Islamabad: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to immediately unfreeze the bank and pension accounts of a retired Pakistan Navy officer, declaring the tax recovery measures taken during the pendency of his appeal as maladministration.
According to an FTO decision, the complainant, retired Pakistan Navy officer Misbah ul Islam Syed, challenged the freezing of his bank accounts, including his pension account, after the FBR initiated recovery proceedings over an income tax demand of Rs12.16 million for the tax year 2018.
The complainant submitted that the tax demand had been created through an assessment order issued under Section 122(1) of the Income Tax Ordinance, 2001, against which he had already filed an appeal before the Commissioner Inland Revenue (Appeals) in July 2024.
Despite the appeal remaining pending, the tax department proceeded to issue recovery notices and subsequently froze his bank accounts, including the account receiving his government pension.
The Revenue Division, through RTO-II Karachi, defended its action by arguing that the assessment order had become enforceable and that, in the absence of a stay order from the appellate authority, recovery proceedings were legally permissible.
The department also maintained that the FTO lacked jurisdiction because the assessment itself was already under appeal. However, the Ombudsman rejected the jurisdictional objection, observing that the complaint was not against the tax assessment itself but against the manner in which recovery was carried out while the statutory appeal remained undecided.
The FTO held that coercive recovery during the pendency of a first appeal was contrary to law and inconsistent with judicial precedents.
It further ruled that attaching or freezing a dedicated pension account for tax recovery was unlawful, noting that pension funds are protected under the Pensions Act, 1871, Section 60(1)(g) of the Code of Civil Procedure, and the relevant civil service regulations.
The Ombudsman also condemned the prolonged delay in deciding the taxpayer’s appeal, noting that it had remained pending for nearly two years despite the Income Tax Ordinance requiring appeals to be decided within 120 days. The delay, combined with the recovery action, amounted to maladministration under the Federal Tax Ombudsman Ordinance, 2000.
In its recommendations, the FTO directed the FBR to instruct the Commissioner Inland Revenue, Zone-I, RTO-II Karachi, to de-attach all bank accounts, including the complainant’s pension account, within seven days.
It further ordered the Commissioner Inland Revenue (Appeals-II), Karachi, to decide the pending appeal within 40 days and submit a compliance report to the Ombudsman within 45 days.