BASHARAT ULLAH KHAN Versus SECRETARY REVENUE DIVISION, ISLAMABAD

FINDINGS/RECOMMENDATIONS

M. ZAFAR UL HAQ HIJAZI, FEDERAL TAX OMBUDSMAN.--- The complaints have been filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) for failure to adjust the Income Tax Refund against Tax demand of Tax Year 2025 and non-issuance of Refund for Tax Years 2009 to 2013, 2016, 2018 and 2020 to 2024 by the Commissioner Inland Revenue, Refund Zone, CTO, Karachi. Since all the complaints are similar in nature hence they are clubbed together for the purpose of this consolidated order.

2.Briefly stated the complainant is a Private Limited Company and running a stock brokerage house in the Pakistan Stock Exchange (PSX) and assessed to tax with CTO, Karachi. The Complainant contended that through letter dated 12.11.2025, the Respondents were informed that refunds amounting to Rs.7,865,248/- pertaining to Tax Years 2009, 2010, 2011, 2012, 2013, 2016, 2018, 2020, 2021, 2022, 2023, and 2024 were available in its case and were intended to be adjusted against its admitted tax liability for Tax Year 2025. However, the IRIS system did not allow the said refunds to be carried forward and adjusted in Tax Year 2025. In response to AR's letter dated 12-11-2025 an e-mail was received from the FBR Helpline wherein the Complainant was advised as under: -

The Complainant stated that the aforesaid system limitation of Rs.200,000/- was grossly inadequate, as refunds totaling Rs.7,865,248/- had remained unissued and unadjusted since Tax Year 2009. Accordingly, through letter dated 15.11.2025, the Respondents were once again requested to enable the IRIS system to allow adjustment of the available refunds against the admitted tax liability for Tax Year 2025 and to carry forward the remaining balance for adjustment in subsequent tax years. Alternatively, the Respondents were requested to process the pending refunds and pass orders under section 170(4) of the Income Tax Ordinance, 2001.

3.The complainant also filed applications for refund under section 170(1) of the ITO, 2001 for the following tax years. The detail of said refund claims are tabulated as under:-

Tax Year

Date of Claim

Amount of Refund

1.

2016

19-12-20217

Rs.1,129,828/-

2.

2018

27-2-2019

Rs.357,859/-

3.

2020

28-1-2021

Rs.781,629/-

4.

2021

25-1-2022

Rs.350,994/-

5.

2022

16-3-2023

Rs.951,127/-

6.

2023

6-3-2024

Rs.1,447,799/-

7.

2024

12-3-2025

Rs.787,381/-

The Complainant contended that the refunds pertaining to the above-said Tax Years have neither been processed nor have any orders under section 170(4) of the Income Tax Ordinance, 2001 been passed by the Respondents, nor was adjustment of the said refunds allowed against its admitted tax liability for Tax Year 2025, despite repeated written and verbal requests. As a result, the Complainant has been compelled each year to discharge its admitted tax liabilities from its own resources, while its genuine refund amounts, aggregating to Rs.7,865,248/- for Tax Years 2009, 2010, 2011, 2012, 2013, 2016, 2018, 2020, 2021, 2022, 2023, and 2024, remain unlawfully withheld by the Respondents for several years. This prolonged withholding has caused severe financial hardship and liquidity constraints and poses a serious risk to the continuity of the Complainant's business.

4.The Complainant further alleged that despite continuous follow-up and personal visits, the departmental officers failed to process the refund applications, leaving the Complainant with no option but to file the instant complaint.

5.The complaint was referred to the Secretary Revenue Division, Government of Pakistan for comments and hearing by the Departmental Representative (D.R.), in terms of Section 10(4) of the FTO Ordinance read with section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013.

FINDINGS:

6.Both parties attended the hearings and made their submissions, which were duly considered, and the record was perused. However, para-wise comments were not furnished by the Respondent Department. Upon investigation conducted by this office and examination of the material available on record, it has transpired that the Complainant had filed refund applications under section 170 of the Income Tax Ordinance, 2001 well within the prescribed time. However, the Department failed to take timely cognizance of the said applications. Refund claims are required to be processed within sixty days of the filing of the application in terms of Section 170(4) of the Income Tax Ordinance, 2001, which states:

It has been found that the concerned officer did not attend to the refund application with the diligence and attention required under the law and failed to act within the prescribed timelines. This omission amounts to "maladministration," as it constitutes neglect, inattention, delay, incompetence, inefficiency and ineptitude, in discharge of duties and responsibilities; as defined under Section 2(3)(ii) of the FTO Ordinance, 2000.

Similarly, FBR's internal instructions limiting adjustment of refunds under section 170 (3) stating that " If the adjustment amount does not exceed 100,000, the system will allow the adjustment. If the refund amount exceeds 100,000, the system validates the checks mentioned below, refund application under section 170 has been filed. At least 60 days have passed since submission, and it remains pending for decision. Refund adjustment shall then be allowed up to lesser of eligible amount or PKR 200000. " Such any administrative instruction which circumvents any statutory provision, adversely impacting tax payer's rights is an act of maladministration in terms of section 2(3)(i) (a) (b) being;

RECOMMENDATIONS:

MQ/7/FTO Order accordingly.