LHC restrains FBR from making further tax recovery from PASSCO

The Lahore High Court has placed a hold on the Federal Board of Revenue (FBR) from collecting additional taxes from Pakistan Agricultural Storage and Services Corporation (PASSCO), a state-owned firm. The court has enabled PASSCO to manage its bank accounts until the upcoming court hearing. The interim ruling came from a Division Bench and prompted the court to send notices to the respondents by October 15, 2026.

PASSCO's legal representative, Ch. Anwaar-ul-Haq Arif, argued that the corporation had contested an assessment order from June 22, 2026, before the Commissioner (Appeals). However, their appeal was rejected on September 14, 2026, because PASSCO has the right to use Alternative Dispute Resolution (ADR) under Section 134A of the Income Tax Ordinance, 2001.

PASSCO subsequently filed a petition under Section 134A on September 25, 2026. According to Section 134A(7), the recovery of taxes is placed on hold when the ADR Committee is established. Arif claimed that tax officials had already given permission to recover funds under Section 140 before the ADR petition was submitted. That part of the disputed amount was taken from PASSCO's bank accounts on the same day.

Arif argued that this action went against the Supreme Court's decision in Pakistan LNG, which stated that same-day recovery under Section 140 is unlawful and that a recovery notice must indicate the date of recovery, allowing the taxpayer a chance to settle the debt. Furthermore, Arif contended that once legal proceedings under Section 134A begin, any recovery from a government-owned entity like PASSCO is prohibited.

Arif welcomed the court's decision, stating that it reflects the spirit of the law. "Disputes between the state and its own entities are meant to be settled through dialogue under the ADR mechanism, not through forceful recovery," he commented. "Section 134A was established to prevent scenarios where the state sues itself. This order safeguards public resources and promotes the efficient operation of a crucial national organization responsible for food security." The case will be reconsidered on October 15, 2026.