ISLAMABAD: The Federal Tax Ombudsman (FTO) has resolved a major dispute between the two tax offices of the Federal Board of Revenue (FBR) on matter related to deduction and deposit of withholding tax under Section 235 of the Income Tax Ordinance 2001 on electricity bills of the consumers.
The FTO has stopped Regional Tax Office (RTO) Islamabad from issuing any further coercive notices to Hazara Electric Supply Company Limited (HAZECO).
In this regard, the FTO has issued an order against FBR.
“Needless to emphasise, the instant complaint also represents a critical failure in the internal coordination and smacks of a blatant disregard for regulatory dispensations devised by FBR (HQ). Since the matter falls squarely in the administrative domain of Member Operations (IR), his indulgence is called for resolving the matter definitively,” the FTO order added.
The complaint was filed under Section 10(1) of the Federal Tax Ombudsman Ordinance 2000 (FTO Ordinance) primarily against RTO, Abbottabad for erroneously diverting the tax deduction for the month of September, 2025, amounting to Rs 180 million and additionally against CTO, Islamabad for initiating coercive measures through issuance of Show Cause notices in the name of senior officials of Hazara Electric Supply Company Limited.
Facts of the case are that the complainant is a registered electricity distribution company registered with CTO, Islamabad. HAZECO shoulders the responsibility of withholding tax under Section 235 of the ITO, 2001
on electricity bills of the consumers and subsequent deposit to the FBR as per procedure laid down in Circular of 2022. The complainant company routinely creates PSIDs and provides the same to its bankers through which the bank makes payment of tax withheld by the HAZECO to the FBR field formation i.e. Corporate Tax Office, Islamabad.
In line with the past practice, the HAZECO generated PSID u/s 235 for the month of September 2025 thereby crediting the payment to the Chief Commissioner, CTO, Islamabad. It was later discovered that the officials of RTO, Abbottabad exerted pressure on the bank authorities and managed to create another PSID misusing HAZECO particulars and submitted the same to the bank, thus diverting the amount of withheld taxes to RTO, Abbottabad.
Feeling aggrieved, the CTO, Islamabad issued multiple show cause notices to the senior officials of HAZECO for their alleged connivance in erroneously crediting the tax amount to the tune of Rs 180 million to RTO, Abbotabad. These acts on part of both the formations caused undue harassment and anxiety for the complainant. The HAZECO has also agitated against the issuance of repeated notices to its functionaries.
During the course of proceedings, it has emerged that the HAZECO stands registered with CTO, Islamabad. The Regional Tax Office Abbotabad has been incessantly vying to have the jurisdiction transferred to it on the premise that the Company is primarily carrying on its business ventures in Hazara Division and the entrustment of jurisdiction to RTO, Abbotabad would ensure proper monitoring and better realization of withholding taxes. The request is yet to be granted by the FBR (HQ).
Furthermore, both the field formations are relying on one instrument to justify their acts. Circular No. 01 of 2022, dated 01.07.2021 prescribes the dispensation of bifurcation of tax deducted between field formations.
The FTO has directed Member (Operations) to examine the matter and address the rift in consonance with Circular No. 01 of 2022.
The FBR will direct the chief commissioner CTO Islamabad to desist from issuing any further coercive notices to the complainant company and retract show cause notices already issued to HAZECO office holders, the FTO added.
Copyright media, 2026
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