ISLAMABAD: To immediately recover disputed tax from taxpayers, the federal government has drastically reduced time period for the recovery of tax arrears when a high court rules in favor of the tax department.
Through Finance Bill 92025-26), the Federal Board of Revenue (FBR) has introduced a significant amendment to the Income Tax Ordinance, 2001.
The amendment, specifically a new subsection added to Section 140 of the Ordinance, stipulates that tax payable under an assessment order will become immediately recoverable, or within the time specified in a notice issued by the income tax authority, irrespective of timelines in other provisions or court judgments. This accelerated recovery is triggered when a tax issue is decided by a High Court or the Supreme Court of Pakistan.
A crucial proviso within this new subsection clarifies the immediate impact on appeals: “Provided that where the High Court decides the appeal filed by the Commissioner in favor of the department under section 133, recovery shall be made after seven days from the date of the order of the High Court.”
This means that if a Commissioner’s appeal against a taxpayer is upheld by the High Court, the tax arrears will become recoverable within a mere seven days from the date of the High Court’s order. FBR is expected to issue further guidelines on the implementation of this amended section, particularly concerning the issuance of recovery notices and the procedures for taxpayers to adhere to the compressed timeline. Tax professionals and businesses are advised to carefully review their litigation strategies and prepare for swifter recovery actions in light of this new legal provision.
When contacted, tax lawyer Waheed Shahzad Butt stated that earlier new amendments introduced through the Tax Laws (Amendment) Ordinance, 2025 have ignited controversy across legal and tax circles, as they grant sweeping powers to tax officers to recover taxes without issuing prior notice to taxpayers. Mr. Butt warned that such unchecked powers could erode public trust in the tax system and potentially lead to abuse. This will undermine the neutrality of the taxation system and promote tax robbery moves rather than genuine tax recovery. IHC has earlier ruled that a notice under Section 138, is mandatory before initiating any coercive tax recovery action under Section 140.
Copyright Business Recorder, 2025
