A dispute over the Federal Board of Revenue’s (FBR) dissolution of a Supreme Court-directed Alternative Dispute Resolution Committee (ADRC) has reached its conclusion — with the Federal Tax Ombudsman (FTO) ruling that the dissolution was legally valid, while simultaneously directing FBR to reconstitute the committee and overhaul its dispute resolution procedures.
Background: How the Case Began
The case originated when a long-standing compliant taxpayer filed a complaint against officers of FBR and the Corporate Tax Office (CTO) Islamabad, alleging deliberate manipulation and misrepresentation in an ADRC matter where a tax dispute decision had already been finalized in the taxpayer’s favour.
According to the taxpayer’s legal representative, tax lawyer Waheed Shahzad Butt, the ADRC — constituted under the Sales Tax Act on the directions of the Supreme Court of Pakistan — heard the tax dispute, completed its proceedings, and announced its decision in the presence of CTO Islamabad officials. Two ADRC members, including the committee’s Chairman — a former judge of the Lahore High Court — subsequently issued a written order discharging the disputed tax liability of the company.
However, three weeks after the decision, the Secretary (STO) issued letters asserting — contrary to the facts — that the ADRCs had “failed to decide the dispute,” and proceeded to dissolve the committees.
FTO Orders Investigation — Then Issues Final Ruling
After reviewing the complaint, FTO Zafar Ul Haq Hijazi initially ordered a formal investigation into allegations of systematic maladministration of justice, abuse of authority, and illegal dissolution of ADRC committees after they had completed their mandate.
However, following the full investigation, the FTO has now reversed course on the core allegation.
The FTO has declared that the dissolution of the Supreme Court-directed ADRC by FBR cannot be termed “maladministration.” The FTO found that since no formal decision had been officially recorded in terms of Section 47A of the Sales Tax Act, 1990, read with Section 134A(5) of the Income Tax Ordinance, 2001, before the statutory 60-day deadline, FBR was legally entitled to dissolve the committee under Section 134A(11) of the Ordinance.
The FTO’s order noted that after the ADRC’s dissolution, a copy of a decision dated December 23, 2025, was received via WhatsApp to the Member (IR-Operations) from the committee’s Chairperson — but this was received after the dissolution order had already been passed on January 12, 2026.
FTO Directs Fresh ADRC and Systemic Reforms
Despite clearing FBR on the maladministration charge, the FTO has directed the revenue body to take corrective action going forward.
The FTO has directed FBR to constitute a fresh ADRC — with the consent of the complainant — ensuring independence and the absence of any apparent conflict of interest, in order to strengthen the ADR regime and ensure compliance with the Supreme Court’s directions.
Additionally, the FTO has recommended that FBR frame and officially notify detailed Standard Operating Procedures (SOPs) governing ADRC proceedings. These should cover formal notices and cause lists, quorum and participation requirements, written recording of time extensions, mandatory conflict of interest disclosures, and formal signing and dispatch of decisions.
Taxpayer’s Concern
The director of the complainant company, Shehryar Ansari, expressed concern that the company is now being directed to engage in a fresh ADRC process from scratch, despite having already participated in a full-fledged ADR process and obtaining a favourable result duly signed by majority members, including a former judge of the Lahore High Court.
Significance for Tax Dispute Resolution
Tax lawyer Waheed Shahzad Butt said the case may become a benchmark for restoring taxpayer confidence in ADR mechanisms and ensuring accountability of tax officials alleged to have acted in excess of their lawful authority.
The FTO emphasized that the ADR mechanism — introduced in line with Supreme Court directives — was intended to offer taxpayers a neutral, transparent, and time-bound avenue for resolving disputes, and that procedural discipline, accurate documentation, and strict adherence to statutory timelines are indispensable for such a mechanism to function credibly.
The ruling puts the onus squarely on FBR to now rebuild the process with proper safeguards — or risk further erosion of taxpayer confidence in the country’s alternative dispute resolution framework.