Refund claim rejection: FTO terms conduct of RTO officer as unfair, contrary to law

ISLAMABAD: The Federal Tax Ombudsman (FTO) has termed the conduct of an assessing officer of Regional Tax Office (RTO) Islamabad as arbitrary, unfair and contrary to law after the tax department rejected a refund claim of a public-sector organisation attached to the Pakistan Air Force without properly considering its reply and supporting evidence.

The case was taken up by the FTO on a complaint filed by the Directorate of Estate Projects, Nur Khan Base, Chaklala Cantt, Rawalpindi, against the Secretary, Revenue Division, under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000.

According to the FTO findings, the complainant had previously approached the Ombudsman over non-disposal of its pending refund application for tax year 2016. The earlier complaint was decided on February 3, 2026, with directions to the respondent department to dispose of the refund application strictly in accordance with law.

The complainant informed the FTO that the department had issued a notice under Section 170(4) of the Income Tax Ordinance, 2001, on August 15, 2020, to which it submitted a detailed reply along with supporting documents on September 6, 2020.

However, after the FTO’s earlier intervention, the department passed an order on June 18, 2026, rejecting the refund claim without providing the complainant an opportunity of hearing. The complainant argued that the order violated principles of natural justice and disregarded the Ombudsman’s earlier directions.

The FTO observed that the department neither denied receiving the complainant’s reply nor produced any material showing that the reply and supporting documentary evidence had been examined before the refund rejection order was issued.

It further noted that the assessing officer did not discuss the complainant’s reply or record findings on the documentary evidence submitted. The order was described as an ex-parte decision that ignored the complainant’s submissions, reflecting non-application of mind and contrary to principles of fair administration.

The Ombudsman also pointed out that compliance with its earlier directions required the assessing officer to examine the material already available on record and, where necessary, provide the complainant with a reasonable opportunity of hearing before reaching an adverse conclusion. Instead, the refund rejection order was issued without considering the earlier reply and evidence.

In its findings, the FTO termed the matter a “classic case of departmental disregard for law and fairness.”

It observed that despite the passage of six years, no fresh notice under Section 170(4) was issued and the complainant’s submissions and relevant legal provisions were not properly considered.

The FTO made a pointed observation that if a public-sector organisation attached to the Pakistan Air Force could be subjected to such treatment, questions arise over what an ordinary taxpayer could expect from RTO Islamabad.

The Ombudsman consequently held the conduct of the assessing officer to be arbitrary, unfair and contrary to law, and declared the omission to constitute maladministration under Section 2(3)(i)(a) and (b) of the Federal Tax Ombudsman Ordinance, 2000.

The FTO recommended that the FBR direct the Commissioner Inland Revenue (Refund Zone), RTO Islamabad, to revisit the impugned order concerning tax year 2016 in light of the law and facts and pass a fresh order after providing an adequate opportunity of hearing to the complainant.

It also directed the Chief Commissioner Inland Revenue, RTO Islamabad, to obtain an explanation from the author of the June 18, 2026 order and share it with the FTO. The department has been directed to report compliance within 30 days.

Copyright Business Recorder, 2026