Income Tax Ordinance, 2001 — Section 134A: Alternative Dispute Resolution

1[134A. Alternative Dispute Resolution. – 1[(1) Notwithstanding any other provision of this Ordinance, or the rules made thereunder, an aggrieved person in connection with any dispute pertaining to 1 Section 134A substituted by the Finance Act, 2023. The Substituted section read as follows: “134A. Alternative Dispute Resolution. — (1) Notwithstanding any other provision of the Ordinance, or the rules made thereunder, an aggrieved person in connection with any dispute pertaining to

(a)the liability of tax of one hundred million and above against the aggrieved person or admissibility of refund, as the case may be;

(b)the extent of waiver of default surcharge and penalty; or

(c)any other specific relief required to resolve the dispute; may apply to the Board for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application, which is under litigation in any court of law or an Appellate Authority, except where criminal proceedings have been initiated.

(2)The application for dispute resolution shall be accompanied by an initial proposition for resolution of the dispute, including an offer of tax payment, from which, the applicant would not be entitled to retract.

(3)The Board may, after examination of the application of an aggrieved person, appoint a committee, within forty five days of receipt of such application in the Board, comprising,

(i)Chief Commissioner Inland Revenue having jurisdiction over the case;

(ii)person to be nominated by the taxpayer from a panel notified by the Board comprising –

(a)chartered accountants, cost and management accountants and advocates having a minimum of ten years’ experience in the field of taxation;

(b)officers of the Inland Revenue Service who have retired in BS 21 or above; or

(c)reputable businessmen as nominated by Chambers of Commerce and Industry: Provided that the taxpayer shall not nominate a Chartered Accountant or an advocate if the said Chartered Accountant or the advocate is or has been an auditor or an authorized representative of the taxpayer; and

(d)person to be nominated through consensus by the members appointed under (i) and (ii) above, from the panel as notified by the Board in clause (ii) above: Provided that where the member under this clause cannot be appointed through consensus, the Board may nominate a member proposed by the taxpayer eligible to be nominated as per clause (ii).

(4)The aggrieved person, or the Commissioner, or both, as the case may be, shall withdraw the appeal pending before any court of law or an Appellate Authority, after constitution of the committee by the Board under sub-section (3), in respect of dispute as mentioned in sub-section

(1).

(5)The committee shall not commence the proceedings under sub-section (6) unless the order of withdrawal by the court of law or the Appellate Authority is communicated to the Board: Provided that if the order of withdrawal is not communicated within seventy five days of the appointment of the committee, the said committee shall be dissolved and provisions of this section shall not apply.

(6)The Committee appointed under sub-section (3) shall examine the issue and may, if it deems necessary, conduct inquiry, seek expert opinion, direct any officer of the Inland Revenue or any other person to conduct an audit and shall decide the dispute by majority, within one hundred and twenty days of its appointment: Provided that in computing the aforesaid period of one hundred and twenty days, the period, if any, for communicating the order of withdrawal under sub-section (5) shall be excluded.

(7)The decision by the Committee under sub-section (6) shall not be cited or taken as a precedent in any other case or in the same case for a different tax year.

(8)The recovery of tax payable by a taxpayer in connection with any dispute for which a Committee has been appointed under sub-section (3) shall be deemed to have been stayed on withdrawal of appeal up to the date of decision by the Committee or the dissolution of the Committee whichever is earlier. 277 Chapter X – Procedure

(a)the liability of tax of fifty million rupees or above against the aggrieved person or admissibility of refund, as the case may be;

(b)the extent of waiver of default surcharge and penalty; or

(c)any other specific relief required to resolve the dispute, may apply, except where criminal proceedings have been initiated, to the Board for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application: Provided that where the aggrieved person is a state-owned enterprise

(SOE), the limit of tax liability of fifty million rupees or above mentioned in clause

(a)of sub-section (1) shall not apply and it shall be mandatory for such aggrieved SOE to apply to the Board for the appointment of a committee for the resolution of any dispute under this section: Provided further that no suit, prosecution, or other legal proceedings shall lie against the SOE or the committee in relation to the dispute resolved under this section.

(9)The decision of the committee under sub-section (6) shall be binding on the Commissioner and the aggrieved person.

(10)If the Committee fails to decide within the period of one hundred and twenty days under sub-section (6), the Board shall dissolve the committee by an order in writing and the matter shall be decided by the court of law or the Appellate Authority which issued the order of withdrawal under sub section (5) and the appeal shall be treated to be pending before such court of law or the Appellate Authority as if the appeal had never been withdrawn.

(11)The Board shall communicate the order of dissolution to the court of law or the Appellate Authority and the Commissioner.

(12)The aggrieved person, on receipt of the order of dissolution, shall communicate it to the court of law or the Appellate Authority, which shall decide the appeal within six months of the communication of said order.

(13)The aggrieved person may make the payment of income tax and other taxes as decided by the committee under sub-section (6) and all decisions, orders and judgments made or passed shall stand modified to that extent.

(14)The Board may prescribe the amount to be paid as remuneration for the services of the members of the Committee, other than the member appointed under clause (i) of sub-section (3).

(15)The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.] 1 Sub-sections (1) and (2) substituted through The Tax Laws (Amendment) Act, 2024. The substituted sub-sections read as follows: “(1) Notwithstanding any other provision of this Ordinance, or the rules made thereunder, an aggrieved person in connection with any dispute pertaining to –

(a)the liability of tax of one hundred million rupees or above against the aggrieved person or admissibility of refund, as the case may be;

(b)the extent of waiver of default surcharge and penalty; or

(c)any other specific relief required to resolve the dispute, may apply to the Board for the appointment of a committee for the resolution of any hardship or dispute mentioned in detail in the application, which is under litigation in any court of law or an appellate authority, except where criminal proceedings have been initiated.

(2)The application for dispute resolution under sub-section (1) shall be accompanied by an initial proposition for resolution of the dispute, including an offer of tax payment.” 278 Chapter X – Procedure Explanation.—State-owned enterprise shall have the same meaning as assigned thereto in the State-Owned Enterprises (Governance and Operations) Act, 2023 (VII of 2023).

(2)The application for dispute resolution under sub-section (1) shall be accompanied by

(a)an initial proposition for resolution of the dispute, including an offer of tax payment; and

(b)an undertaking that the applicant shall accept the decision of the Committee which shall be binding on him in all respects and shall on receipt of the decision immediately withdraw any and all pending litigation or cases of any kind in respect of the dispute, mentioning details thereof: Provided that if the applicant is an SOE, it shall withdraw any and all such pending litigation and cases immediately and mention the details thereof in the undertaking: Provided further that the SOE may file an appeal to the Appellate Tribunal or a reference to the High Court or a petition for leave to appeal the Supreme Court, as the case may be, where subsection (11) is applicable.]

(3)The Board may, after examination of the application of an aggrieved person, appoint a committee, within fifteen days of receipt of such application in the Board, comprising, –

(i)a retired judge not below the rank of a judge of a High Court, who shall also be the Chairperson of the Committee, to be nominated by the Board from a panel notified by the Law and Justice Division for such purpose;

(ii)the Chief Commissioner Inland Revenue having jurisdiction over the case; and

(iii)a person to be nominated by the taxpayer from a panel notified by the Board comprising –

(a)chartered accountants, cost and management accountants and advocates having a minimum of ten years’ experience in the field of taxation;

(b)officers of the Inland Revenue Service who stood retired in BS 21 or above; or

(c)reputable businessmen as nominated by the Chambers of Commerce and Industry: 279 Chapter X – Procedure Provided that the taxpayer shall not nominate a chartered accountant or an advocate if the said chartered accountant or the advocate is or has been an auditor or an authorized representative of the taxpayer.

(4)The Board shall communicate the order of appointment of Committee to the aggrieved person, court of law or the appellate authority where the dispute is pending and to the concerned Commissioner.

(5)The Committee appointed under sub-section (3) shall examine the issue and may, if it deems necessary, conduct inquiry, seek expert opinion, direct any officer of the Inland Revenue or any other person to conduct an audit and shall decide the dispute by majority, within forty-five days of its appointment extendable by another fifteen days for the reasons to be recorded in writing.

(6)The decision by the Committee under sub-section (5) shall not be cited or taken as a precedent in any other case or in the same case for a different tax year.

(7)The recovery of tax payable by a taxpayer in connection with any dispute for which a Committee has been appointed under sub-section (3) shall be deemed to have been stayed on the constitution of Committee till the final decision or dissolution of the Committee, whichever is earlier.

(8)The decision of the Committee under sub-section (5) shall be binding on the Commissioner when the aggrieved person, being satisfied with the decision, has withdrawn the appeal pending before the court of law or any appellate authority in respect of dispute as mentioned in sub-section (1) and has communicated the order of withdrawal to the Commissioner: Provided that if the order of withdrawal is not communicated to the Commissioner within sixty days of the service of decision of the Committee upon the aggrieved person, the decision of the Committee shall not be binding on the Commissioner.

(9)Subject to sub-section (10), the Commissioner shall also withdraw the appeal, if any, pending before any court of law or an appellate authority in respect of dispute as mentioned in sub-section (1) within thirty days of the communication of the order of withdrawal by the aggrieved person to the Commissioner.

(10)The aggrieved person shall make the payment of income tax and other taxes and within such time as decided by the Committee under sub-section

(5)and all decisions and orders made or passed shall stand modified to that extent.

(11)1[Subject to sub-section (11A), if] the Committee fails to decide within the period of sixty days under sub-section (5), the Board shall dissolve the 1 The word “If” substituted by the Finance Act, 2025. 280 Chapter X – Procedure Committee by an order in writing and the matter shall be decided by the court of law or the appellate authority where the dispute is pending under litigation. 1[(11A) In the case of a state-owned enterprise, if the Committee fails to decide within a period of sixty days, the Board shall reappoint a Committee under sub-section (3), that shall decide the dispute in accordance with sub-section (5) of this section. (11B) Sub-section (11) shall apply, in case of a state-owned enterprise, if the reappointed Committee fails to decide the matter within a further period of sixty days.]

(12)The Board shall communicate the order of dissolution to the aggrieved person, court of law or the appellate authority and to the Commissioner. 2[(13) On receipt of the order of dissolution, the court of law or the Appellate Tribunal shall decide the appeal within ninety days of the communication of the said order.]

(14)The Board may prescribe the amount to be paid as remuneration for the services of the members of the Committee, other than the member appointed under clause (ii) of sub-section (3).

(15)The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.] 3[ ] 1 Sub-sections (11A) and (11B) inserted by the Finance Act, 2025. 2 Sub-section (13) substituted through Tax Laws (Amendment) Act, 2024. The substituted sub-section read as follows: “(13) On receipt of the order of dissolution, the court of law or the appellate authority shall decide the appeal within six months of the communication of the said order.” 3 Section 135 omitted by the Finance Act, 2002. The omitted section 135 read as follows: “135. Revision by the Commissioner.- (1) The Commissioner may either of the Commissioner’s own motion or on application in writing by a person for revision, call for the record of any proceeding under this Ordinance in which an order has been passed by any taxation officer other than the Commissioner (Appeals).

(2)Subject to sub-section (3), where, after making such inquiry as is necessary, Commissioner considers that the order requires revision, the Commissioner may make such revision to the order as the Commissioner thinks fit.

(3)An order under sub-section (2) shall not be prejudicial to the person to whom the order relates.

(4)The Commissioner shall not revise any order under sub-section (2) if –

(a)where an appeal against the order lies to the Commissioner (Appeals) or to the Appellate Tribunal, the time within which such appeal may be made has not expired, or the person has not waived their right of appeal;

(b)the order is pending on appeal before the Commissioner (Appeals) or has been made the subject of an appeal to the Appellate Tribunal; or

(c)in the case of an application made by a person, the application has not been made within ninety days of the date on which such order was served on the person, unless the Commissioner is satisfied that the person was prevented by sufficient cause from making the application within the time allowed.

(5)No application for revision of an assessment order may be made under sub-section (1) unless the amount of tax due under the assessment that is not in dispute has been paid by the taxpayer. 281 Chapter X – Procedure