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Federal Tax Ombudsman Orders Refund and Inquiry into RTO Rawalpindi for Maladministration

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Federal Tax Ombudsman Orders Refund and Inquiry into RTO Rawalpindi for Maladministration

Islamabad 19-10-2024: In a recent decision, the Federal Tax Ombudsman (FTO) has issued a landmark ruling against the Regional Tax Office (RTO) Rawalpindi, citing severe maladministration in the handling of a taxpayer’s sales tax audit and appeals process. The complaint, filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000, revolved around the RTO’s failure to give effect to the decision of the Commissioner Inland Revenue (Appeals-III), Rawalpindi, despite the appellate order having attained finality years ago.

The complainant, a registered taxpayer under the Sales Tax Act, 1990, was subjected to an ex-parte order passed by the Inland Revenue Audit Officer for the tax periods 2008-09 and 2009-10. The audit resulted in a total sales tax liability of Rs. 16,74,321, which was recovered by attaching the taxpayer’s bank account in June 2012. Following a second round of litigation, the Commissioner Inland Revenue (Appeals-III) decided in favor of the taxpayer, but the RTO failed to implement the appellate decision, despite multiple requests and representations.

The Ombudsman’s investigation found that the RTO’s failure to implement the order of the appellate authority over the course of seven years constituted maladministration under Section 2(3)(ii) of the Federal Tax Ombudsman (FTO) Ordinance, 2000. The Federal Tax Ombudsman (FTO) referred to legal precedents, including a Sindh High Court ruling (2017 PTD 1852) and prior findings of the Ombudsman’s office in [Complaint No. 0204/OM/2021], which underscore the duty of tax authorities to follow appellate directives in a timely manner.

In response to the complaint, the RTO cited procedural issues, stating that no time limitation existed in the Sales Tax Act, 1990 for deciding remanded cases until the Finance Act, 2018 introduced such limits. Despite this, the Federal Tax Ombudsman (FTO) criticized the RTO’s handling of the case, calling the delay unacceptable and labeling the situation as a serious breach of administrative responsibility.

The Federal Tax Ombudsman (FTO) has issued a series of directives to address the issue. The Member-IR (Ops), FBR has been instructed to conduct a fact-finding inquiry to identify the officers responsible for the maladministration in this case. The Chief Commissioner, RTO Rawalpindi has been ordered to refund the recovered amount of Rs. 1,673,244 to the complainant. Compliance with these recommendations must be reported within 45 days.

This decision highlights the legal and procedural obligations of tax authorities to promptly execute appellate orders. It serves as a reminder that delays in giving appeal effect can undermine the integrity of tax administration, as emphasized in the Sindh High Court ruling and the Federal Tax Ombudsman (FTO’s) earlier findings. The case also brings attention to the procedural changes brought about by the Finance Act, 2018, particularly the introduction of time limits for resolving remanded cases.

This ruling is expected to lead to significant accountability within the Federal Board of Revenue (FBR) and may serve as a deterrent to future cases of administrative inaction.

This news reflects the key elements of the judgement, emphasizing its broader implications for tax administration in Pakistan.