Procedural flaw in Rs880m IT case: ATIR recalls order despite reference pending before LHC

ISLAMABAD: A procedural issue has been witnessed in a high-value income tax case worth approximately Rs 880 million, after the Appellate Tribunal Inland Revenue (ATIR), Lahore Bench, recalled its own earlier order through a miscellaneous application rectification, even as a legal reference challenging that very order was already pending before the Lahore High Court.

Details of the cases revealed that taxpayer had originally declared taxable income of approximately Rs 24.18 million in its income tax return. Following an audit, however, revenue authorities reassessed the matter and passed an order that inflated the taxable income to Rs 881 million, by making multiple additions on account of alleged unverified purchases, unexplained expenses, and questioned salary disbursements. The taxpayer challenged the assessment before the ATIR, which dismissed the appeal through a detailed order dated 4 November 2025, leaving the Rs 880 million demand intact. The taxpayer then exercised its statutory right under Section 133(1) of the Income Tax Ordinance, 2001, by filing a Reference Application before the Lahore High Court on questions of law arising from the Tribunal’s order. Documents reviewed by this scribe confirmed that the reference remains pending adjudication before the High Court.

A new development took place at this time. Rather than awaiting the High Court’s determination of the reference, the taxpayer simultaneously filed a Miscellaneous Application before the same ATIR bench, seeking recall of the very order that was already the subject of the High Court proceedings. On 17 February 2026, the Tribunal allowed the application and set aside its own order of 4 November 2025, remanding the case to the tax department for fresh adjudication.

Tax experts opined that once a party approaches a superior court challenging a tribunal order, the tribunal’s authority over that order is ordinarily considered spent. For the ATIR to recall and replace an order that was simultaneously before the Lahore High Court raises the spectre of conflicting outcomes, the High Court may decide the reference on facts and law that no longer represent the live order in the proceedings. Critics argue the move also undermines the policy rationale behind Section 133 references, which exist precisely to give superior courts supervisory oversight over tribunal determinations, they added.

Copyright Business Recorder, 2026