ISLAMABAD: Islamabad High Court (IHC) has ruled that the Federal Tax Ombudsman (FTO) cannot assume the powers of the State Bank of Pakistan (SBP) as the regulator of banks, as the FTO has no jurisdiction to probe the legality of the conduct of the business of banks.
In this regard, the IHC has issued an order (Summit Bank vs FTO) against the FTO. The court has also ruled that the FTO was vested with no jurisdiction to probe the issue of legality or illegality about how the petitioner conducts its business as a baking company.
Such probe falls beyond the domain of the FTO as defined under section 9 of the FTO ordinance. Therefore, the assumption of such jurisdiction is ultra vires section 9 of the Ordinance and is liable to be set aside.
In the Writ Petition No. 2568/2023, the LHC has declared that the court agrees with the bank concerning the scope of the jurisdiction, powers, and functions of the FTO. The FTO has been established to investigate allegations of maladministration on the part of the employees working within the tax machinery being administered by the State. It is to curb maladministration on part of employees of the State that the FTO has been established for expeditious disposal of complaints.
The FTO has not been vested with authority- to investigate the business of a company against which a complaint is filed. In the instant matter, the FTO assumed the powers of SBP as a regulator of banks to frame a question as to whether the bank was performing functions that it was duly authorized to perform in accordance with the license issued to the petitioner as a banking company.
After framing such a question, the FTO concluded that the petitioner was performing functions that it was not authorized to perform under banking laws. Based on such conclusion it issued recommendations to the Chief Commissioner, LTO, Islamabad, and FBR to probe the matter.
