The Federal Tax Ombudsman has held that an RTO committed maladministration by delaying an income tax refund for more than 21 months where the underlying tax demand had already been quashed by the Lahore High Court. The amount had originally been recovered through bank attachment for Tax Year 2017, but once the High Court annulled the demand, the FTO observed that the recovered amount became consequentially refundable.
An important aspect of the order is the FTO’s rejection of the department’s position that the taxpayer was required to file a fresh refund application under Section 170 of the Income Tax Ordinance, 2001. According to the FTO, where direct relief has already been granted by the High Court, the tax department is required to give appeal effect and process the consequential refund instead of requiring the taxpayer to initiate another round of refund proceedings.
The FTO consequently directed the Commissioner to release the refund along with statutory compensation under Section 171 and report compliance within 30 days. The development is particularly relevant for taxpayers whose amounts have been recovered against demands that are subsequently annulled by appellate courts, as it reinforces the importance of timely implementation of judicial orders and consequential relief.