FTO directs FBR to withdraw penalties imposed on NBP manager
The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to withdraw penalties imposed on a National Bank of Pakistan (National Bank of Pakistan) branch manager, ruling that the action amounted to maladministration and administrative excess.
In its detailed findings issued on June 3, 2026, the FTO ordered the relevant Commissioner Inland Revenue to revoke penalty orders totalling Rs236,490 that had been imposed on the manager of the NBP Qaboola Sharif branch in Arifwala.
The case originated from tax recovery proceedings initiated by the Regional Tax Office (RTO) Sahiwal against Al-Qadir Seed Corporation (Private) Limited under Section 140 of the Income Tax Ordinance, 2001. The tax authorities had issued recovery notices to the bank manager on September 18, 2025, seeking recovery of alleged outstanding tax liabilities owed by the taxpayer.
According to the complaint, the bank manager promptly forwarded the notices to the bank’s legal department in line with internal compliance procedures. However, before any recovery action could be executed, the taxpayer obtained a stay order from the Commissioner Inland Revenue (Appeals), which was communicated to the bank on the same day.
Despite the stay order, the tax authorities subsequently imposed penalties of Rs25,000 under Section 182(1)(13) and Rs211,490 under Section 182(1)(15), alleging delay and obstruction in the recovery process.
The Ombudsman observed that the stay order had been issued and conveyed within working hours on the same day the recovery notice was served. It further noted that the penalties were imposed even though the underlying tax demand had later been annulled by the appellate authority.
Referring to recent Supreme Court jurisprudence, the FTO stated that Section 140 of the Income Tax Ordinance does not permit immediate coercive recovery without allowing reasonable time and due process to third parties holding funds on behalf of taxpayers.
The Ombudsman held that the FBR’s insistence on immediate enforcement action, followed by penal proceedings against a bank official, constituted administrative excess and maladministration under the Federal Tax Ombudsman Ordinance.
The FTO further highlighted procedural irregularities in the issuance of penalty orders and directed the FBR to withdraw the penalties. It also instructed the tax authority to submit a compliance report within 30 days.
The ruling is expected to influence future tax recovery practices involving banks and other financial institutions, reinforcing the importance of due process, reasonable compliance timelines, and legal safeguards for third-party intermediaries.
