ISLAMABAD: The Islamabad High Court (IHC) has declared that the Federal Tax Ombudsman (FTO) cannot assume the powers of the State Bank of Pakistan (SBP) as the regulator of banks, as the FTO has no jurisdiction to probe the legality of the conduct of the business of banks.

According to an order (bank vs FTO) of the IHC, the court has ruled that the FTO was vested with no jurisdiction to probe the issue of legality or illegality with regard to the manner in which the petitioner conducts its business as a banking company. Such probe falls beyond the domain of the FTO as defined under Section 9 of the FTO ordinance. The assumption of such jurisdiction is therefore ultra vires Section 9 of the Ordinance and is liable to be set aside.

In the writ petition No 2568/2023, the LHC has declared that the court agrees with the bank with regard to the scope of the jurisdiction, powers and functions of the FTO.

The FTO has been established to investigate allegations of maladministration on part of the employees working within the tax machinery being administered by the State. It is to curb maladministration on the part of employees of the State that the FTO has been established for expeditious disposal of complaints.

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The FTO has not been vested with authority- to investigate the business of a company against which a complaint is filed. It appears that in the instant matter, the FTO assumed the powers of SBP as regulator of banks to frame a question as to whether the bank was performing functions that it was duly authorised to perform in accordance with the license issued to the petitioner as a banking company.

After framing such a question, the FTO came to the conclusion that the petitioner was performed functions that it was not authorized to perform under banking laws. And based on such conclusion it issued recommendations to the Chief Commissioner, LTO, Islamabad, and FBR to probe the matter.

The LHC order stated that the petitioner is a banking company and the FTO has no jurisdiction to inquire into the affairs of the petitioner. The petitioner had provided certain information sought by the FTO in a complaint filed by citizens against the Revenue Division and based on such statement the FTO has ordered an inquiry into the affairs of the petitioner, which is beyond its jurisdiction and such instruction is also in breach of section 23 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (“Ordinance”).

The recommendations issued by the FTO amounts to suo motu exercise of authority into the affairs of the petitioner as a banking company, which jurisdiction vests in the regulator of banks (i.e. State Bank of Pakistan (SBP) and not the Federal Board of Revenue (FBR) or the Tax Ombudsman.

Copyright Business Recorder, 2024