Federal Tax Ombudsman Expresses Concern over Arbitrary Transfer of Tax Jurisdiction

The Federal Tax Ombudsman (FTO) has raised serious concerns regarding the repeated changes in the tax jurisdiction of an overseas Pakistani, aimed at attaching his bank account for recovery purposes after an ex parte amendment order. In response, the FTO has issued an order against the tax department on Tuesday.

Read More: Tax Break for Telecom Services Disappearing Mysteriously from Budget 2023–24

According to the FTO’s order, the complainant, an overseas Pakistani residing permanently in Germany for the past 20-25 years, has never been a tax resident of Pakistan nor had any source of income in the country. The complainant explained that he had purchased a property using foreign income earned from his business in Germany.

The complainant had previously filed a declaration under the “Tax Amnesty Scheme 2018” on July 26, 2018, which predates the assessment date of March 22, 2021. He also declared cash and prize bonds that were utilized for the same property in the reconciliation of his net wealth, as stated in the revised wealth statement filed on October 26, 2020. All these documents are available on his online profile.

The complainant further revealed that for Tax Year 2018, the original assessment order under Section 122(1) of the Income Tax Ordinance, 2001 was ex parte amended on March 22, 2021. The amendment treated properties worth Rs. 60,809,500 as concealed income and imposed a tax of Rs. 20,502,825, which was directly withdrawn from his bank account. The taxpayer’s tax profile indicates an address in Rawalpindi, falling under the jurisdiction of RTO Rawalpindi.

During the hearing, the complainant confirmed that the jurisdiction of his case lies with RTO Rawalpindi and requested that reassessment proceedings be conducted in the same office where the return was filed, the amendment was made, the appeal order was passed, and tax recovery was carried out through coercive measures.

Based on the aforementioned facts, the complainant’s stance regarding the jurisdiction of the case is deemed correct. It is perplexing that while making an ex parte assessment and effecting bank recovery, RTO Rawalpindi acknowledged its jurisdiction. However, as soon as the case was set aside and the possibility of a refund emerged, the case was transferred to another jurisdiction. Therefore, the tax authority is directed to handle the case within RTO Rawalpindi and refrain from transferring it elsewhere.

The FTO office has noted that remand back proceedings have been pending since the order passed by CIR (Appeals), which the tax authorities have failed to complete. The complainant has already suffered hardships due to the ex parte amendment order and the recovery of tax through the attachment of his bank account, prompting him to go through the appeal procedure to seek relief. Therefore, in this particular case, the tax authorities should have expedited the reassessment proceedings to provide relief to the taxpayer, which has not been done.

Based on the findings, the FTO office has determined that the transfer of jurisdiction at this stage, considering the facts presented, constitutes maladministration under section 2(3) (i)(b) of the FTO Ordinance, 2000.

The FTO has directed the Federal Board of Revenue (FBR) to ensure that the transfer of jurisdiction is not done arbitrarily and unilaterally. Additionally, the CIR RTO Rawalpindi has been instructed to promptly complete the reassessment proceedings in accordance with the law and the directions of the appeal order.