ISLAMABAD: The Federal Tax Ombudsman (FTO) has urged the Federal Board of Revenue (FBR) to launch a Faceless Income Tax Refund System to enable the automated processing of eligible tax refunds and their direct electronic transfer into taxpayers’ bank accounts, saying the move would reduce delays and improve taxpayer facilitation.
The recommendation came while deciding a complaint filed by M/s Sprint Oil & Gas Services FZC, which sought the release of an income tax refund of Rs42.86 million for tax year 2025. The company had submitted its online refund application on April 13, 2026, but alleged that the refund remained pending despite the expiry of the statutory 60-day processing period.
According to the complaint, the delay constituted maladministration under the Federal Tax Ombudsman Ordinance, 2000. The complainant also referred to an Islamabad High Court directive calling for the implementation of an automated refund mechanism under Section 170A of the Income Tax Ordinance, 2001, to minimise taxpayer interaction with tax offices and speed up refund payments.
In its response, the Chief Commissioner Inland Revenue, Corporate Tax Office (CTO), Islamabad, stated that refund applications were being processed on a first-in, first-out (FIFO) basis under FBR instructions and that the taxpayer’s claim was still under verification after notices were issued seeking supporting documents.
After reviewing the record, the Tax Ombudsman Zafar Hijazi ruled that the refund application had remained pending beyond the statutory timeframe and that such delay amounted to maladministration due to departmental neglect and inattention. The FTO rejected the department’s reliance on the FIFO policy as a justification for prolonged delays, observing that administrative procedures cannot override taxpayers’ legal rights.
The FTO directed FBR to instruct the Commissioner Inland Revenue (Refund Zone), CTO Islamabad, to decide the pending refund claim in accordance with the law after determining the nature of the taxes paid or deducted and submit a compliance report within 30 days.
In a significant policy recommendation, the Ombudsman advised FBR to operationalise a Faceless Income Tax Refund System under Section 170A of the Income Tax Ordinance, 2001. The proposed system would allow refunds, verified through the Board’s computerised system, to be transferred electronically into taxpayers’ notified bank accounts without requiring formal refund applications, similar to the faceless customs clearance and assessment regimes already introduced by FBR. The FTO said such a mechanism would enhance efficiency, reduce taxpayer hardship and promote a modern, technology-driven tax administration.
