FTO directs FBR to settle 2023 refund claim, bars coercive recovery before decision

ISLAMABAD: Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to immediately decide a taxpayer’s pending income tax refund claim for Tax Year 2023 and ensure that no coercive recovery of tax demand is initiated before disposal of pending refund claims or adjustment requests.

The directions were issued on a complaint regarding non-adjustment of pending income tax refunds of previous tax years against tax liability for Tax Year 2025.According to the complaint, the taxpayer had approached the tax department well within time for adjustment of refund claims relating to Tax Years 2017, 2018, 2019, 2020 and 2023, but the matter remained unattended due to departmental delay and inaction, forcing the taxpayer to seek relief from the Ombudsman.

After examining the case, the FTO observed that refund claims for Tax Years 2017 to 2020 had not yet attained finality, as their admissibility would be determined only after implementation of the relevant appellate orders.

However, in respect of Tax Year 2023, the Ombudsman noted that the taxpayer had filed a refund application amounting to Rs44.673 million, which the department was legally required to decide within the prescribed time. Despite this statutory obligation, the department failed to dispose of the claim.

The Ombudsman further observed that when the taxpayer subsequently requested adjustment of the claimed refund against tax liability for Tax Year 2025, the department again failed to act. It was only after issuance of notices by the FTO Secretariat that the concerned tax office moved and initiated proceedings on the refund application.

In its findings, the FTO noted that while the department often demonstrates “phenomenal quickness” in adjusting refunds against tax demands raised by itself, the same legal facility is frequently denied to taxpayers despite repeated requests.

The Ombudsman held that such conduct amounted to arbitrary treatment, delay and maladministration within the meaning of the FTO Ordinance, 2000.

The FTO has, therefore, recommended that RTO Islamabad immediately dispose of the pending refund claim for Tax Year 2023 strictly in accordance with law.

The Ombudsman has also directed Member Inland Revenue (Operations) to issue instructions to all field formations that coercive recovery of tax demand should only be initiated after disposal of pending refund claims and adjustment requests. The FBR has further been directed to submit a compliance report within 60 days.

Copyright Business Recorder, 2026