ISLAMABAD, June 17 (ABC): The Federal Tax Ombudsman (FTO) has held officials of the Regional Tax Office (RTO) Hyderabad responsible for maladministration in a withholding tax case involving a Matiari-based rice mill. The FTO directed the Federal Board of Revenue (FBR) to conduct fresh proceedings after providing the taxpayer a proper opportunity of hearing.
According to an order issued by Federal Tax Ombudsman Zafar Hijazi, M/s Manglani Rice & Dali Mills filed the complaint against an order passed under Section 161(1) of the Income Tax Ordinance, 2001. The order created a tax demand of approximately Rs7.3 million for tax year 2019.
Case returned to FTO for third time
The Ombudsman observed that the matter had come before the FTO for the third time. This indicated a persistent failure by tax authorities to comply with earlier directions. Previous FTO findings had already identified procedural shortcomings. The department was instructed to revisit the assessment after ensuring due process and a fair hearing for the taxpayer.
During the proceedings, the complainant argued that a significant portion of the purchases consisted of paddy procured directly from growers. Such purchases did not attract withholding tax under the relevant provisions.
The complainant also argued that the assessing officer imposed tax on various expenditure heads without identifying the recipients of payments. The officer also failed to establish the basis for applying a withholding tax rate of 7.75%.
Assessment found defective
The FTO noted that departmental representatives had earlier acknowledged defects in the assessment. Despite this, the assessing officer repeatedly passed similar orders.
The Ombudsman further observed that no material evidence was placed on record to justify taxing all payments. Tax authorities also failed to verify whether all recipients were non-filers before treating them as such.
Declaring the actions of the tax officer as “arbitrary”, “unreasonable” and “unjust”, the FTO ruled that the case fell within the definition of maladministration under the Federal Tax Ombudsman Ordinance.
Fresh proceedings ordered
The Ombudsman recommended that the Commissioner Inland Revenue, WHT Zone, RTO Hyderabad, revisit the impugned order after granting the taxpayer a proper hearing.
The FTO further directed authorities to assign the case to a different officer if fresh proceedings become necessary. It also ordered the FBR to submit a compliance report within 45 days.
The FTO has also asked its Registrar Headquarters to examine the repeated instances of maladministration in the matter and submit findings for further action.
