KARACHI: The Federal Tax Ombudsman (FTO) has held that the Federal Board of Revenue (FBR) cannot hide behind the ‘technical limitations’ of its own IRIS software to deprive a taxpayer of a substantive legal right and has directed the board to remove system glitches that were blocking a lawful tax credit under Section 63 of the Income Tax Ordinance 2001.

The ruling came in a complaint filed by a salaried individual serving as a director in a private limited company through his counsel Muhammad Aleem. The complainant, a regular and compliant taxpayer, had made an investment in an Approved Pension Fund entitling him to a tax credit of Rs2,341,120 under Section 63 of the ordinance.

“However, due to system-related constraints on the IRIS portal, the correct credit could not be claimed at the time of filing the return for tax year 2025, compelling the complainant to deposit Rs217,188 merely to ensure timely filing of return and avoid penal consequences,” said the complainant’s counsel Muhammad Aleem citing the background of the issue.

“The amount of surcharge of Rs1,066,257 under Section 4AB of the ordinance at the rate of 10 per cent was paid in addition to the income tax imposed under Division-I of Part-I of the First Schedule and was not included by IRIS for calculating the correct tax credit under Section 63 where the taxable income exceeds Rs10 million. Surcharge under Section 4AB is a defined tax under Section 2(63) which was not picked up by IRIS automatically for correct calculation of tax under Section 63 in the case of this taxpayer.”

Orders fix to allow tax credit, removal of glitches in IRIS

On the complainant’s application, the Commissioner Inland Revenue granted approval under Section 114(6)(ba) of the ordinance to file a revised return incorporating the tax credit. Despite this approval, IRIS still did not allow the credit — a failure the department itself attributed to glitches in the FBR’s filing system. The complainant’s subsequent representations to the FBR chairman, Member (Operations) and the FBR helpline went unanswered.

“After investigation, the FTO found there was no dispute regarding either the complainant’s entitlement to the Section 63 credit or the validity of the revision approval,” said Mr Aleem.

“The Ombudsman observed that the department cannot use the technical limitations of its own software as a shield to deny a taxpayer a substantive legal right, holding that the FBR is duty-bound to provide a functional interface wherever the law allows a credit and the Commissioner authorises a revision.”

The complainant’s unsuccessful attempts to seek redress from FBR headquarters, the FTO noted, pointed to a systemic failure. The FTO emphasised that a taxpayer should not be penalised or forced into litigation because the department’s computer system is not updated in accordance with the provisions of law.

“The inability of IRIS to implement the commissioner’s order, coupled with the silence of FBR headquarters, was held to constitute maladministration under Section 2(3)(ii) of the Establishment of the Office of Federal Tax Ombudsman Ordinance 2000, reflecting inattention, delay and inefficiency in the administration of the tax system,” the counsel said, citing the FTO order.

Accordingly, the FTO recommended and directed the Director General (IT & DT), FBR, to take up the matter with M/s PRAL for immediate redressal by removing the system glitches and enabling the complainant to revise his income tax return for tax year 2025 with the admissible tax credit under Section 63.

“In compliance with the FTO’s recommendations, the glitches in IRIS were removed and the complainant successfully filed his revised return under Section 114(6) of the ordinance, in which the lawful tax credit under Section 63 was duly allowed,” added the counsel.

Published in Dawn, July 21st, 2026