
  
CA 59/2015 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
3
 
 
For the Appellants: 
Dr. Farhat Zafar, ASC 
 
 
 
 
Mr. M.S. Khattak, AOR 
Mr. Javaid Iqbal, Commissioner IR 
Mrs. Nafeesa Satti, Commissioner IR 
Mr. Tahir Mehmood Bhatti, IRO 
Mr. Amir Sultan, Law Officer 
 
 
 
For the Respondent (1): Hafiz Muhammad Idris, ASC 
 
 
 
 
Syed Rifaqat Hussain Shah, AOR 
(In CAs 992, 995 to 1001, 1004, 1005, 1007, 1012, 
1017 of 2013, 21 & 22 of 2015) 
 
 
 
 
 
N.R.  
(In CAs 993, 994, 1002, 1003, 1006, 1007 to 1010, 
1013, 1015, 1206, 1207 of 2013 & 57 to 59/2015) 
 
Date of Hearing:  
04.04.2017 
 
 
 
JUDGMENT 
 
 
 
 
FAISAL ARAB, J.- The respondents are engaged in the 
business of selling Compressed Natural Gas (CNG). It is produced 
by compressing the natural gas to less than one percent of the 
volume it occupies. Economy in space facilitates the storage of CNG 
in hard containers for use as a fuel. The natural gas is supplied in 
volume which in Pakistan is measured on the gas meters as well on 
the monthly bills by its energy content Million British Thermal Unit 
known by the acronym MMBTU. After it is converted into CNG, it is 
sold at the CNG stations by mass i.e. in kilograms at a retail price 
regulated by Oil and Gas Regulatory Authority (OGRA). For the 
purposes of determining the retail price per kilogram of CNG, OGRA 
has adopted a formula that converts volume i.e. MMBTUs of natural 
gas into kilograms of CNG.  
 
2. 
 
It appears that the tax authorities of Rawalpindi region 
took a decision to select CNG stations as a separate class of 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
4
business in order to audit their income tax affairs. Their returns of 
income were thus scrutinized and in the process, disparity between 
the CNG sales reported by the respondents with the corresponding 
purchase of the natural gas was noticed in the tax years 2004 and 
2007. This conclusion was drawn after the prices of natural gas and 
its volume (MMBTUs) consumed by the respondents in the tax years 
in question were procured from Sui Northern Gas Pipelines Limited 
(SNGPL) and the prices of CNG for the tax years in question and the 
formula for converting MMBTUs of natural gas into kilograms of 
CNG were procured from OGRA. Such information was gathered 
from both the institutions by invoking the provisions of Section 176 
of the Income Tax Ordinance, 2001 (Ordinance for short). As to the 
adoption of conversion formula by OGRA, we may state that 
internationally, the natural gas after it is transformed into CNG is 
sold either by mass or on the basis of its energy level or by gasoline 
gallon equivalent (gge). OGRA had adopted conversion formula that 
is based on sale of CNG by mass (in kilograms). This conversion 
formula is used by OGRA in the determination of countrywide retail 
price per kilogram of CNG. After noticing significant disparity in the 
consumption of natural gas and the sale of CNG declared in the 
returns of income on the basis of the data procured from SNGPL 
and OGRA, the Commissioner, Inland Revenue issued notices under 
sub-Section (9) read with sub-Section 5 of Section 122 of the 
Ordinance to confront the respondents with his intention to amend 
the assessment orders that were deemed to have been issued under 
the provisions of Section 120(1) of the Ordinance. Finally the 
Commissioner, Inland Revenue after hearing the representative of 
the respondents applied OGRA’s conversion formula (volume to 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
5
mass) to the information procured from SNGPL and OGRA and 
determined the quantum of CNG produced by each of the 
respondents in a tax year. After determining the quantum of CNG, 
an allowance of 11% wastage of natural gas in the process of 
conversion was also given to the respondents. Then, on basis of 
actual prices of natural gas as well as of the CNG that were 
prevalent from time to time in the tax years in question, the 
quantum of CNG sold in the tax years in question was determined. 
This exercise was repeated for all the tax years in question and the 
amended assessment orders were issued accordingly.  
 
3. 
 
Keeping aside the determination of quantum of CNG on 
the basis of OGRA formula for a moment, the Commissioner, Inland 
Revenue made certain other amendments in the original assessment 
orders on the basis of discrepancies that were noticed in the returns 
of income which were separately pointed out in the notices to each 
of the respondents. One of such discrepancies pertained to the 
difference between the actual cost of natural gas and the cost that 
was declared in the returns of income towards the purchase of 
natural gas. Another discrepancy that was pointed out was with 
regard to profit and loss expense account. Upon failure of the 
respondents to substantiate such discrepancies, the Commissioner, 
Inland Revenue adjusted the expenses which increased the tax 
liability.  The tax liability so imposed was not challenged by the 
respondents in the departmental appeals and hence no more 
remained the subject matter of dispute in these proceedings. The 
only controversy that remained alive was with regard to the 
application of OGRA’s conversion formula that was applied to 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
6
determine the quantum of CNG produced from the natural gas 
consumed in the tax years in question, which resulted in issuance 
of amended assessment orders.  
 
4. 
 
Against the decision of the Commissioner, Inland 
Revenue to amend the original assessment orders on the basis of 
application of OGRA’s conversion formula, the respondents 
preferred departmental appeals but remained unsuccessful. Having 
failed in the departmental appeal as well, the respondents filed their 
respective appeals before the Appellate Tribunal, Inland Revenue, 
Islamabad. The Tribunal, however, decided in respondents’ favour 
and annulled the amended assessment orders. The tax department 
then chose to file Tax References in the Lahore High Court, 
Rawalpindi Bench under Section 133 of the Ordinance. In all Tax 
References following legal question was framed:-  
 
“Whether ‘OGRA formula’ constitutes ‘definite information’ for 
determination of sales and, therefore the deemed assessment 
order passed under Section 120 of the Income Tax Ordinance, 
2001 could be amended under Section 122(5) of the Income Tax 
Ordinance, 2001?” 
 
 
5. 
       The learned Division Bench of the Lahore High Court vide 
its judgment dated 12.11.2012 answered the legal question in the 
negative after holding that the ‘OGRA formula’ does not constitute 
‘definite information’ within the meaning of Section 122(5) of the 
Ordinance so as to justify amendments in the original assessment 
orders. The reasons that mainly prevailed with the Lahore High 
Court in reaching such conclusion were as follows:- 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
7
 
“12.       The term "definite information" in section 122(5) of the 
Ordinance is not just any information but definite enough to 
satisfy the concerned officer that income chargeable to tax of an 
assessee has escaped assessment or total income of an 
assessee 
has 
been 
under-assessed, 
etc6. 
"Definite" 
means indisputable, known for certain, explicitly precise, 
clearly defined, leaving nothing to implication, established 
beyond doubt and cut and dried. Definite information is, 
therefore, that select information which falls within the 
restrictive meaning of the word "definite" explained above. The 
law also provides that definite information must be acquired 
from 
audit 
or 
otherwise. 
Applying 
the 
interpretative 
tool/doctrine of ejusdem generis which literally means "of the 
same kind or class" and the doctrine provides that where 
general words follow an enumeration of two or more things, 
they apply only to persons or things of the same general kind or 
class specifically mentioned the word "otherwise" appearing 
next to the word "audit" in section 122(5) of the Ordinance on 
the basis of the above doctrine means a methodology akin or 
similar to audit where some determined, final, certain, 
indisputable, calculated information is picked up from any 
available record of the assessee. "Otherwise," therefore, does 
not mean putting information through further process of 
calculation by the department. The word "acquired" used in 
section 122(5) of the Ordinance which literally means to "gain 
possession of" in the present context connotes that the 
information already exits and has to be picked up from the 
records or documents. This acquisition provides no margin for 
incomplete, imprecise and inexact information to be completed 
through further calculation or processing as that would not be 
acquiring information but analyzing it.” 
 
6. 
 
Having felt dissatisfied, the appellants challenged the 
decision of the Lahore High Court in the present appeals after 
obtaining leave of this Court. 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
8
 
7. 
 
Learned counsel for the appellants argued that in all 
these cases, the respondents were given due notice to respond to 
the determination of quantum of CNG produced in the disputed tax 
years on the basis of the conversion formula, which was adopted by 
OGRA in consultation with SNGPL and All Pakistan CNG 
Association and having received no challenge to the authenticity of 
the formula, the same was applied. She further submitted that over 
and above the determination of quantum of CNG by applying the 
conversion formula, a wastage allowance of 11% was also granted 
while amending the assessment orders. With regard to the veracity 
of OGRA’s conversion formula, learned counsel for the appellants 
submitted that this formula has also been accepted by CNG owners 
in the legal proceeding that culminated upto this Court. In this 
regard, reference was made to an unreported judgment rendered on 
24.06.2016 in Civil Appeal Nos. 1436 to 1450 of 2015 by this Court 
in the case of Shabbir Husseini vs. Federation of Pakistan and other 
connected appeals.  
 
8. 
 
The leaned Counsel for the respondents on the other 
hand argued that reliance on OGRA formula was misplaced as it 
could not be made basis to estimate how much CNG was actually 
sold by the respondents. It was contended that the actual sales 
made by the respondents in the tax years in question were duly 
disclosed in the returns of income alongwith the quantum of natural 
gas purchased and even the gas bills were provided during the 
process of investigation and audit yet the OGRA formula was 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
9
applied which in law does not constitute ‘definite information’ so as 
to warrant amendment to the original assessment orders. In support 
of his arguments, the counsel for the respondents relied upon the 
cases reported as Central Insurance Co Vs. Central Board of 
Revenue, Islamabad (1993 SCMR 1232); Inspecting Assistant 
Commissioner and Chairman Panel 20 Companies Vs. Pakistan 
Herald Ltd (1997 SCMR 1256); Edulji Dinshaw Limited Vs. Income 
Tax Officer (1990 PTD 155); EFU General Insurance Co. Limited Vs. 
Federation of Pakistan (1997 PTD 1693) and Income Tax Officer Vs. 
Chappal Builders (1993 PTD 1108) wherein the scope of ‘definite 
information’ has been elaborately discussed. 
   
9. 
 
We shall first proceed to examine the scope of making 
amendment to a tax return filed under the provisions of Income Tax 
Ordinance, 2001, which came into effect from 01.07.2002. Where a 
return of income filed by a taxpayer is in accordance with the 
provisions of sub-section 2 of Section 114 of the Ordinance then in 
terms of Section 120(1) of the Ordinance, it is to be regarded as 
complete and taken to be an assessment made and order issued by 
the Commissioner though no assessment is made by him with 
conscious application of mind. Notwithstanding such deeming 
provision, Section 120(1A) of Ordinance vests in the Commissioner 
the power to conduct audit of income tax affairs of a person in the 
manner prescribed in Section 177 of the Ordinance. Under the 
provisions of Section 177 of Ordinance, the Commissioner can call 
from a taxpayer inter alia record or documents including books of 
accounts, examine the same and make enquiries into the 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
10
expenditure, assets and liabilities. If deemed appropriate and 
necessary, he may even order forensic audit to be conducted. Thus 
the Commissioner can gather necessary information or data for the 
purpose of investigation and audit. After completing the audit, if the 
Commissioner considers necessary, he may obtain taxpayer’s 
explanation on all issues raised in the audit and proceed to amend 
the assessment by virtue of the power contained in sub-section (1) 
or sub-section (4) of Section 122 of the Ordinance as the case may 
be. Apart from conducting audit, the Commissioner, Inland Revenue 
is also vested with the power under sub-section (5A) of Section 122 
of the Ordinance to amend an assessment after making or caused to 
be made such enquiries as he deems necessary if he considers that 
the assessment order is erroneous in so far it is prejudicial to the 
interest of the revenue. In cases where a person has either not 
maintained or failed to produce books of accounts or any document 
or record required to be maintained under Section 174 of the 
Ordinance or any other evidence that was required for the purpose 
of audit or investigation, the Commissioner is vested with the power 
under Section 121 of the Ordinance to make best judgment 
assessment based on any available information or material and 
issue assessment order. Only when the Commissioner, Inland 
Revenue invoke his powers as contained in the above referred 
provisions of the Ordinance in order to conduct audit or 
investigation of the income tax affairs of a person, the original 
(deemed) assessment order come under scrutiny with conscious 
application of mind. Thus the Commissioner, Inland Revenue by 
virtue of and in exercise of the powers contained in Sections 120 
(1A), 121, 122 (1)(5A) and 176 and 177 of the Ordinance can initiate 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
11
the proceedings for investigating the income tax affairs of a person 
notwithstanding the fact that such return of income by virtue of 
Section 120(1) of the Ordinance was taken as an assessment made 
and assessment order issued by the Commissioner, Inland Revenue. 
The deemed assessment order after its amendment with conscious 
application of mind loses its legal effect in terms of sub-section 10 of 
Section 177 of the Ordinance.  
 
10. 
 
The judgments cited by respondents’ counsel pertain to 
disputes arising from the provisions of repealed income Tax 
Ordinance, 1979. A bare comparison of the provision of Section 65 
(2) of the repealed Ordinance and Section 122(5) of the Income Tax 
Ordinance, 2001 shows that the procedure prescribed for amending 
an assessment order under the repealed law was not the same as in 
the present law. In order to appreciate the difference between these 
provisions of the two laws, it would be advantageous to reproduce 
Section 65(2) of the repealed Ordinance and Section 122(5) of the 
present Ordinance:-  
 
Section 65(2) of Income Tax Ordinance, 1979 
 
“65.  Additional assessment.- (1) ……………………………………… 
 
(2) 
No proceedings under sub-section (1) shall be initiated unless 
definite information has come into the possession of the Deputy 
Commissioner [and] he has obtained the previous approval of the 
Inspecting Additional Commissioner of Income Tax in writing to do so. 
 
Section 122(5) of Income Tax Ordinance, 2001 
 
 “122(5) An assessment order in respect of tax year, or an 
assessment year, shall only be amended under sub-section (1) and 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
12
an amended assessment for that year shall only be further amended 
under sub-section (4) where, on the basis of definite information 
acquired from an audit or otherwise, the Commissioner is satisfied 
that — 
 
(i)  
any income chargeable to tax has escaped assessment; 
or 
 
(ii)  total income has been under-assessed, or assessed at 
too low a rate, or has been the subject of excessive 
relief or refund; or  
 
(iii)  
any amount under a head of income has been mis-
classified.……………………………………………….” 
 
(underling is ours to lay emphasis) 
 
 
11. 
 
From the above provisions of the two laws, it is evident 
that the power to initiate proceedings to amend an assessment 
order was not available under Section 65(2) of the repealed 
Ordinance unless some definite information had already come in the 
hands of the Income Tax Officer. This was so, as under the repealed 
Ordinance, the initial assessment used to be made by the Income 
Tax Officer with the conscious application of mind, therefore, second 
opinion on such assessment was not permissible as a matter of 
course. The Income Tax Officer had to have definite information in 
his hands before he could even initiate proceedings for making 
additional assessment. In the case of Central Insurance Co. Vs. 
Central Board of Revenue, Islamabad (1993 SCMR 1232) while 
discussing the scope of Section 65 of the repealed Ordinance, it was 
held that once the return of income, disclosing all material facts 
without any concealment has been assessed under Section 59 of the 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
13
repealed Ordinance then unless some definite information first 
became available to the income tax authorities, the assessment 
order cannot be re-opened for scrutiny. In other words, no change of 
opinion was held to be permissible on the basis of material on which 
the Income Tax Officer has already made assessment with conscious 
application of mind. Thus in absence of definite information, the 
very initiation of the proceedings with the intent to make additional 
assessment was prohibited under the repealed law. The ratio of 
other judgment cited at the bar by the counsel of the respondents is 
also the same. Under the Income Tax Ordinance, 2001, however, the 
Commissioner has been given the authority to initiate proceedings 
such as audit  and investigation and in the process if he acquires 
‘definite information’ which satisfies him to form an opinion that 
any income chargeable to tax has been under assessed or escaped 
assessment or wrongly classified or assessed at too low a rate then 
he can proceed to amend the original assessment order, which on 
account of provisions of Section 120(1) of Ordinance was deemed to 
have already been issued by him. The main reason behind this 
change brought about under the Ordinance was that the original 
assessment orders are not issued with conscious application of 
mind as was the case under the repealed Ordinance and therefore 
the question of prohibiting second opinion on a consciously 
assessed assessment order does not arise under the present 
Ordinance.   
 
12. 
 
Before we examine what ‘definite information’ came 
in the hands of the Commissioner, Inland Revenue which 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
14
prompted him to amend the assessment orders, it would be 
advantageous to reproduce the definition of the term ‘definite 
information’ as defined in sub-section (8) of Section 122 of the 
Ordinance. It states “For the purposes of this section, “definite 
information” includes information on sales or purchases of any 
goods made by the taxpayer, receipts of the taxpayer from 
services rendered or any other receipts that may be chargeable to 
tax under this Ordinance, and on the acquisition, possession or 
disposal of any money, asset, valuable article or investment made 
or expenditure incurred by the taxpayer.” Now, the information 
available with the tax authorities in the present case was the 
volume of natural gas purchased by each of the respondents and 
the rates of the natural gas as well as of the CNG that were 
prevalent in the tax years in question. Such information was 
procured from SNGPL and OGRA by exercising powers contained 
in Section 176(1) (a) of the Ordinance. After applying OGRA’s 
conversion formula to the volume of the natural gas consumed, 
the tax authorities ascertained the kilograms of CNG produced 
by the respondents in each tax year in question. A wastage 
allowance of 11% in the conversion process was also granted. On 
the basis of the quantum of CNG so ascertained and taking into 
account the rates of CNG that were prevalent at the relevant 
time, the tax authorities reached the conclusion that the 
respondents have not been truthful in their disclosures as they 
underreported the sale of CNG in their returns of income. Based 
on such calculations, the amended assessment orders were 
issued.  
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
15
 
13. 
 
It is not the case of the respondents that the quantity of 
CNG produced from a given volume of natural gas is not 
ascertainable at all. Certainly it can be done with the application of 
a mathematical or scientific formula and that is exactly what has 
been done in the present case when conversion formula was 
applied. For the purpose of determining the correct tax liability, any 
information falling within the ambit of ‘definite information’ may not 
by itself produce an answer unless such information is further 
processed. The use of any process to ascertain something depends 
upon the type of information and the result that is sought to be 
obtained. So the process could be a chemical analysis conducted in 
a laboratory or the application of some mathematical or scientific 
formula or simply the use of a calculator. For example need may 
arise to apply some formula or method which converts volume into 
weight or vice versa, miles into kilometers or vice versa. The word 
‘definite’ not only means being certain of something but also means 
that one knows with certainty that something will happen. In the 9th 
edition of Oxford dictionary by A.S. Hornsby1 the word ‘definite’ has 
been defined as “something that you are certain about or that you 
know will happen”. Internationally there are three formulas that are 
used to convert the volume of natural gas into CNG. Of these, the 
one that is applied to convert volume of natural gas into kilograms 
of CNG has been adopted by OGRA. The definite information 
procured by tax authorities was then processed through this 
formula to find out how much CNG was produced from the natural 
gas consumed. To prohibit use of the conversion formula would in 
                                                
1 Oxford Advanced Learner’s Dictionary, 9th edition, A.S. Hornby 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
16
reality amount to prohibiting the tax authorities from ascertaining 
the quantum of CNG sold by the respondents. If the tax authorities 
are denied the means to ascertain the quantum of CNG then no 
matter how disproportionate the sale of CNG to the consumption of 
natural gas is declared, the same had to be accepted by Income Tax 
Authorities and the evasion of tax would go undetected. Therefore, 
application of any scientific or mathematical method to determine 
the quantum of sale of CNG for the purpose of determining the tax 
leviable under the Ordinance, by no stretch of imagination can be 
excluded from consideration. We may point out here that the 
parameters of conversion formula applied in the present case for the 
purposes of converting the volume of natural gas into weight of 
CNG, which were also reproduced in the amended assessment 
orders, were also never challenged by the respondents to be 
arbitrary or not sustainable on any mathematical or scientific basis.  
 
14. 
 
As to the veracity of the OGRA’s conversion formula, it 
is pertinent to point out that a dispute between CNG station owners 
and Sale Tax authorities came up for consideration before the High 
Court of Sindh and with it came up for consideration OGRA’s 
conversion formula. The decision rendered by the Sindh High Court 
on 06.10.2015 in Constitution Petitions No. 3266 of 2014 (Shakeel 
Ahmed Vs. Federation of Pakistan alongwith several other connected petitions) 
was challenged by CNG station owners before this Court. After grant 
of leave, the appeals of CNG owners were dismissed on 24.06.2016. 
In this decision the validity of conversion formula adopted by OGRA 
has been clearly acknowledged by CNG owners. The relevant portion 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
17
in paragraph 10 of the said judgment of this Court authored by our 
learned brother Sheikh Azmat Saeed, J in Civil Appeals Nos. 1436 to 
1450 of 2015 ‘Shabbir Husseini Vs. Federation of Pakistan and 
other connected cases is reproduced below:-     
 
“……………………… There is an admitted formula for 
conversion of Natural Gas into CNG, which is employed for 
determining the tax liability. In pith and substance, it is the 
case of the Appellants that though such formula may be 
scientifically correct yet in practicable terms there is some 
wastage in the process of conversion, as a consequence 
whereof, Sales Tax is collected on Natural Gas with regard to 
its levy on CNG, including the Natural Gas, which is lost 
through wastage and is never supplied by the Appellants to the 
CNG consumers resulting in collection of the Sales Tax with 
regard to the supply of CNG which is never made. It is also the 
case of the Appellants that such wastage is about 11% of the 
Natural Gas. By way of the impugned judgment, it has been 
held that the conversion formula has been notified and takes 
into account the element of wastage.” 
 
   
15. 
 
The above quote from Shabbir Husseini’s case supra 
shows that CNG owners did not dispute the conversion formula and 
were only seeking that wastage of natural gas, which in their 
opinion occurs to the extent of 11% in the process of conversion, 
ought to have also been factored in while fixing the price of CNG. 
This claim for wastage was based on the ground that it has been 
historically accepted by Federal Board of Revenue. We do not think 
it is necessary to deliberate upon the question whether any wastage 
occurs in the process of conversion or not for the simple reason that 
in the cases before us wastage to the extent claimed by the CNG 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
18
owners i.e. 11%, has already been accounted for by the 
Commissioner, Inland Revenue while amending the assessment 
orders. The tax department also chose not to challenge the grant of 
11% wastage allowance to the respondents before higher forum and 
thus never made an issue in the present proceedings.  
 
16.   
From the above discussion, it is quite apparent that the 
quantum of CNG produced by the respondents in each of the tax 
years in question was not determined on the basis of some 
hypothetical or arbitrary criteria. The tax authorities first procured 
from SNGPL the volume of natural gas consumed by the respondent 
and its rates that were prevalent during the tax years in question. 
Likewise, they procured from OGRA the rates of CNG prevalent in 
the tax years in question. All such information was procured by 
exercising powers contained in Section 176 of the Ordinance. Both 
the sources of information i.e. SNGPL and OGRA are bodies that are 
competent to divulge such information with absolute correctness as 
one is the supplier of natural gas and the other fixes the retail price 
of CNG in the country. To the information so procured, which on the 
face of it fall within the ambit of ‘definite information’, the tax 
authorities applied OGRA’s conversion formula to ascertain the 
quantum of CNG produced from the natural gas consumed in each 
of the tax years in question. It then transpired that the sale of CNG 
has been under-reported, which led to issuance of amended 
assessment order. We find no legal infirmity in the manner in which 
the tax authorities ascertained the quantum of CNG produced from 
the volume of natural gas consumed in the process of conversion.  
 
CIVIL APPEAL NOs. 992 TO 1017, 1206 & 1207 OF 2013, 21 
& 22 OF 2015, 57 TO 59 OF 2015 
19
17. 
 
In view of what has been discussed above, the answer 
to the legal question framed by the High Court could only be in the 
affirmative. We, therefore, allow these appeals, set-aside the 
impugned judgment passed in all connected cases and restore the 
amended assessment orders issued to the respondents.   
 
 
 
 
CHIEF JUSTICE 
JUDGE 
JUDGE 
 
 
Islamabad, the  
 
Announced on _______________ by Hon’ble Mr. Justice Faisal Arab 
 
Approved For Reporting 
Khurram 
