LHC restrains FBR from making further tax recovery from PASSCO

ISLAMABAD: The Lahore High Court has restrained the Federal Board of Revenue (FBR) from making any further tax recovery from the Pakistan Agricultural Storage and Services Corporation (PASSCO), a state-owned entity, and has allowed the corporation to operate its bank accounts until the next date of hearing. A Division Bench passed the interim order in W. P and issued notices to the respondents for October 15, 2026. Counsel for PASSCO, Ch. Anwaar-ul-Haq Arif told the Court that the corporation had challenged an assessment order dated June 22, 2026 before the Commissioner (Appeals). That appeal was dismissed on September 14, 2026, because PASSCO, as a government-owned entity, has a remedy of Alternative Dispute Resolution (ADR) under Section 134A of the Income Tax Ordinance, 2001. PASSCO then filed a petition under Section 134A on September 25, 2026. Under Section 134A(7), recovery is deemed stayed once the ADR Committee is constituted. Counsel submitted that before the ADR petition was filed, the tax department approved recovery under Section 140. A recovery notice was issued and part of the disputed amount was recovered from PASSCO’s bank accounts on the same day. The petitioner argued that this recovery was contrary to the Supreme Court’s judgment in Pakistan LNG. In that case the apex court held that same-day recovery under Section 140 is impermissible, and that a recovery notice must specify the date on which recovery will be made so the taxpayer has a reasonable opportunity to settle the liability. Counsel further contended that once proceedings under Section 134A are initiated, no recovery can be made from a government-owned entity. Welcoming the order, Ch. Anwaar-ul-Haq Arif, Advocate, said the Court’s intervention reflects the spirit of the law. “Disputes between the state and its own entities are meant to be resolved through dialogue under the ADR mechanism, not through coercive recovery, ” he said. “Section 134A was enacted precisely to avoid a situation of the state litigating against the state. This order protects public resources and facilitates the smooth functioning of a vital national institution responsible for food security. ” The matter will be taken up again on October 15, 2026. Copyright Business Recorder, 2026

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