The Corporate Tax Office (CTO) Islamabad has been accused of ignoring an order issued by Federal Tax Ombudsman (FTO) Zafar-ul-Haq Hijazi, raising concerns about the implementation of Pakistan’s Alternative Dispute Resolution Committee (ADRC) framework.
According to sources, the dispute relates to a tax demand that was supposed to be resolved through the ADRC process. However, it is alleged that the amount was recovered indirectly by withholding or adjusting tax refunds owed to the taxpayer.
Officials say the FTO was established to protect taxpayers from administrative excess and to ensure fair handling of tax disputes. Ignoring its orders, they warn, could weaken the credibility of the institution and undermine the dispute resolution system.
Sources further claimed that a refund officer at the CTO Islamabad adjusted income tax refunds for tax years 2018 to 2021 against a sales tax demand that is currently under dispute and pending before the ADRC. The matter had already been referred to the ADRC following an order by the FTO.
It is also alleged that the action may conflict with several legal provisions, including a Supreme Court ruling, an Islamabad High Court decision, an FBR policy circular, and the FTO’s directive.
When contacted, company director Shehryar Ansari said the issue was not a simple administrative error but a deliberate decision. He stated that the FTO had issued clear and enforceable orders under both income tax and sales tax laws, but the CTO allegedly proceeded with the adjustment without explanation.
Ansari also referred to a Supreme Court judgment that restricts tax authorities from recovering disputed taxes without following due legal procedures. He said that when a tax demand is under review by the ADRC, it should not be enforced until the process is completed.
He further said the matter extends beyond a single company’s refund and could affect the credibility of the ADRC system, which was introduced to encourage out-of-court resolution of tax disputes.
According to Ansari, if tax refunds can be adjusted against disputed demands during ADRC proceedings, it may discourage businesses and investors from relying on the mechanism for fair dispute resolution.
The issue has been formally brought to the attention of the Chairman of the Federal Board of Revenue (FBR), as well as Member IR-Legal and Member IR-Operations.
Ansari questioned whether other taxpayers may have faced similar actions without having the resources to challenge them through higher courts.
