ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to ensure that taxpayers’ super tax liabilities are adjusted against their pending income tax refunds, terming the department’s refusal to do so arbitrary and discriminatory.
The directive was issued after a complaint filed by a taxpayer from Faisalabad regarding the non-issuance of a refund amounting to Rs4.506 million for Tax Year 2024.
According to the case record, the taxpayer had submitted the income tax return under the Income Tax Ordinance, 2001 and electronically filed the refund application on August 13, 2025, followed by reminders in December 2025 and January 2026. However, the tax department failed to process the refund within the stipulated time frame.
Super Tax Demand Created by FBR
During the proceedings, it emerged that the tax department had issued an order under Section 4C (Super Tax) of the Income Tax Ordinance on February 11, 2026, creating a tax demand of Rs1.548 million against the complainant.Sales tax fraud
The taxpayer requested that the refund claim for the same tax year be adjusted against the super tax demand to avoid enforcement measures. However, departmental representatives informed the FTO that the tax authorities were following an unofficial policy of collecting the demand in cash without allowing adjustment against refunds.
FTO Terms FBR Policy Arbitrary
After reviewing the case, the FTO observed that the department’s delay in processing the refund reflected neglect and maladministration. It also ruled that refusing to adjust the refund against the super tax liability lacked legal justification and amounted to coercion of taxpayers.
The Ombudsman further stated that insisting on cash payment despite a valid refund claim for the same tax period was perverse, arbitrary, and discriminatory.
Key Directives Issued to FBR
The FTO has recommended that the FBR:
• Issue instructions to all Inland Revenue field formations to recover super tax only after adjusting pending refund claims.
• Direct the Commissioner Inland Revenue (Refund Zone), Regional Tax Office Faisalabad, to process the taxpayer’s refund application according to law after providing a proper hearing.
• Submit a compliance report within 45 days.
The recommendations were issued by M. Zafar-ul-Haq Hijazi, reinforcing the need for transparent and fair tax administration.
Implications for Taxpayers
Tax experts say the ruling could provide relief to taxpayers facing similar situations where refund claims remain pending while tax demands are raised by the authorities. The directive also underscores the FTO’s role in addressing maladministration and ensuring that taxpayers are not subjected to unnecessary financial pressure.Sales tax fraud
The decision is expected to prompt the FBR to review its internal practices regarding refund adjustments against super tax liabilities, potentially benefiting thousands of taxpayers across Pakistan.
