Legislation rarely announces its own importance. The Income Tax Ordinance, Third Amendment Act, 2026, passed by the National Assembly, replaces Section 134A in its entirety, and the redesign deserves careful reading by anyone who has considered ADR as a route out of protracted tax litigation.
The threshold for eligibility remains meaningful, not nominal. The mechanism is available to an aggrieved person contesting a tax liability of fifty million rupees or above, or disputing the admissibility of a refund, a floor that keeps the process reserved for disputes of genuine scale. What has changed fundamentally is the committee's composition. The taxpayer's nominee may now be drawn from a defined, credentialed pool, a Chartered Accountant, a Cost and Management Accountant, an Advocate with at least fifteen years of relevant experience, a retired Inland Revenue Officer of BS-21 or above, or a businessman from a panel notified by the Board on the recommendation of the Federation of Pakistan Chambers of Commerce and Industry. The chairperson, however, is now nominated by the Chairman of the Board from a panel of three retired judges of the Supreme Court or High Courts with adequate experience in tax or commercial matters, a marked shift toward judicial gravitas at the head of what remains, formally, an administrative forum.
One distinction embedded in the new section deserves particular attention. Where the aggrieved party is a State Owned Enterprise wholly or indirectly owned by the Federal Government, the committee's decision is expressly made final and binding on both the Commissioner and the SOE. The Act is notably more measured about finality where the aggrieved person is an ordinary private taxpayer, a distinction practitioners should read closely before advising a client to abandon appellate proceedings for this route. The Act also tightens procedural discipline around withdrawal, requiring the Commissioner to withdraw any pending appeal within thirty days of the withdrawal order being communicated, and it addresses transition carefully, providing that committees not yet decided at commencement may be reconstituted under the new framework, subject to the ordinary savings principles under Section 6 of the General Clauses Act.
For practitioners with matters currently pending before an ADR Committee, or considering that route for a client, the immediate task is straightforward. Establish under which regime, old or new, the relevant application falls, examine the transitional provisions before assuming continuity, and weigh the finality question with real precision rather than treating ADR outcomes as uniformly binding across every category of taxpayer. Reform of this kind rewards the practitioner who reads the fine print before the client signs on to a forum they cannot easily leave.
Muhammad Rehan Sarwar
Advocate High Court,
The Nomologists Law Firm
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