Islamabad High Court Tells FTO to Stop Behaving Like A Bank Regulator

The Federal Tax Ombudsman (FTO) is not authorized to take over the State Bank of Pakistan’s (SBP) regulatory authority over banks since the FTO lacks the authority to investigate the legitimacy of the way banks conduct their operations. This is the ruling of the Islamabad High Court (IHC).

In this context, an order against the FTO has been issued by the IHC (Summit Bank vs. FTO). Additionally, the court decided that the FTO lacked the authority to investigate the legality or illegality of the petitioner’s business practices as a baking company.

According to section 9 of the FTO ordinance, such an investigation is outside the purview of the FTO. Since section 9 of the Ordinance is extra vires, the assumption of such jurisdiction is subject to set aside.

Regarding the extent of the FTO’s jurisdiction, authority, and duties, the LHC stated in the Writ Petition No. 2568/2023 that the court concurs with the bank. The FTO was created in order to look into claims of poor performance made by staff members who operate inside the State-managed tax administration system. The FTO was created to expeditiously handle complaints in order to prevent maladministration on the part of State personnel.

The powers to look into a company’s operations that a complaint has been made against have not been granted to the FTO. The petitioner’s banking firm license granted the FTO the authority to regulate banks in this case, therefore the FTO took over SBP’s regulatory duties and asked whether the bank was carrying out any activities for which it had the proper authorization.

In posing this query, the FTO came to the conclusion that the petitioner was carrying out tasks for which it lacked the necessary authorization under banking regulations. The Chief Commissioner, LTO, Islamabad, and FBR were advised to look into the problem based on this determination.

Since the petitioner is a financial company, the FTO is not authorized to look into the petitioner’s personal matters, according to the LHC judgment.

section 23 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (“Ordinance”) was violated by the FTO because it ordered an investigation into the petitioner’s affairs, which is outside of its purview. The petitioner had supplied the FTO with certain information that it had requested in a complaint that citizens had filed against the Revenue Division.

According to the FTO’s recommendations, the petitioner’s banking company’s affairs are under the suo motu exercise of authority, which is the jurisdiction of the State Bank of Pakistan (SBP), the bank regulator, rather than the Federal Board of Revenue (FBR) or the Tax Ombudsman.

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