Karachi, May 17, 2024 – The Federal Tax Ombudsman (FTO) has uncovered significant maladministration by the Commissioner of Inland Revenue (IR) of Regional Tax Office (RTO)-II Karachi.
The commissioner was found to have issued an illegal show cause notice and subsequent order, according to a recent complaint.
The FTO’s investigation stemmed from a complaint filed against the Commissioner IR Zone-I, RTO-II Karachi. The complaint alleged that the commissioner had issued an unauthorized order suspending the sales tax registration of the complainant on January 26, 2024. This action was taken under the Sales Tax Act, 1990, despite the commissioner lacking jurisdiction over the case.
The complainant, an individual engaged in the electrical engineering services sector, had obtained sales tax registration in February 2021. The period coincided with the COVID-19 pandemic, which severely disrupted businesses globally. Consequently, the complainant experienced delays in starting the electrical supplies business for which the registration was initially obtained. During this period, the complainant continued to file sales tax returns, which consistently showed no business activity.
On January 26, 2024, the Commissioner IR, Zone-I, RTO-II, Karachi, suspended the sales tax registration of the complainant. The suspension was based on the claim that the complainant was conducting business with M/s UFT Corporation, a blocked registered entity. This decision was made despite the fact that the commissioner had no jurisdiction over the complainant’s case.
Aggrieved by the departmental action, the complainant lodged a formal complaint with the FTO. The investigation revealed that, according to the Federal Board of Revenue (FBR) jurisdiction order, the complainant’s case fell under the purview of Commissioner IR, Zone-II, RTO-I, Karachi, not RTO-II.
The FTO’s findings were clear: the impugned order dated January 26, 2024, issued by Commissioner IR, Zone-I, RTO-II, Karachi, was made without proper jurisdiction and constituted maladministration. The FTO noted that such unauthorized actions not only violate legal protocols but also undermine trust in the tax administration system.
This case highlights the critical importance of adhering to established jurisdictional boundaries within tax administration. It underscores the need for tax officials to exercise their powers within the limits of their designated authority to prevent unjust actions against taxpayers.
The FTO’s ruling serves as a reminder to the Inland Revenue Department and its officers to strictly comply with jurisdictional guidelines and to ensure fair treatment of taxpayers. The decision also reinforces the role of the FTO in safeguarding taxpayer rights and promoting transparent and accountable tax administration practices.