IHC Suspends FBR Super Tax Recovery Notices

The Islamabad High Court has suspended recovery notices issued by the Federal Board of Revenue (FBR) to three independent power producers regarding the collection of super tax, citing the authorities’ failure to adhere to procedural requirements prescribed under the Income Tax Ordinance, 2001, according to a report by Business Recorder.

The order was issued during proceedings on petitions filed by the companies challenging recovery actions initiated by the Corporate Tax Office Islamabad.

According to the petitions, the tax authorities commenced enforcement proceedings without first issuing the mandatory notice required under Section 137 of the ordinance. This provision obligates the tax department to formally notify taxpayers of their assessed tax liability and allow them a specified period to deposit the amount before coercive recovery measures are undertaken.

The petitioners informed the court that although the ruling of the Federal Constitutional Court regarding the applicability of super tax is binding on the tax department, the authorities nonetheless failed to comply with the procedural safeguards stipulated under the law.

They further submitted that the tax department had amended their deemed assessment orders under Section 122(5A) of the ordinance. The revisions increased their declared taxable income, consequently resulting in higher super tax liabilities.

Subsequent to these amendments, the Corporate Tax Office Islamabad issued notices under Sections 138 and 140 of the ordinance, leading to the attachment of the companies’ bank accounts as part of the recovery process.

However, the companies argued that the authorities bypassed Section 137, which requires the issuance of a demand notice enabling the taxpayer to voluntarily settle the assessed liability prior to the initiation of enforcement actions.

The petitioners also informed the court that appeals had been filed before the Commissioner Inland Revenue (Appeals), although no interim relief in the form of a stay order against the recovery proceedings had been granted.

In its observations, the Islamabad High Court noted that the petitioners had not contested the constitutionality of Section 4C of the ordinance—under which super tax is imposed—but had instead challenged the procedural manner in which the tax authorities executed the recovery process.

The court held that the arguments raised by the petitioners required judicial examination and consequently issued notices to the tax authorities. It further ordered that the operation of the recovery notices issued on January 30 and 31, 2026, by the Corporate Tax Office Islamabad shall remain suspended until the next hearing.