ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) has issued a landmark judgment, exposing the conduct of a Corporate Tax Office (CTO), where tax officials acted unlawfully to deny and delay issuance of admissible refunds to a foreign company.
The ATIR’s judgement termed an unlawful, time-barred and malafide attempt by tax officials to deny a foreign based company its rightful refunds that were backed by the Supreme Court of Pakistan binding judgment in refund matters jurisdiction of a tax officer.
Even the process of justice before the Federal Tax Ombudsman has been violated by the CTO.
The Tribunal’s ruling not only nullifies the refund rejection order issued by the CTO Islamabad, it publicly indicts the department for overstepping its authority, violating settled law, and weaponising procedural powers to obstruct justice.
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After the taxpayer waited, without action for years, the case was escalated to the Federal Tax Ombudsman, which on 11 November 2025 formally declared the CTO’s delay as maladministration and ordered the department to decide the refund within 45 days. Rather than complying in good faith, the department issued a sweeping rejection order, ignoring evidence, violating law, and contradicting the country’s highest court.
In a recently issued landmark order, the ATIR has annulled the patently illegal actions of the CTO and annulled the treatment. Taxpayer’s annual return for Tax Year 2018 had already attained the status of a valid assessment under Section 120. Any change in tax liability could only have been made through Section 122 and that window had already closed five years ago. Yet, in blatant disregard for the law and the apex court’s judgment in Honda Atlas Cars vs. CIR, Legal, LTO, the CTO attempted to re-adjudicate the nature of withholding taxes paid under sections 148 and 152, wrongly declaring them “minimum tax” and therefore non-refundable.
The Tribunal categorically held that neither Section 170 nor any refund processing mechanism empowers tax officers to reclassify income, reinterpret the taxpayer’s business, or reassess a time-barred return.
This follows the exact principle earlier affirmed by Lahore High Court (2016 PTD 377), and ATIR’s own binding precedent (131 TAX 1). The message is unambiguous, refund processing cannot be used as a backdoor to reopen assessments that the law has permanently closed.
The Tribunal’s decision paints a devastating portrait of administrative misconduct. No authority to reopen or reinterpret a time-barred assessment. No legal basis to convert adjustable taxes into “minimum tax”. No justification for years-long delay. Direct defiance of settled jurisprudence from the High Court and the Supreme Court and improper exercise of power under the guise of Section 170 refund processing. ATIR annulled the CTO’s order in its entirety and restored the taxpayer’s right to a refund.
When contacted, tax lawyer Waheed Shahzad Butt alleged that this case adds to a growing list of complaints that CTO Islamabad routinely delays refunds for years.
He said officers misuse legal provisions to block legitimate claims. Internal checks fail to prevent repeated violations of settled law. Businesses, especially foreign investors face uncertainty and harassment. Such conduct directly undermines Pakistan’s investment environment at a time when economic recovery desperately needs transparency, trust, and compliance with judicial orders.
The Tribunal’s ruling serves as a stern warning to the FBR, ignoring Supreme Court law, mishandling refunds, and abusing statutory powers will no longer go unchallenged. CTO Islamabad now stands exposed, not just for a wrongful order, but for a deeper institutional culture of resistance to accountability, Waheed added.
Copyright Business Recorder, 2026
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