ISLAMABAD: Islamabad High Court (IHC) has suspended Federal Board of Revenue’s (FBR) notices issued to three independent power producers (IPPs) for recovery of Super Tax without fulfilment of procedure prescribed by the Income Tax Ordinance 2001.
Three IPPs have challenged the recovery notices of Super Tax where recovery proceedings have been started without giving a time period to the companies required under Section 137 of the Income Tax Ordinance, 2001.
Interestingly, the companies have admitted before the IHC that that the judgment passed by the Federal Constitutional Court (FCC) on Super Tax has a binding effect upon the tax department, but the department bypassed the procedure by failure to issue notice under Section 137.
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According to the details, the Corporate Tax Office Islamabad has adopted similar kind of recovery proceedings on weak legal grounds against the IPPs without issuing notices under Section 137 of the Income Tax Ordinance, 2001. Notice under Section 137 of the Income Tax Ordinance, 2001 for recovery of super tax demand raised through an order issued under Section 4C of the Income Tax Ordinance, 2001 is an integral step mandated by Section 4C(4) of the Income Tax Ordinance, 2001.
This step has been circumvented by the CTO.
The deemed assessment orders of all three companies were amended under section 122(5A) of the Ordinance, which increased the taxable income of companies making them liable to pay higher amount of Super Tax.
The CTO Islamabad attached the bank accounts of all three companies by serving notices under Section 138 and Section 140 of the Income Tax Ordinance, 2001, but failed to serve notice under Section 137 of the Income Tax Ordinance, 2001, which mandates to allowing time to the taxpayer to deposit the determined tax liability voluntarily following the issuance of an order under Section 4C of the Income Tax Ordinance, 2001. The non-serving notice under Section 137 of the Income Tax Ordinance, 2001 has bypassed the legal procedure and rendered the recovery process infructuous according to the companies.
The companies filed appeals with the Commissioner Inland Revenue (Appeals) which did not grant stay against recovery of super tax.
According to the IHC’s order, through this Writ Petition, the petitioner has challenged notices dated 30.01.2026 and 31.01.2026 issued by respondent no. 3 (Assistant Commissioner/ Deputy Commissioner IR, CTO Islamabad).
At the very outset, learned counsel for the petitioner submitted that the petitioner has not challenged the vires of Section 4C of the Income Tax Ordinance, 2001; rather, it is contended that the judgment passed by the Federal Constitutional Court (FCC) has a binding effect upon the respondents. It was further submitted that the mandatory requirements provided under Section 4C have not been complied with.
The tax department were under a statutory obligation to first issue a notice under Section 137 of the Income Tax Ordinance, 2001, and thereafter to proceed with recovery in accordance with Section 138 thereof.
Learned counsel argued that in the instant case, without complying with the statutory provisions of Section 137 ibid, the respondents directly attached the petitioner’s bank accounts, which action is in violation of Section 4C as well as the relevant provisions of the Income Tax Ordinance, 2001. It was contended that the impugned notices are in derogation of the petitioner’s fundamental rights guaranteed under Articles 4, 8, 9, 10A, 18, 23, 24, and notices are in derogation of the petitioner’s fundamental rights guaranteed under Articles 4, 8, 9, 10A, 18, 23, 24, and 25 of the Constitution.
The submissions made by the learned counsel for the petitioner are worth consideration, IHC stated.
Let at the first instance, notices be issued to the respondents (tax department).
Meanwhile, the operation of the impugned notices dated 30.01.2026 and 31.01.2026 issued by the CTO Islamabad shall remain suspended till the next date of hearing. In case learned counsel for the petitioner fails to proceed with the matter, the interim order shall automatically stand recalled, IHC order added.
Copyright Business Recorder, 2026
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