IHC rules all tax reference pleas to be sent to ATIR as pending appeals

ISLAMABAD: The Islamabad High Court (IHC) has held that all tax reference applications filed directly before it against orders of the Commissioner Inland Revenue (Appeals) CIR(A) are to be remitted to the Appellate Tribunal Inland Revenue (ATIR), where such cases will be treated as pending appeals before the ATIR.

Historically, Pakistan’s tax appellate framework was straightforward: a taxpayer aggrieved by a tax authority’s assessment order would file a first appeal with the CIR (A). A further appeal lay before the ATIR, and questions of law arising from the ATIR’s decision could be taken to the High Court through a tax reference application.

This long-standing scheme was disrupted by the Tax Laws (Amendment) Act, 2024, which restructured the appellate hierarchy.

FBR has failed to implement ATIR order

Under that new regime, depending on the monetary impact of a tax assessment order, the first appeal could lie either before the CIR (A) or the ATIR, and thereafter a reference would lie before the High Court against the decision of either forum. The Finance Act, 2024, maintained this approach.

However, these changes triggered confusion, procedural complexity, and litigation. The Finance Act, 2025; therefore, reversed course. Under the currently applicable law, a taxpayer may appeal to the CIR (A) and, thereafter, to the ATIR, or file an appeal directly before the ATIR against a tax assessment order. A further challenge to an ATIR order lies with the High Court by way of a reference. As a result, reference applications can no longer be filed against CIR (A) orders.

Against this legislative backdrop, the IHC confronted the status of reference applications already pending before it that had been filed against CIR (A) orders under the now-defunct 2024 regime.

The Court held that the amendments introduced through the Finance Act, 2025- being procedural in nature and restoring an additional forum of appeal—must be applied retrospectively to all pending cases. Relying on long-standing jurisprudence from the Supreme Court, the Court reaffirmed that procedural changes, particularly those that confer a beneficial right such as an additional appeal, operate retrospectively unless they disturb vested rights or reopen past and closed matters.

Since no party would suffer prejudice from being granted an additional level of adjudication, the IHC ordered that all such pending references be transmitted to the ATIR to be heard as appeals. The Court also endorsed the Lahore High Court’s earlier view in Harris Hasan Syed v. CIR that court fees paid for filing these references should be refunded to the applicants.

The taxpayers were represented by several eminent tax practitioners from Islamabad, whereas the Federal Board of Revenue was represented by its legal counsel, Osama Shahid. Both parties concurred that the references should be forwarded to the ATIR.

Copyright Business Recorder, 2025