A recent interim order of the Lahore High Court in the PASSCO matter brings renewed attention to the procedure surrounding recovery of disputed tax demands. PASSCO had challenged an assessment before the Commissioner (Appeals), and subsequently approached the Alternative Dispute Resolution mechanism under Section 134A. Meanwhile, the tax department had initiated recovery under Section 140 and recovered part of the disputed amount from its bank accounts.
Before the Court, PASSCO relied on the Supreme Court’s judgment in Pakistan LNG, arguing that same-day recovery under Section 140 is impermissible. According to the argument recorded in the document, a recovery notice should specify when recovery will take place so that the taxpayer has a reasonable opportunity to discharge the liability. It was also argued that, in the case of a government-owned entity, the commencement of proceedings under Section 134A affects the department’s ability to proceed with recovery.
The Lahore High Court has, at this stage, restrained further recovery and allowed PASSCO to operate its bank accounts until the next hearing, fixed for October 15, 2026. Since this is an interim order, it should not be read as a final determination of the underlying dispute. Nevertheless, the matter reinforces an important distinction in tax practice: the existence of a tax demand and the manner in which that demand may lawfully be recovered are separate questions, and statutory recovery procedures and available remedies remain important even after an adverse assessment or appellate order.