Pakistan Restores the Two-Tier Tax Appeal: What the Finance Act 2025 Means for Taxpayers
Practice areas: Tax · Dispute Resolution
Key takeaways
After a year of disruption, Pakistan has reinstated the familiar two-tier tax appeal structure: the Commissioner (Appeals) followed by the Appellate Tribunal Inland Revenue, regardless of the amount in dispute.
The short-lived system introduced by the Tax Laws (Amendment) Act 2024 — which used monetary thresholds and allowed direct references to the high courts — has been undone by the Finance Act 2025.
The change matters because it restores a specialist tax forum before any constitutional court is approached, and it removes the direct High Court route that had created a significant backlog.
Taxpayers and their advisers must once again exhaust the Commissioner and the Tribunal before a tax reference can be filed in the High Court.
Few areas of Pakistani practice have changed as abruptly, and then reversed as completely, as the law governing tax appeals. For taxpayers and the lawyers who advise them, the past two years have required close attention simply to know which forum a dispute belongs in. The position has now settled, and the settlement is worth understanding.
What changed in 2024, and why it caused difficulty
The Tax Laws (Amendment) Act, 2024 made a fundamental change to a structure that had stood for decades. In place of the long-established sequence — a first appeal to the Commissioner (Appeals), a second appeal to the Appellate Tribunal Inland Revenue, and only then a reference to the High Court — the 2024 framework introduced monetary thresholds. Income-tax matters above a prescribed value bypassed the Commissioner and proceeded directly to the Tribunal, the time to file an appeal was shortened, and, significantly, decisions could be carried directly to the high courts.
The intention was to streamline. The effect, in practice, was congestion. By routing a large volume of matters straight to the high courts, the framework placed disputes that turned heavily on the appreciation of facts before constitutional courts whose jurisdiction is better suited to questions of law. The resulting backlog drew judicial criticism, including from the Lahore High Court, which observed that the new route was clogging the arteries of the judicial system. For a system already burdened by delay, the cure had begun to resemble the disease.
The Finance Act 2025 reinstates the familiar structure
With effect from 1 July 2025, the Finance Act 2025 restored the two-tier appellate process. The Commissioner (Appeals) and the Appellate Tribunal Inland Revenue are once again mandatory appellate forums, and the monetary thresholds that determined which forum a matter went to have been removed. A taxpayer must first appeal to the Commissioner (Appeals), then to the Tribunal, and only after exhausting those forums may approach the High Court through a tax reference. The direct-reference route to the high courts has been abolished.
The logic of the restoration is sound. The Tribunal is a specialist body equipped to examine the factual and technical substance of a tax dispute. Requiring that disputes pass through it before reaching a constitutional court preserves both the quality of the eventual legal question put to the High Court and the High Court's capacity to deal with genuinely complex matters of law.
What taxpayers and advisers should do now
The practical message is one of sequence and discipline. An adverse order from a revenue officer must now be challenged before the Commissioner (Appeals) within the prescribed time, and an unfavourable appellate order taken to the Appellate Tribunal. Only once those remedies are exhausted does a tax reference to the High Court become available. Matters that were filed, transferred or part-heard during the 2024 framework require careful handling, because the forum in which a case began is not necessarily the forum in which it now belongs.
In tax disputes, the early decisions are frequently the decisive ones. The forum, the framing of the grounds, and the marshalling of the documentary record at the first appellate stage often determine the outcome long before a matter reaches the Tribunal, let alone the High Court. The restored structure rewards taxpayers who engage the process properly at the outset rather than treating the lower forums as formalities to be rushed through.
How Muzy & Meraris LLP can help
We represent individuals and businesses across the full appellate chain — preparing and arguing appeals before the Commissioner (Appeals) and the Appellate Tribunal Inland Revenue, and filing tax references before the High Court where a question of law genuinely arises. We also advise on alternate dispute resolution where it offers a faster and more commercial path to settlement. Our focus is on getting the strategy right at the first stage, where tax disputes are most often won or lost.
This article is general commentary and does not constitute legal or tax advice. Tax law and procedure depend on the specific facts, figures and dates of each matter; please seek tailored advice before acting. For a consultation, contact Muzy & Meraris LLP.
