04/11/2025
📢 Important Ruling by FTO on Sales Tax Adjustment ⚖️
The Federal Tax Ombudsman (FTO) has ruled that no prior notice or intimation is required under the law for the adjustment or recovery of sales tax liabilities against income tax refunds.
🔍 Key Details:
According to the latest FTO order, Section 170(3)(b) of the Income Tax Ordinance, 2001 places a legal obligation on the Commissioner to apply any refundable amount toward outstanding tax liabilities under any other law. This means that such adjustments are mandatory and do not require prior notice to the taxpayer.
The FTO order further mentioned that the issue of adjustment is already pending before the appeal forum, and therefore no intervention is warranted under the FTO Ordinance.
⚖️ Case Insight:
The department had issued a refund order under Section 170(4) for Tax Year 2017, adjusting an amount of Rs. 193.29 million against an outstanding sales tax demand of Rs. 374.96 million for Tax Year 2020.
The FTO observed that this adjustment was in accordance with law and therefore did not constitute maladministration.
đź’¬ Legal Response:
The legal community, however, has raised concerns that the FTO office should have implemented the Supreme Court’s ruling in the Pakistan LNG case, emphasizing the need for consistency in applying judicial precedents.
✅ FTO’s Decision:
> “Adjustment is obligated by law while passing the refund order in case any liability of the same person is outstanding. Therefore, there is no maladministration involved"
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