ATIR Bars Super Tax Default Surcharge During Court Protection

A two-member bench of the Appellate Tribunal Inland Revenue (ATIR), Islamabad, has ruled that a default surcharge cannot be imposed on super tax for the period during which a taxpayer’s payment obligation remained protected under interim or final orders issued by the superior courts.

In its decision issued in ITA No. 773/IB/2026, the tribunal affirmed that the taxpayer was legally liable to pay super tax in accordance with Section 4C of the Income Tax Ordinance, 2001.

However, the ATIR held that the default surcharge levied under Section 205 could not be legally sustained for the duration in which the taxpayer’s obligation to make payment was governed by valid judicial orders issued by the superior courts.

The tribunal observed that constitutional protections prevent the imposition of adverse fiscal consequences on a taxpayer who has acted in compliance with binding court directives throughout the litigation period.

Accordingly, the bench concluded that charging a default surcharge for the period covered by judicial protection lacked lawful authority and was therefore unsustainable in law.

On this basis, the ATIR set aside the impugned order to the extent that it imposed a default surcharge for the court-protected period, while maintaining the taxpayer’s liability to pay the underlying super tax.

The appeal was consequently allowed to the limited extent of the default surcharge, subject to the findings and observations recorded by the tribunal.