ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) has set aside a refund rejection order issued by the Corporate Tax Office (CTO) Islamabad, holding that tax officials acted beyond their legal authority in denying refunds to a foreign company.
In its ruling, the tribunal declared the department’s action unlawful and time-barred, stating that officials attempted to reopen a concluded assessment in violation of settled law and binding Supreme Court precedent.
According to the judgment, the taxpayer’s return for Tax Year 2018 had attained the status of a deemed assessment under Section 120 of the Income Tax Ordinance. Any amendment to the assessment could only have been made under Section 122 within the prescribed timeframe, which had already expired.
Despite this, the CTO sought to revisit the treatment of withholding taxes paid under Sections 148 and 152, classifying them as “minimum tax” and therefore non-refundable. The tribunal ruled that refund proceedings under Section 170 do not empower tax authorities to reclassify income, reinterpret business activities or reassess a return that has become time-barred.
The decision also noted that the Federal Tax Ombudsman had earlier declared the department’s delay in processing the refund as maladministration on November 11, 2025, and directed the CTO to decide the matter within 45 days. Instead of complying, the department issued a rejection order that, according to the tribunal, ignored evidence and contradicted established jurisprudence.
The tribunal referred to precedents, including a Supreme Court judgment, as well as Lahore High Court and previous ATIR rulings, reaffirming that refund mechanisms cannot be used to indirectly reopen closed assessments.
ATIR annulled the CTO’s order in full and restored the taxpayer’s right to the refund, observing that tax authorities lacked legal basis to reopen the case, recharacterise adjustable taxes as minimum tax, or delay the matter for years.
