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ISLAMABAD: The powers of Federal Tax Ombudsman (FTO) for conducting inspections of the Commissioners Appeals or the Federal Board of Revenue’s (FBR) field formations, is an effective tool to check maladministration in the tax machinery.

Sources told Business Recorder here on Saturday that the FTO office is authorised under section 17 of the FTO Ordinance to conduct an inspection to check maladministration in the FBR while administrating tax laws. The term maladministration has been clearly defined in section 2(3) of the FTO Ordinance, 2000.

The FTO has unearthed serious loopholes and maladministration in the past cases where inspections of the FBR field formations have been carried out. So far, no court has issued any order to suspend or hold in abeyance section 17 of the FTO Ordinance to conduct inspections of the FBR field formations.

The court has also not stopped the FTO office from exercising powers under section 17 of the FTO Ordinance.

Under section 17 (Inspection Team), the FTO may form an inspection team for the performance of any of the functions of the FTO. The inspection team shall consist of one or more staff members and shall be assisted by such other person or persons as the FTO may consider necessary.

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The inspection team shall exercise such of the powers of the FTO as he may specify by order in writing and every report of the Inspection Team shall first be submitted to the FTO with its recommendations for appropriate action, it added.

The FTO office has three ways to investigate maladministration in the tax machinery. First, is investigation being conducted under section 10 (Procedure for redressal of grievances), second, inspection under section 17 and third, informal resolution of the problem under section 33 of the FTO Ordinance.

From 2000 to 2019, the FTO office was exercising section 10 for the investigation of complaints.

In 2019, for the first time the FTO office invoked section 17 for conducting inspections under section 17 of the FTO ordinance against a Commissioner Appeals Faisalabad. As a result of the inspection, it revealed that the Commissioner Appeals Faisalabad has shown disposal of 945 cases that were actually not disposed of.

Over Rs11 billion revenue was involved in these 945 cases not disposed of by the concerned commissioner. Through inspection, the FTO office has unearthed a big loophole and maladministration in the appellate system of the FBR.

The inspection team also had a representative of the FBR. Commissioner Appeal went to the President against the order of the FTO, but his appeal was turned down. In 2021, the FTO office again decided to use the instrument on inspection.

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The FTO office started inspections at four stations i.e. Karachi, Lahore, Islamabad and Peshawar. The FTO office authorized inspections in these offices of the FBR. The FTO inspections were challenged in High Courts. The IHC has yet to issue a judgment in the said case.

The court has set aside the FTO letter dated 14-04-2021 to carry out an inspection of the office of the Commissioner Inland Revenue, Islamabad. In Karachi, the matter is still subjudice.

The Lahore High Court (LHC) has disposed of the petition with the direction to the FTO to decide the matter strictly in accordance with the law. The Peshawar High Court (PHC) has dismissed the petition filed against the FTO inspection.

The FTO office conducted an inspection in Peshawar in 2021 and shared it with the FBR and the FBR agreed with the findings of the inspection. The inspection unearthed massive irregularities in the system and loopholes in the enforcement and monitoring of the cigarette sector. The FBR did not challenge the findings of the inspection, thereby the FBR agreed to the findings of the FTO inspection of Commissioner Corporate Zone, Peshawar.

Copyright Business Recorder, 2022

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