NA passes Income Tax Ordinance amendment to revamp Alternative Dispute Resolution process

The National Assembly of Pakistan passed the Income Tax Ordinance (Third Amendment) Bill, 2026, on Thursday to strengthen the Alternative Dispute Resolution (ADR) mechanism for tax disputes and revise the appointment process for the chairperson of the ADR committee.

As per reports, the bill was tabled by Minister of State for Finance Bilal Azhar Kayani and was passed by a majority vote of the House. Under the amended law, changes have been made to the procedure for appointing the ADR committee chairperson, with the stated objective of improving impartiality and transparency in dispute resolution.

Speaking during the debate, the minister said the legislation addresses gaps in the existing framework, particularly concerns over the appointment of the ADR chairperson. He said the amendments are intended to strengthen taxpayer safeguards, improve the efficiency of the ADR mechanism and reduce the burden on courts.

Under the revised procedure, both the taxpayer and the Federal Board of Revenue will propose three names each for the position of chairperson. If consensus is not reached, one nominee from each side will be forwarded to the federal minister for law and justice, who will make the final selection.

The chairperson must be a retired judge of a High Court, the Federal Constitutional Court or the Supreme Court with relevant experience in tax or commercial matters. Previously, the FBR held the authority to appoint the chairperson, which, according to the minister, had raised concerns about neutrality.

The amended law also sets out the composition of the ADR committee, which will include a senior Inland Revenue officer not below BS-21 and a member nominated by the taxpayer from among qualified accountants, advocates with at least 15 years of experience in tax or commercial law, retired senior Inland Revenue officers, or businessmen notified by the FBR. The law restricts taxpayers from nominating auditors or authorised representatives associated with their case.

According to the statement of objects and reasons, the bill aims to enhance the effectiveness of ADR, ensure fair dispute resolution and make it a cost-effective alternative for resolving tax disputes.