Super tax: Recovery only after adjustment of pending refund claims, FTO tells FBR

ISLAMABAD: Taking a major step to facilitate the corporate sector, the Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue to recover Super Tax from taxpayers only after adjustment of pending refund claims.

The FTO has also declared that the tax department’s insistence on cash recovery of Super Tax despite the existence of a refund claim amounts to coercion and harassment to the taxpayer.

In this regard, the FTO has issued an order here on Wednesday.

Through this new order, the FTO has directed the Federal Board of Revenue to issue instructions to all Inland Revenue field formations ensuring that recovery of Super Tax is made only after adjustment of pending refund claims. The FTO has further directed the Commissioner of Inland Revenue, Refund Zone, RTO Faisalabad to dispose of the complainant’s refund application for Tax Year 2024 strictly in accordance with law after providing a proper hearing to the taxpayer and to report compliance within 45 days. The Ombudsman observed that the delay in processing the refund and the insistence on cash recovery of the tax demand, despite the availability of a refund claim, constituted maladministration and arbitrary conduct on the part of the department.
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The complaint was filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000, against non-issuance of an income tax refund amounting to Rs. 4.506 million for Tax Year 2024. The complainant had filed a return of income under Section 114(1) of the Income Tax Ordinance, 2001, claiming the said refund and subsequently e-filed the refund application on 13 August 2025.

According to the complainant, despite submission of the application and reminders dated 17 December 2025 and 6 January 2026, the department failed to dispose of the refund application within the prescribed time under Section 170(4) of the Income Tax Ordinance, 2001.

During proceedings it was revealed that the department had also passed an order under Section 4C of the Income Tax Ordinance on 11 February 2026 creating a tax demand of Rs. 1.548 million for the same tax year. The complainant requested that the refund amount be adjusted against the demand to avoid coercive recovery. The departmental representative informed that the department was informally pursuing a policy of collecting Super Tax demand through cash payment without allowing adjustment of refunds, but failed to cite any legal authority for such practice. The Ombudsman observed that the taxpayer’s offer to adjust the refund against the demand for the same tax period was reasonable, and that the department’s insistence on cash recovery despite the existence of a refund claim amounts to coercion and harassment.

In its findings, the Federal Tax Ombudsman held that the department’s refusal to adjust the pending refund against the Super Tax demand and its insistence on cash payment was perverse, arbitrary and discriminatory within the meaning of Section 2(3)(i)(b) of the FTO Ordinance.

Copyright Business Recorder, 2026