Taxpayer Wins Refund Dispute in Landmark FTO Case

The Federal Tax Ombudsman (FTO) of Pakistan has issued a significant decision in favor of a taxpayer who faced delays in receiving a tax refund for the 2013 and 2014 tax years. This case highlights the role of the FTO in addressing grievances related to tax administration.

Key Points of the Case:

  • Delay in Refund: The taxpayer experienced a significant delay in receiving a tax refund for the aforementioned tax years, despite the Corporate Tax Office (CTO) in Islamabad already determining the refundable amount.
  • FTO’s Ruling: The FTO ruled that the CTO’s delay constituted “maladministration of justice.” This delay was deemed unreasonable, unfair, and arbitrary.
  • Compensation Ordered: The FTO ordered the Federal Board of Revenue (FBR) to settle the refund proceedings and compensate the taxpayer for the delay as per legal provisions.

Tax Lawyer’s Perspective:

  • Call for Investigation: Tax lawyer Waheed Shahzad Butt, representing the taxpayer, urged the government to investigate the FBR’s alleged maladministration and potential violation of the taxation system.
  • FBR’s Practices Questioned: Butt raised concerns about the FBR’s field formations potentially using new methods to block refunds, which could be a violation of Supreme Court orders.

FTO’s Reasoning:

  • Department’s Defense: The CTO argued that the FTO lacked jurisdiction due to a pending reference before the Islamabad High Court regarding the refund.
  • FTO’s Rebuttal: The FTO rejected the CTO’s argument, stating that the inordinate delay itself constituted maladministration, and the High Court case wouldn’t necessarily affect the FTO’s investigation.

FTO’s Directives:

  • Refund Processing: The FTO directed the FBR to instruct the concerned Commissioner of Income Tax (CIT) to dispose of the refund proceedings within 30 days based on legal merit.
  • Compensation Consideration: The FTO instructed the FBR to assess and potentially award compensation to the taxpayer for the delay, as mandated by law.

Significance of the Case:

This FTO decision establishes a precedent for holding tax authorities accountable for unreasonable delays in processing tax refunds. It also highlights the FTO’s role in ensuring fair and timely resolution of taxpayer grievances.

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