The Finance Act 2025 introduces critical additions to Section 124 of the Income Tax Ordinance, 2001, which governs the procedure for giving effect to appellate orders. These amendments clarify when an appeal effect order is required and when the Commissioner can proceed directly to recovery.
This blog explains new sub-sections 124(4A) and 124(4B) in plain legal language, supported by practical examples, SEO data, and FAQs.
Overview of the Amendment
📝 New Sub-Sections Introduced
Section 124(4A):
Where an appellate authority (Commissioner (Appeals), Appellate Tribunal, High Court, or Supreme Court) fully confirms the tax payable in the appealed order, no further appeal effect order is required, and the Commissioner shall directly proceed with recovery.
Section 124(4B):
Where a higher appellate forum partly sets aside the order and confirms or modifies other parts, the Commissioner must issue an appeal effect order to compute tax only for the confirmed/modified issues (excluding the set-aside matters), and proceed with recovery accordingly.
Practical Interpretation and Implications
When Appeal Effect Order Is Not Required (124(4A))
If an appeal is dismissed or fully rejected, and the tax demand is upheld, no appeal effect order is needed. The original order stands, and the FBR can begin tax recovery immediately.
Example: A taxpayer challenges an assessment of Rs. 5 million. The Appellate Tribunal fully upholds the assessment. The Commissioner can recover Rs. 5 million without issuing a separate appeal effect order.
When Appeal Effect Order Is Required (124(4B))
If the higher authority:
Partly confirms, and
Partly modifies, or
Remands certain issues
Then the Commissioner must issue a fresh appeal effect order under a prescribed format, recalculating:
Tax due on confirmed/modified issues
Excluding amounts linked to remanded or set-aside matters
Example: Out of Rs. 10 million tax, Rs. 6 million is upheld, Rs. 2 million is modified, and Rs. 2 million is remanded back. The Commissioner will compute appeal effect only for the Rs. 6M + Rs. 2M and initiate recovery on that amount.
Benefits and Legal Certainty
Eliminates delay in recovery when appeals are fully rejected
Streamlines compliance by requiring appeal effect orders only when necessary
Aligns procedure with appellate rulings at various levels (Tribunal, High Court, Supreme Court)
FAQs – Section 124 Appeal Effect Amendments
What is an appeal effect order?
It’s an order passed by the Commissioner to give effect to an appellate decision by recalculating the final tax payable.Is an appeal effect order always required?
No. If the appeal is fully dismissed and the tax is confirmed, no appeal effect order is needed as per Section 124(4A).What happens if only some issues are remanded or set aside?
The Commissioner must issue an appeal effect order only for the confirmed/modified issues (as per Section 124(4B)).Who can confirm the order that triggers recovery?
Commissioner (Appeals), Appellate Tribunal, High Court, or Supreme Court.Can recovery be initiated before appeal effect is passed?
Only if the tax demand is fully confirmed and no further appeal effect order is needed.What does ‘remanded’ mean in tax appeals?
It refers to the appellate authority sending the case back to the lower authority for reconsideration on certain issues.What is the prescribed format for appeal effect orders?
The FBR is expected to issue standardized forms via rules or circulars.Can the Commissioner misuse this power for recovery?
No. Recovery must strictly align with appellate decisions and procedural law.What if the taxpayer has filed a further appeal?
Until that appeal is disposed of, final recovery should ideally await unless the earlier appellate decision is final and binding.Is there a time limit to pass an appeal effect order?
The law doesn’t specify a strict time frame, but it must be done within a reasonable period to comply with natural justice and avoid procedural default.
