ISLAMABAD: The Corporate Tax Office (CTO) Islamabad has reportedly declined to implement an unchallenged order issued by Federal Tax Ombudsman (FTO) Zafar-ul-Haq Hijazi, raising serious concerns about the effectiveness of Pakistan’s Alternative Dispute Resolution Committee (ADRC) framework and the government’s commitment to resolving tax disputes outside the courts.
According to details, the disputed tax demand—meant to be addressed through the ADRC mechanism—was allegedly recovered indirectly through the adjustment of lawful tax refunds owed to the taxpayer. Observers say the move highlights longstanding issues related to compliance with legal orders within the Federal Board of Revenue’s (FBR) field formations.
The Federal Tax Ombudsman’s office was established to protect taxpayers from administrative excesses and ensure fair treatment in tax matters.
The taxpayer claims that officials at CTO Islamabad adjusted legitimate income tax refunds for Tax Years 2018 to 2021 against a disputed sales tax demand that is currently pending before an ADRC forum. The process had earlier been initiated following an order issued by FTO Zafar-ul-Haq Hijazi.
Company director Shehryar Ansari stated that the action was not merely a bureaucratic oversight but a deliberate step that violated multiple legal obligations. According to him, the refund adjustment allegedly conflicts with a Supreme Court ruling, an Islamabad High Court judgment, an FBR policy circular, and a direct order issued by the FTO.
The FTO had issued separate binding orders under both the income tax and sales tax regimes, directing appropriate action in the matter. However, the CTO reportedly did not comply with these directives.
Legal experts note that the Supreme Court’s decision in case 2025 SCP 267 prohibits tax authorities from initiating arbitrary recovery actions without following due legal process. Furthermore, tax demands that are under review by the ADRC are generally considered unenforceable during the pendency of dispute resolution proceedings.
Ansari said the matter extends beyond a single company’s refund dispute and raises broader concerns regarding Pakistan’s tax reform initiatives.
He argued that the ADRC system—introduced as part of Prime Minister Shehbaz Sharif’s tax reform agenda—relies on the principle that once a dispute is referred to the ADRC, coercive recovery actions should be suspended until the committee reaches a decision.
“If tax officers continue to adjust refunds against demands that are pending before ADRC, it sends a negative signal to taxpayers and investors about the credibility of the dispute resolution mechanism,” Ansari said.
He further claimed that a refund officer could effectively bypass ADRC protections by issuing an order under Section 170(4), undermining the purpose of the alternative dispute resolution framework.
The matter has reportedly been brought to the attention of senior FBR officials, including the Chairman FBR, Member IR-Legal, and Member IR-Operations. Ansari questioned how many other taxpayers may have faced similar issues without pursuing legal remedies.
