FBR Raises Rs 406M Demand Against Faisal Town

Islamabad: Pakistan’s tax authorities have initiated significant enforcement proceedings against Faisal Town Pvt. Ltd., alleging substantial non-compliance with withholding tax obligations for Tax Year 2023. A tax demand amounting to Rs 406.23 million, along with default surcharge, has been raised through an order issued by the Deputy Commissioner Inland Revenue, Large Taxpayer Office (LTO) Islamabad.

Faisal Town, a prominent private housing development situated in Sector F-18 adjacent to the M-1 Motorway near the Islamabad–Peshawar Motorway interchange, has developed into a major residential and investment hub within the Islamabad capital region. Owing to its strategic connectivity to Islamabad, Rawalpindi, and the national motorway network, the project has attracted substantial local and overseas investment, positioning it among the high-value real estate ventures in the region.

The impugned order has been passed under Sections 161 and 205 of the Income Tax Ordinance, 2001. Section 161 imposes personal liability upon withholding agents who fail to deduct, collect, or deposit tax in accordance with statutory requirements, whereas Section 205 authorizes the levy of default surcharge on outstanding tax liabilities.

According to available information, the proceedings stem from alleged failures in the discharge of withholding obligations. In the real estate sector, developers are generally required to deduct advance tax under Sections 236K and 236C on property transactions. However, concerns have reportedly been raised regarding delayed deposit of collected taxes, non-submission or late submission of withholding statements to the Federal Board of Revenue, and inadequate documentation concerning payments to brokers and intermediaries. Such procedural lapses, if established, may give rise to transparency deficiencies and potential revenue exposure.

The company has formally challenged the assessment by filing an appeal before the Commissioner Inland Revenue (Appeals), Islamabad. In its appellate submissions, Faisal Town has contended that the order dated January 31, 2026 is legally unsustainable and void ab initio, asserting that jurisdiction under Section 161 was exercised in disregard of the statutory framework and settled jurisprudence.

It has been argued that the assessing officer failed to identify specific transactions, omitted particulars of alleged payees or intermediaries, and did not substantiate any concrete instance of default. The appellant further maintains that reconciliation proceedings under Rule 44(4) were not properly undertaken and that the principles of natural justice were compromised due to the absence of a meaningful opportunity of hearing prior to finalization of the order. Additionally, the levy of default surcharge under Section 205 has been challenged as unlawful and unwarranted.

The appellant has accordingly requested the appellate authority to annul the impugned order in its entirety and to delete the tax demand of Rs 406,233,613 along with the associated default surcharge.