You are currently viewing TAX DISPUTE RESOLUTION


The apex revenue authority at the federal level, Federal Board of Revenue (FBR), administers four major laws at national level. These are Income Tax Ordinance, 2001, Sales Tax Act, 1990, and Federal Excise Duty, 2005, by Inland Revenue Service (IRS), and Customs Act, 1969 by Customs Group. Both India and Pakistan inherited tax administration and tax appellate system from the British Raj. After independence in 1947 (Pakistan announced it on 14 August 1947 and India a day later), the direct and indirect taxes, unlike in post-independence India, remained under one umbrella, Central Board of Revenue (CBR), established by the Central Board of Revenue Act of 1924, later renamed as Federal Board of Revenue (FBR). In 2007, it was made a statutory body under the Federal Board of Revenue Act, 2007, having common Chairman, who is also Federal Secretary, Revenue Division of Ministry of Finance, Government of Pakistan. In India, after independence, there was a separate organization for collection of direct taxes renamed Central Board of Direct Taxes (CBDT), and, for indirect taxes, Central Board of Indirect Taxes and Customs (CBIC). Each Board is headed by a separate Chairman, who is also ex-officio Special Secretary to the Government of India. Matters relating to the levy and collection of all direct taxes are looked after by the CBDT whereas those relating to levy and collection of Customs and Central Excise Duties and other indirect taxes fall within the purview of the CBIC. The two Boards were constituted under the Central Board of Revenue Act, 1963, repealing the Central Board of Revenue Act, 1924, to administer direct taxes. The detailed history is available on the official website of CBDT. While India has been continuing till today with Income Tax Appellate Tribunal, established in 1940, Pakistan renamed it Appellate Tribunal Inland Revenue (ATIR) in 2007 after establishing IRS within FBR. However, like India, Pakistan continued with Customs Tribunal as pre-independence legacy.
In Pakistan, at federal level, tax litigation begins when the taxpayer disagrees with the tax assessed by the tax authorities or any order concerning imposition of penalty or additional tax (interest) passed by the tax authorities, or any administrative decision taken by the tax authorities working under the IRS or Customs Group under the control of FBR.
Tax litigation has been increasing in Pakistan due to several reasons discussed in the coming paragraphs. It is worthwhile to mention that with income tax filers of less than three million as on April 5, 2021, as per Active Taxpayers List (it is updated every Monday by FBR on its website), the total pendency in one area alone, income tax, on the said date with all appellate levels, e.g. Commissioners Inland Revenue (Appeals), ATIR, High Courts (HCs) and Supreme Court of Pakistan (SCP), involved disputed tax of PKR 1500 billion, almost the same amount collected by FBR under this head in fiscal year 2019-20, as per annual publication FBR Year Book 2019-20. We personally approached Chairman FBR on March 31, 2021, and he confirmed that in respect of all the four tax laws administered by his organization on national level, the amount stuck up in various appellate forums is PKR 2185 billion whereas in the first nine months of the current fiscal year, i.e. 2020-21 (July 2020 to June 2021), the total collection after giving refunds was PKR 3400 billion. Over the last 10-year period, from 2010 to 2020, over 200,000 cases remained undecided at various appellate levels, as per telephonic conversation with the Chairman FBR. From 2014 to 2016, the combined pendency of litigation cases in the HCs and SCP increased from 304,813 to 312,478. In the SC alone, the pendency of cases increased from 22,764 in 2014 to 31,807 in 2016. However, there has been marginal decrease in the pendency of tax litigation cases in the HCs from 282,049 in 2014 to 280,671 in 2016.
Approximately 717,266 cases have been filed in the SC and HCs during the three-year period from 2014 to 2016. From 2016 to 2020, this number has increased to about 985,000 as per verbal interviews with Members Legal, IRS and Customs. The SC and HCs gave decisions in 685,553 cases. The SC and HCs decided 48,637 and 639,916 cases during the same period. Around 59,177 and 658,089 fresh tax litigation cases were instituted in the SC and the Hcs, respectively, during the same period.
Thus, the statistical data reveal that the overall pendency of cases in the SC and the HCs has increased and the fresh litigation cases outpaced the cases decided by the courts during the mentioned period.
Pakistan has conventional system of tax appeals, like many other countries. An aggrieved taxpayer may appeal against the decision of the tax authorities in the Office of the Commissioner (Appeals) competent to hear the appeal, and in case of customs, Collector of Appeals. If the decision of the Commissioner (Appeals) [CIR(A)] or Collector of Appeals (CoA) does not satisfy the taxpayer or the tax authorities, either party may appeal against such decision in the ATIR in the case of IRS jurisdiction and CAT in the case matters relating to disputes under the Customs Act, 1990, and rules issued thereunder.
If one of the parties is not satisfied with the decision of the ATIR of CAT, it may file a reference in the HC on the question(s) of law arising out of the order of ATIR of CAT, as the case may be. The reference application is heard by a Division Bench (DB) of the High Court as provided in tax codes administered by the FBR, mentioned in the introduction. The DB has only advisory jurisdiction to answer the question of law arising out of the order of Tribunal. If the taxpayer or the tax authorities are not satisfied with the decision of the HC, either party may file a civil petition to leave the appeal (CPLA) in the SC under Article 185(2)(e) of the Constitution of Pakistan.
The first two appellate fora decide the cases on both questions of fact and questions of law whereas the HCs and the SC do not examine the facts; they only decide the correct application of substantive law and of fundamental procedural rules. On the fact finding, the order of the ATIR or CAT is final.
At all appellate fora, cases are represented by the taxpayer’s representative or counsel. Especially, cases are pleaded through legal representative in the Tribunals, the HCs and the SC. Normally, the tax authorities represent the cases at the first and second level of appeal. However, before the HCs and SC, the tax authorities are represented by the legal advisors or the attorneys.
Tax Appeal System in Pakistan
Pakistan has a four-tier tax appeal system, including the Commissioner (Appeals), the Tribunal, the HCs and the SC. First two tiers, the Commissioner (Appeals) and Collector of Appeals and the Tribunal, are appellate fora of the first and second instance that decide the tax litigation cases on question of facts and question of law. The last two tiers, the HC and the SC are the judicial fora that decide tax matters involving question(s) of law only. Below we discuss the first tier, the Commissioner (Appeals) and Collector of Customs. Other tax dispute resolution fora will be discussed in the following issues of JWT.
The Commissioner (Appeals) & Collector of Appeals
Normally, the Commissioner (Appeals) or Collector of Appeals is a senior officer of the Inland Revenue Service (IRS) or Customs Group who is appointed by the FBR. There are several offices of the Commissioner (Appeals) and Collectors of Appeal across the country. A taxpayer dissatisfied with any order concerning assessment of tax liability, penalty or additional tax, rectification of mistake, claiming of refund or any other administrative decision of the tax authorities may appeal to the Commissioner (Appeals) on a prescribed form within 30 days of service of demand notice for tax recovery or administrative decision. The same is the case in the case of Customs, where any order-in-original can be assailed by the aggrieved party before the Collector of Appeals. If appeal is against assessment order, a fee PKR 5,000 in the case of company and PKR 2500 in other cases is charged. In case the appeal is against an order other than assessment order, fee for company is PKR 5,000 and for other taxpayers, it is PKR 1000. The Commissioner (Appeals) may grant stay against recovery of tax for 30 days period further extendable for another 30 days. After providing adequate opportunity of hearing to both the parties, the Commissioner (Appeals) has to pass order within 120 days of filing of appeal or within an extended period of 60 days wherein he can:
a. confirm the assessment order of the tax authorities;
b. modify the assessment order of the tax authorities; or
c. annul the assessment order of the tax authorities.
While modifying the assessment order of the tax authorities, the Commissioner (Appeals) can increase the amount of tax or decrease the amount of refund, however, only after affording sufficient opportunity of hearing to the taxpayer.
Effective 1 January 2021, the taxpayers are legally required to file appeals manually in cases pertaining to the tax year 2014 and thereafter. The taxpayers are obliged to electronically file their appeals before the Commissioner (Appeals), together with prescribed documents, through the IRIS web portal of the Federal Board of Revenue. They are also required to electronically file stay applications against recovery of tax by the tax authorities.
All income tax appeals and stay applications are to be finalised in an electronic manner by the Commissioner (Appeals) within the stipulated time period. The allocation of the appeals, communication of notices to concerned parties, verification, enquiries, hearings and communication of the orders, etc. are also be conducted through the web portal.
Moreover, a Commissioner (Appeals) is obliged to electronically submit a monthly performance report by the 5th of every month and a stay applications’ disposal report by the 5th and 20th of every month.
The electronic appeals system aims to provide greater convenience to taxpayers, reduce the cost of litigation for taxpayers, ensure a uniform, just and fair appeal process and bring efficiency, transparency and accountability in the functioning of the appellate system.

The author is serving as Additional Commissioner Inland Revenue at Federal Board of Revenue, Pakistan. He can be contacted at

Muhammad Ali Asghar

This is the Admin of this website

Leave a Reply