ISLAMABAD: The government is all set to propose a scrutiny committee in the upcoming Finance Bill 2026-27 for filing review appeals on behalf of the Federal Board of Revenue (FBR) to reduce the number of frivolous litigation cases before legal forums.
This decision was taken after a detailed report presented by the Task Force on pending litigations, led by Shad Muhammad, to Prime Minister Shehbaz Sharif and other cabinet members. The FBR has also moved a summary for the creation of a new post of Member Legal Reforms, with the possibility of appointing a senior official to undertake crucial legal reforms.
The task force report states that Pakistan’s tax system faces an acute and worsening litigation crisis. As of April 2026, the FBR carries a combined pendency of approximately 85,480 cases across the Inland Revenue and Customs sides, spanning the Supreme Court, high courts and appellate tribunals, with an estimated Rs278 billion in Customs revenue alone blocked in active disputes. “The true Inland Revenue exposure cannot be reliably quantified because, as this report documents, FBR’s own case data is materially inconsistent with independent court records,” it stated.
The prime minister had directed the constitution of a task force to conduct a comprehensive review of the FBR’s Legal Wings and propose a credible reform framework.
The task force found that, as of April 2026, based on court records, there are a total of 85,480 pending cases. Of these, 1,322 cases are pending before the Supreme Court of Pakistan (909 Inland Revenue, 414 Customs); 17,410 cases are pending in high courts (11,995 Inland Revenue, 5,414 Customs); and 66,747 cases are pending in tribunals (60,893 Inland Revenue, 5,884 Customs).
Of the Customs pendency, approximately 50 percent of high court cases are concentrated in the Sindh High Court. In the Inland Revenue stream, tribunal pendency is particularly acute: at a disposal rate of approximately 10,000 cases per year, the existing backlog alone would take six years to clear before accounting for new filings. In Customs, Rs278 billion is currently blocked across 13,750 cases.
The task force report further stated that the Legal Wing is bifurcated between Inland Revenue and Customs, each with its own hierarchy of officers and appellate representatives. Despite its strategic importance, the Legal Wing has historically not been accorded the same institutional priority as the Policy or Operations Wings.
The task force review identified systematic weaknesses spanning institutional structure, data integrity, digital systems and governance discipline. There is no effective coordination between policy, enforcement and operations wings, producing fragmented and contradictory litigation positions before different forums.
The FBR’s Legal Management System (LMS) data is materially inconsistent with court records. There is no structured pre-appeal review mechanism. The prevailing culture favours protective appeals over merit-based litigation, with no safeguard against arbitrary audits and assessments that burden the courts.
The FBR persistently files appeals on questions of law already settled by the superior courts. No centralised databank of decided cases exists within the Legal Wing. There is no accountability framework for filing frivolous or redundant appeals. Legal advisors and formation officers are not evaluated on litigation outcomes. The officers of both members (Legal) from IRS and Customs are not functioning as active supervisory or directional authorities over field legal operations. Policy and directions are not flowing to field offices in a structured manner. The IRIS, WeBoC and LMS operate as isolated platforms with no integration. The appellate tribunals have no digital case management system. The Alternate Dispute Resolution (ADR) mechanism under Section 195C (Customs Act) and Section 134A (Income Tax Ordinance) is underused, despite offering a faster and cheaper path to resolution.
