Tax Ombudsman Directs FBR to Clarify Tax Credit Correction

The Federal Tax Ombudsman (FTO) has recommended the Federal Board of Revenue (FBR) issue a clarification regarding the rectification of tax credit under Section 221 of the Income Tax Ordinance.

The recommendation came while deciding on a complaint filed by M/s Pakistan Telecommunication Authority (PTA) regarding an order under Section 221 of the Income Tax Ordinance, 2001.

FTO has observed that in the instant case, on 18 February 2022, the department passed an order u/s 221(1) for Tax Year (TY) 2014, wherein without confronting the taxpayer in terms of Section 221(2) of the said Ordinance, and instead of restoring the deemed assessment and allowing credit of tax recovered from the bank accounts, demand equal to the recovery was created afresh. Nowhere in the said order the alleged ‘mistake,’ apparent from the record, was mentioned, confronted, or discussed, the FTO stated.

FTO further observed that although the said order was appealable, passing an outright illegal, perverse, and unjust order cannot be justified in the guise of mindless litigation. Eight-year-old matter of regulatory authority was being handled arbitrarily, the FTO noted.

Accordingly, FTO has recommended FBR to direct IR-Policy and Legal wings to examine the case in-depth and issue necessary clarification/instructions to all IR field formations concerning the scope of section 221 of the Ordinance, and in the light of aforesaid clarification, if so required, the Commissioner concerned may like to revisit the order passed u/s 221 of the Ordinance for TY 2014, after granting a proper opportunity of being heard and as per law.