RIAA Barker Gillette has secured an interim order from a Division Bench of the High Court of Sindh, Karachi. The order restrains the Federal Board of Revenue (FBR) from coercive super tax recovery against an individual taxpayer.
The FBR pursued recovery under Section 4C of the Income Tax Ordinance, 2001. It cited the Federal Constitutional Court’s recent judgment upholding that provision.
Background
The Section 4C demand arose from an alleged taxable capital gain on the disposal of immovable property by our client. In July 2024, the Appellate Tribunal Inland Revenue (ATIR) set aside the same super tax demand in our client’s favour. Critically, the FBR did not file a reference under Section 133 of the Ordinance. Accordingly, the ATIR’s order attained finality. Nonetheless, on 30 January 2026, the authorities issued a recovery notice for the identical amount. They relied on a recent Federal Constitutional Court ruling on the vires of Sections 4B and 4C. The client was not a party to those proceedings.
Arguments before the Court
We advanced three principal grounds. First, the recovery notice impermissibly reopened a matter that had attained finality before the ATIR. Secondly, pursuing the same liability afresh would expose the client to double jeopardy under Article 13 of the Constitution. Thirdly, the authorities had breached the right to fair trial under Article 10A. They had never put any Section 4C allegation to the client in a subsequent show cause notice. We further submitted that the Federal Constitutional Court’s ruling addressed only the vires of Section 4C. Our client, however, had succeeded before the ATIR on a discrete statutory point under Section 37(3A) of the Ordinance. The constitutional ruling had no bearing on that point.
Strategic significance
The interim order reaffirms a fundamental principle in tax adjudication. Once the appellate hierarchy conclusively decides an issue of liability and no reference follows, the demand cannot resurface through super tax recovery. Moreover, a constitutional ruling on vires does not revive a demand the Tribunal has negatived on separate statutory grounds.
“Once the appellate hierarchy decides tax liability conclusively and no reference follows, the matter cannot resurface through a recovery notice. Taxpayers are entitled to expect finality before being exposed to coercive recovery The Court’s order reinforces this fundamental safeguard,” said Shahbakht Pirzada, Partner at RIAA Barker Gillette.
Shahbakht Pirzada (Partner-Pakistan) leads the matter with assistance from Sheheryar Malik (Associate).
For advice on tax disputes or constitutional challenges in fiscal matters, please contact Shahbakht Pirzada today.
This article is not legal advice; it provides information of general interest about current legal issues.
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RIAA Barker Gillette is Pakistan’s premier law firm, with an on-the-ground presence in three major cities in Pakistan: Karachi, Islamabad and Lahore, and affiliated offices in Dubai (DIFC) and London.
The firm practices in all areas of corporate, commercial and dispute resolution law. Leading international legal directories consistently recognise the firm as a top-tier law firm in Pakistan.
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