LAHORE: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to withdraw penalties imposed on a National Bank of Pakistan (NBP) branch manager, declaring the action a case of maladministration and administrative excess.
In a detailed order issued on June 3, 2026, the FTO instructed the concerned Commissioner Inland Revenue to revoke penalty orders totaling Rs236,490 that had been imposed on the manager of the NBP Qaboola Sharif branch in Arifwala.
The dispute arose from tax recovery proceedings initiated by the Regional Tax Office (RTO) Sahiwal against Al-Qadir Seed Corporation (Pvt.) Ltd. under Section 140 of the Income Tax Ordinance, 2001. The tax department had served recovery notices on the bank manager on September 18, 2025, seeking the recovery of alleged outstanding tax liabilities from the taxpayer’s bank account.
According to the complaint, the branch manager immediately forwarded the notices to the bank’s legal department in accordance with internal compliance procedures.
However, before any recovery action could be taken, the taxpayer secured a stay order from the Commissioner Inland Revenue (Appeals), which was communicated to the bank on the same day.
Despite the stay order, tax authorities imposed penalties of Rs25,000 under Section 182(1)(13) and Rs211,490 under Section 182(1)(15), alleging delay and obstruction in the tax recovery process.
The FTO observed that the stay order had been issued and conveyed during working hours on the very day the recovery notice was served. It also noted that the penalties remained in place even though the underlying tax demand was subsequently annulled by the appellate authority.
Referring to recent Supreme Court judgments, the Ombudsman stated that Section 140 of the Income Tax Ordinance does not authorize immediate coercive recovery without providing reasonable time and due process to third parties holding funds on behalf of taxpayers.
The FTO concluded that the FBR’s insistence on immediate enforcement, followed by penal action against a bank official, constituted administrative excess and maladministration under the Federal Tax Ombudsman Ordinance.
The Ombudsman further identified procedural irregularities in the issuance of the penalty orders and directed the FBR to withdraw the penalties without delay. The tax authority has also been instructed to submit a compliance report within 30 days.
The ruling is expected to have significant implications for future tax recovery proceedings involving banks and financial institutions, reinforcing the principles of due process, reasonable compliance timelines, and legal protections for third-party intermediaries in tax enforcement matters.
