Islamabad — The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to ensure that coercive income tax recovery measures are only initiated after the adjustment or resolution of taxpayers’ pending refund claims.
In a significant ruling issued on Wednesday, the FTO instructed the Member Inland Revenue (Operations) to circulate clear directives to all field formations, emphasizing that tax recovery proceedings must not begin until refund claims and adjustment requests are properly addressed.
The directive was issued in response to a complaint filed by a taxpayer regarding delays in the adjustment of income tax refunds from previous years against liabilities for Tax Year 2025. According to the complaint, the taxpayer had applied within the stipulated timeframe for adjustment of refunds related to Tax Years 2017, 2018, 2019, 2020, and 2023. However, due to administrative delays and inaction, the matter remained unresolved, forcing the taxpayer to seek intervention from the Ombudsman.
Upon reviewing the case, the FTO noted that refund claims for Tax Years 2017 to 2020 were still pending final determination, as their admissibility depended on the implementation of relevant appellate orders. However, the situation for Tax Year 2023 was more concerning. The taxpayer had filed a refund claim amounting to Rs44.673 million, which the department was legally obligated to process within a prescribed timeframe but failed to do so.
The Ombudsman further observed that when the taxpayer later requested adjustment of the pending refund against tax liability for 2025, the FBR again did not take timely action. It was only after formal notices were issued by the FTO Secretariat that the concerned tax office initiated proceedings on the refund application.
In its findings, the FTO criticized the tax authority’s inconsistent approach, noting that while the department often acts swiftly in adjusting refunds against its own tax demands, it frequently delays or denies similar relief to taxpayers. The Ombudsman termed this behavior as arbitrary and a clear case of maladministration under the FTO Ordinance, 2000.
As part of its recommendations, the FTO directed the Regional Tax Office (RTO) Islamabad to immediately process and decide the pending refund claim for Tax Year 2023 strictly in accordance with the law. The FBR has also been instructed to submit a compliance report within 60 days, reinforcing accountability and ensuring timely resolution of taxpayer grievances.