LAHORE: The Federal Tax Ombudsman (FTO) has criticised the Regional Tax Office (RTO) Islamabad over its handling of an income tax refund claim filed by a public sector organisation attached to the Pakistan Air Force (PAF), terming the conduct a case of severe maladministration.
The observation was made by Federal Tax Ombudsman M. Zafar ul Haq Hijazi while deciding complaint No. 11887/ISB/IT/2026, filed by the Directorate of Estate Projects, Nur Khan Base, Rawalpindi.
The complaint related to a pending income tax refund claim for Tax Year 2016.
The FTO noted that the Directorate had approached the Ombudsman after the tax authorities failed to process its refund application. On February 3, 2026, the FTO directed the Revenue Division to dispose of the pending refund claim in accordance with the law.
However, the tax authorities subsequently rejected the claim through an order issued on June 18, 2026, without providing the complainant an opportunity for a hearing.
Tax refund dispute dates back to 2020
According to the FTO’s findings, the tax department had issued a notice to the Directorate under Section 170(4) of the Income Tax Ordinance, 2001, on August 15, 2020.
The Directorate submitted a detailed response on September 6, 2020, along with documentary evidence in support of its refund claim.
Despite the submission, the RTO Islamabad issued a rejection order almost six years later without properly considering the evidence or addressing the arguments contained in the Directorate’s response.
The Ombudsman further observed that the tax authorities did not issue a fresh notice or provide an opportunity of hearing before passing the ex-parte order.
FTO finds serious procedural violations
The FTO determined that rejecting the refund claim through an ex-parte order, without following due process and properly examining the evidence already available on record, constituted severe maladministration under Section 2(3)(i)(a) and (b) of the Federal Tax Ombudsman Ordinance, 2000.
The Ombudsman expressed particular concern over the treatment of the complainant given its status as a public sector organisation and an attached department of the PAF.
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“If the Complainant, a public sector organization [and] an attached department of Pakistan Air Force, has been meted out such treatment, what an ordinary taxpayer should expect from RTO Islamabad,” the FTO observed.
The remarks highlight concerns over the manner in which taxpayer refund claims are handled and the need for tax authorities to ensure procedural fairness before issuing adverse orders.
Due process stressed in tax administration
The case underscores the importance of giving taxpayers an adequate opportunity to respond to adverse proceedings and ensuring that evidence and arguments submitted on record are properly examined before a final decision is taken.
The FTO’s findings also reinforce the requirement for tax authorities to administer tax laws transparently and in accordance with established legal procedures.
For taxpayers, timely processing of refunds and adherence to due process remain important elements of confidence in the tax administration system, particularly in cases where claims have remained pending for extended periods.
