The Federal Tax Ombudsman (FTO) has taken a significant step toward ensuring fairness and uniformity in the verification of income tax refund claims. In a recent directive, the FTO has instructed the Federal Board of Revenue (FBR) to implement a consistent procedure across all field formations. The directive addresses concerns of discriminatory treatment in income tax refund cases and emphasizes the need for uniformity in handling claims with identical facts.
Background
The directive, issued on Tuesday, stems from a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000. The complaint highlighted delays in processing a refund application for Tax Year 2021, raising questions about the uniformity of treatment in similar cases.
Details of the Complaint
The complainant, who filed a return of income for Tax Year 2022, claimed a refund of Rs. 1,564,950 under Section 236J of the Income Tax Ordinance, 2001. The refund was due to excess tax deducted. Despite filing the refund application on 21-07-2023, the department failed to pass the order within the stipulated time, prompting the complainant to seek intervention from the FTO.
During the hearing, it was revealed that the department rejected the claim based on a deduction under Section 236A dated 03-11-2020. The Comprehensive Payment Receipt (CPR) in question contained entries for both the complainant and another individual, Malik Muhammad Yousaf, with identical tax deductions of Rs. 1,564,950.
Discriminatory Treatment and Maladministration
The crux of the matter emerged when the department accepted the refund claim of Malik Muhammad Yousaf based on the same CPR but rejected the complainant's claim. This discrepancy, deemed arbitrary and discriminatory by the FTO, raised concerns about maladministration, falling within the ambit of Section 2(3)(ii) of the FTO Ordinance.
The FTO emphasized that this maladministration occurred before the filing of the first and second appeals, contributing to unnecessary litigation between appellate authorities and the tribunal. Such instances of arbitrary decision-making and discriminatory treatment not only impact individual taxpayers but also strain the overall efficiency of the tax refund system.
FTO's Directives to FBR
In response to the complaint, the FTO has directed the FBR to issue necessary instructions to field formations. The FBR is tasked with ensuring a uniform approach in the verification of income tax refund claims, particularly in cases with 100 percent identical facts.
Specifically, the FBR is instructed to:
Direct the concerned Chief Commissioner of Inland Revenue (CCIR) to review cases with discriminatory treatment and ensure consistent handling.
Instruct the Commissioner-Inland Revenue (Zone-III, RTO Lahore) to reevaluate the order under Section 170(4) and settle the refund claim, providing the opportunity for a hearing and adhering to the law.
Conclusion
The FTO's directive to the FBR marks a crucial step toward establishing fairness and uniformity in the income tax refund process. Addressing concerns of discriminatory treatment and maladministration, the FTO's intervention aims to streamline procedures, reduce unnecessary litigation, and ensure a transparent and equitable tax system. As the FBR implements these directives, taxpayers can expect a more consistent and efficient handling of income tax refund claims, fostering trust and confidence in the tax administration system.
