FTO directs FBR to adjust refunds before recovery of Super Tax

ISLAMABAD, (UrduPoint / Pakistan Point News - 11th Mar, 2026) The Federal Tax Ombudsman (FTO) on Wednesday directed the Federal board of Revenue (FBR) to issue instructions to all Inland Revenue field formations to ensure that recovery of Super Tax is made only after adjustment of pending refund claims of taxpayers.

The Ombudsman also directed the Commissioner Inland Revenue, Refund Zone, Regional Tax Office (RTO) Faisalabad to decide the complainant’s refund application for Tax Year 2024 strictly in accordance with law after providing an opportunity of hearing to the taxpayer and submit a compliance report within 45 days, a news release said.

The directions were issued while deciding a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 regarding non-issuance of an income tax refund amounting to Rs4.506 million for Tax Year 2024.

According to the complaint, the taxpayer had filed a return of income under Section 114(1) of the Income Tax Ordinance, 2001 claiming the refund and later e-filed the refund application on August 13, 2025.

The complainant contended that despite filing the application and sending reminders on December 17, 2025 and January 6, 2026, the department failed to dispose of the refund claim within the timeframe prescribed under Section 170(4) of the Income Tax Ordinance, 2001.

During the proceedings, it emerged that the department had also passed an order under Section 4C of the Income Tax Ordinance on February 11, 2026, creating a Super Tax demand of Rs1.548 million for the same tax year.

The taxpayer requested the department to adjust the refund amount against the tax demand in order to avoid coercive recovery proceedings.

However, the departmental representative informed that the department had been informally pursuing a policy of collecting Super Tax through cash payment without allowing adjustment of refunds, but failed to cite any legal provision supporting such practice.

The Ombudsman observed that the taxpayer’s request for adjustment of the refund against the demand for the same tax period was reasonable and lawful.

It further noted that the delay in processing the refund and the insistence on cash recovery of the tax demand despite the existence of a refund claim constituted maladministration and arbitrary conduct on the part of the department.

In its findings, the Federal Tax Ombudsman held that the refusal to adjust the pending refund against the Super Tax demand and insistence on cash payment was perverse, arbitrary and discriminatory within the meaning of Section 2(3)(i)(b) of the Federal Tax Ombudsman Ordinance.