Commissioner can follow High Court or Appellate Tribunal decisions on questions of law and subsequently revise assessments when those decisions are overturned or modified.
The Federal Board of Revenue (FBR) has outlined the powers of tax authorities to modify assessments and other orders following judicial decisions under Section 124A of the Income Tax Ordinance, 2001, applicable to Tax Year 2027.
The provision enables the Commissioner to follow a decision of a High Court or the Appellate Tribunal on a question of law in the case of a taxpayer, even where the Commissioner has challenged that decision before a higher forum.
Under Section 124A(1), where a question of law has been decided by a High Court or the Appellate Tribunal in a taxpayer’s case on or after July 1, 2002, the Commissioner may apply that decision to the same question of law arising in any assessment pending before the Commissioner.
This power remains available even if the Commissioner has filed an appeal against the High Court decision or made an application for reference against the Appellate Tribunal’s order.
The Commissioner can continue following the ruling until the decision is reversed or modified by the relevant appellate or judicial authority.
Assessment can be revised after final ruling
Section 124A also provides a mechanism for correcting assessments when a previously followed judicial decision is subsequently overturned or changed.
Where the High Court or Appellate Tribunal decision is reversed or modified, the Commissioner may modify the assessment or order in which the earlier decision was applied so that it conforms to the final decision.
Importantly, this power can be exercised notwithstanding the expiry of the normal limitation period prescribed for making an assessment or order.
The Commissioner must, however, exercise this power within one year from the date of receipt of the final decision.
The provision therefore creates a statutory mechanism for maintaining consistency between assessments and prevailing judicial interpretations of questions of law. It also allows tax authorities to correct earlier assessments when a court or tribunal subsequently changes the legal position.
For taxpayers, Section 124A means that an assessment may initially reflect a High Court or Appellate Tribunal ruling even while the FBR challenges that ruling. If the decision is later reversed or modified, the Commissioner can bring the assessment into line with the final legal position within the prescribed one-year period.