I. BACKGROUND

1. This refers to the related Important TLQC3194 of 10.7.25 in trail, blue, italic and double line about Budget 2025-26: KPMG Comments on Finance Act

2. We also refer to several Other TLQCs including (a) 3182 28.6.25 about Budget 2025-26: AFF Comments on Finance Act (b) 3183 of 30.6.25 about Budget 2025-26: Finance Act - Gazette version (c)2747 of 21.5.24 about Tax Laws (Amendment) Act, 2024 – Gazetted & Applicability issue 

II. EXECUTIVE SUMMARY

Key Issue: Whether references filed directly to High Court under Tax Laws (Amendment) Act, 2024 (introducing Section 126A Income Tax Ordinance) as well as similar amendments in FST, should be remitted to ATIR after Finance Act, 2025 omitted Section 126A and restored pre-2024 appeal structure. 

--HC Order: The Islamabad High Court ruled that amendments to the ITO via the Finance Act, 2025, are procedural and beneficial, applying retrospectively to pending references against CIR (Appeals) orders. Hence, remitted all pending Income Tax & Sales Tax references to ATIR and to be treated as appeals and decided on merits. Applies only to pending cases, not final/closed transactions. Refund court fees paid for High Court references; applicants pay ATIR appeal fees.

III. DETAILS

A. Reference & Brief Facts

1. Further to KQU 3666 of -------------, being and important matter, we would inform you about ---------------------------------------------------------- (Attachment 3362.1) in ensuing paragraph, with emphasis ours in bold & Underline for quick reading.

2. Through this judgment IHC decided the fate of the Income Tax References as well as Income/Sales Tax References listed in Annexure-A to this judgment.

3. The primary question that arises in all these references is whether references filed against orders of CIR (Appeals) were to be remitted to the ATIR in view of amendments promulgated through the Finance Act, 2025.

B. Pre-2024 Appeal Structure and 2024 Amendments

1. Prior to the enactment of the Tax Laws (Amendment) Act, 2024, a person aggrieved by the decision of CIR (Appeals) could impugn the same before the ATIR. And a person aggrieved by the decision of the ATIR could file a reference seeking the adjudication of questions of law arising from the ATIR's order. Section 133 of the ITO, was amended through the Tax Laws (Amendment) Act, 2024, which introduced Section 126A into the ITO, pursuant to which a party aggrieved by the order of CIR (Appeals) or the ATIR could file a reference application before the High Court under Section 133(1) of the ITO. Consequently, one forum of appeal i.e. an appeal before the ATIR against an order of CIR (Appeals), was excluded.

2. However, through the Finance Act, 2025, the Parliament once again reverted to the old adjudicatory scheme by omitting Section 126A of the ITO and restoring Section 133 of the ITO to the form in which it existed prior to enactment of the Tax Laws (Amendment) Act, 2024.

C. Two Key Contexts of the Dispute

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D. Logical Prioritization of Issues

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E. Learned Counsel for Taxpayers & Department Submissions

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F. Supreme Court Precedent:

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G. Lahore High Court: Curative Legislation for Pending Cases

H. Final Ruling: Retrospective Application to Pending References

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I. Court Fees Refund and ATIR Fee Requirement

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IV. FURTHER DETAILS & SERVICES

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Advisory, Statement or Return Filing or Review services, or related accounting matters like the above, please feel free to email Mr Amsal at amsal@786tax.com with CC to info.kasbati@professional-excellence.com. Your Goodself may continue to get other services from your current Tax & Legal Advisors.

Best regards for Here & Hereafter

Asif S Kasbati (FCA, FCMA & LLB)

Managing Partner 

Kasbati & Co (1400+ Tax, Levies, Companies, Economy, Inflation, HR, Banking, Finance, etc

Quick Commentary Service Provider and High Level 440+ Tax & Levies Laws Consultants) 

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