President Rejects FBR Demand for Surety Bonds

Asif Ali Zardari has dismissed a representation filed by the Federal Board of Revenue against the Federal Tax Ombudsman, rejecting the tax authority’s position that taxpayers should be required to furnish surety bonds before receiving refunds arising from appellate relief orders.

According to media reports, the matter originated from complaints filed by a foreign-based company against the Corporate Tax Office Islamabad regarding failure to implement appellate decisions relating to tax years 2007 and 2009.

Despite obtaining favourable appellate relief, the taxpayer’s refund claims reportedly remained pending and unprocessed for nearly a decade.

The Federal Tax Ombudsman had subsequently directed the concerned commissioner to implement the appellate orders and process the outstanding refund applications in accordance with law.

The FBR later challenged the Ombudsman’s ruling before the President’s Secretariat, contending that references pending before the Islamabad High Court automatically suspended implementation of the underlying appellate decisions.

The tax authority further argued that the taxpayer should be compelled to provide a surety bond prior to release of the refund amount, relying on what it described as an earlier presidential precedent.

However, the Presidency rejected both contentions raised by the FBR.

Regarding the requirement of surety bonds, the President’s Secretariat observed that although such a condition had been imposed in one earlier matter, the same approach had not been consistently followed in multiple comparable cases decided during the previous two years.

The Secretariat accordingly held that the FBR’s reliance upon that precedent was inconsistent and legally unsustainable.

On the issue of pending references before the High Court, the Presidency upheld the findings of the Federal Tax Ombudsman, observing that no stay order or restraining order had been issued against implementation of the appellate decisions.

The Secretariat further clarified that no provision contained in the Income Tax Ordinance, 2001 provides for automatic suspension of an appellate order merely because a tax reference has been filed before a superior court.

The Presidency additionally ruled that the FBR’s failure to implement the appellate decisions within the statutory two-month period prescribed under Section 124(4) of the Income Tax Ordinance constituted delay, neglect, inefficiency, and maladministration.