Islamabad, July 26, 2025 – The Federal Board of Revenue (FBR) has suffered a legal setback as the Supreme Court of Pakistan dismissed its petition in a high-profile input tax adjustment case, reinforcing the importance of substantiated tax enforcement actions.
The Supreme Court, comprising Justice Munib Akhtar and Justice Aqeel Ahmed Abbasi, delivered its ruling on June 30, 2025, in the case titled Commissioner Inland Revenue vs. M/s Mustafa Enterprises and another. The apex court dismissed the FBR’s appeal against the Lahore High Court’s earlier judgment, stating that no substantial question of law had arisen from the case.
The court found that the show cause notice issued to the respondents was vague and lacked material evidence. The FBR had alleged that Mustafa Enterprises claimed inadmissible input tax of Rs. 55 million based on fake or “flying” invoices. However, the Supreme Court observed that no proof was presented to establish that the suppliers were black-listed during the relevant tax period.
The case originated from an audit of tax returns for the period July 2019 to June 2020. The Assistant Commissioner had imposed a recovery demand, claiming the company had committed tax fraud. However, both the Appellate Tribunal Inland Revenue (ATIR) and the Lahore High Court had overturned the decision, citing absence of verified evidence and due process.
Reinforcing the High Court’s stance, the Supreme Court held that the entire case rested on presumptions rather than verified facts. The Supreme Court emphasized that neither invoices nor payment records proving fake transactions were ever confronted or authenticated. As a result, the apex court found no merit in the civil petition for leave to appeal filed by the FBR.
This verdict marks a significant development in Pakistan’s tax jurisprudence. It also serves as a reminder to the tax authorities that all actions must be grounded in solid evidence and compliance with due legal process. The Supreme Court’s decision underscores the judiciary’s role in maintaining checks and balances over administrative overreach.