Tax default is no longer a minor compliance issue. Under Pakistan’s tax laws, the Federal Board of Revenue (FBR) holds extensive powers to recover unpaid taxes, including the sale of property and arrest of taxpayers.
These powers are clearly laid out in Section 138 of the Income Tax Ordinance, 2001, and every taxpayer should understand how they work to avoid severe consequences.
Here’s an interactive, step-by-step guide explaining FBR’s recovery powers and what tax defaulters need to know.
🚨 What Triggers FBR Recovery Action?
Recovery proceedings begin when:
• Tax has been legally determined and is due
• The taxpayer fails to pay after receiving a formal notice
📬 Recovery Notice
Under Section 138(1):
• The Commissioner issues a notice of demand
• The taxpayer is required to pay the specified amount within the given time
👉 Ignoring this notice can lead directly to coercive recovery measures.
⚖ Powerful Recovery Methods Available to FBR
If payment is not made within the specified or extended time, Section 138(2) authorizes FBR to recover tax through one or more of the following methods:
🏠 1️⃣ Attachment and Sale of Property
• Movable assets (vehicles, machinery, goods)
• Immovable assets (houses, plots, commercial properties)
👉 Properties can be attached and auctioned to recover outstanding tax dues.
👨💼 2️⃣ Appointment of a Receiver
• A receiver may be appointed to manage your property
• Income generated can be used to settle tax liabilities
🚔 3️⃣ Arrest and Detention
• The taxpayer may be arrested
• Detention can extend up to six months
⚠ This is one of the most serious enforcement actions and is used in persistent default cases.
🔄 4️⃣ Other Recovery Methods
• FBR may also apply recovery measures provided under the Sales Tax Act, 1990
• This includes attachment of bank accounts and other assets
🏛 Powers Equivalent to a Civil Court
Under Section 138(3):
• The Commissioner has the same powers as a Civil Court
• This allows enforcement similar to recovery under a court decree
⚠ Immediate Recovery in High-Value Cases
💰 Special Provision: Section 138(3A)
Tax becomes immediately recoverable, regardless of time limits, if:
• The case is decided in favor of FBR at three appellate forums, including the High Court
• Recovery is limited to the lowest confirmed demand
• The tax payable exceeds Rs. 200 million
👉 In such cases, FBR can proceed with recovery without waiting for further legal timelines.
📜 Rules and Procedures
Under Section 138(4):
• FBR may frame detailed rules for recovery procedures
• These rules regulate attachment, auction, arrest, and other enforcement steps
🧠 Why Taxpayers Must Take This Seriously
Failure to pay assessed tax can result in:
• Loss of property
• Arrest and imprisonment
• Long-term financial and legal consequences
✅ How to Protect Yourself
✔ Respond promptly to FBR notices
✔ Pay dues or apply for instalments or stay where applicable
✔ File appeals within time
✔ Seek professional tax advice early
📌 Final Takeaway
Section 138 gives FBR strong and enforceable powers to recover unpaid taxes, including property auctions and arrest of defaulters. Compliance, timely payments, and proactive communication with tax authorities are the only effective safeguards against harsh recovery actions.
Pro tip:
Never ignore a recovery notice. Early action can prevent irreversible enforcement steps.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws and recovery procedures may change. Taxpayers should consult qualified professionals for guidance specific to their case.