Mohsin Siddiqui (Chief Reporter)
The Federal Tax Ombudsman (FTO) has issued a directive to the Federal Board of Revenue (FBR), instructing that field formations should not demand individual computerized payment receipts (CPRs) from taxpayers (withholdees) in cases where bulk withholding payments are received from banks and telecom companies. This move aims to simplify the tax process and alleviate the burden on taxpayers who are part of bulk payment systems.
In a recent instruction, the FTO has directed the FBR to ensure that Member IR (Operations) issues necessary guidelines to IR field formations. These guidelines should clarify that in instances involving banks, distribution companies (Discos), and telecom companies, where bulk withholding payments are received, individual CPRs should neither be generated nor demanded from withholdees.
The FBR has also been instructed to direct the concerned Commissioner-IR in Faisalabad to ensure that, in line with similar cases, the credit of withholding tax is appropriately allowed to the taxpayer by rectifying the order under Section 122(5A) of the Income Tax Ordinance for the Tax Year 2010, in accordance with the law.
The issue came to light when a refund of Rs 1.410 million for the Tax Year 2010 was sanctioned by the department, but an amount of Rs 0.043 million was rejected due to lack of verification. The complainant subsequently filed a complaint against this rejection, asserting that the deduction was made under Section 231A by banks and that he possessed the relevant deduction certificates.
The complainant had filed a rectification application on November 30, 2023, but the tax department failed to address the issue as required by law. Upon review, it was revealed that the department had issued a refund of Rs 1.410 million after due verification of documents and certificates, as per the provisions of Section 170(4) of the Income Tax Ordinance, 2001.
The FTO’s order highlighted the impracticality of enforcing the provisions of Section 164 of the Income Tax Ordinance, 2001 in its literal sense. Currently, the payment of taxes by millions of customers of banks, telecom companies, and power distribution companies does not align with the requirements of Section 164. The department’s insistence on literal compliance with Section 164, while accepting bulk payments without individual challans, was deemed self-contradictory.
The FTO pointed out that the tax department had misled itself into believing that the verification of withholding tax, supported by certificates and bank account statements, required further proof from the complainant. The records examined showed that the concerned bank had duly verified and attested the certificates issued by it. The FTO criticized the department’s insistence on appealing such a trivial matter, describing it as callous and unnecessary.
