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In a major development, the Federal Investigation Agency (FIA) has withdrawn the corruption case it lodged just a day earlier against former Federal Board of Revenue (FBR) chairman Syed Muhammad Shabbar Zaidi, who had been accused of issuing unauthorised tax refunds amounting to Rs16 billion during his tenure.
According to official documents and sources familiar with the matter, the FIA’s Karachi Zone has classified the case as “C-Class”, a legal term indicating that the accused is found to be innocent or the allegations are unsubstantiated.
Case Background
The case, registered under FIR No. 32/2025 on October 29, 2025, was initiated by the FIA’s Anti-Corruption Circle in Karachi. Zaidi, who served as FBR chairman from 2019 to 2020, was accused of criminal misconduct, abuse of authority, and unauthorised disbursement of public funds during his tenure.
The FIA alleged that Zaidi approved income tax refunds worth Rs16 billion to several private sector entities without proper authorisation or adherence to regulatory procedures. These refunds, according to investigators, were allegedly granted to three private banks, two cement factories, and one chemical company.
Sources within the FIA claimed that these entities had previously been clients of Zaidi’s private audit and consultancy firm before his appointment as FBR chief — a fact that raised questions of conflict of interest and potential misuse of office.
The FIA’s Allegations
According to the initial complaint, the refunds were processed in violation of established FBR protocols. The FIA accused Zaidi of approving payments that were “not justified under the prevailing tax laws” and alleged that the former chairman “used his official capacity to favour companies connected to his previous business interests.”
Officials at the time stated that the investigation aimed to determine whether these refunds were part of a broader pattern of policy manipulation or isolated administrative decisions. The agency’s Anti-Corruption Circle also hinted at the possibility of expanding the probe to other senior FBR officials.
Case Withdrawal and Official Notification
However, in a swift turn of events, the FIA’s Karachi division issued a formal notification on Thursday, directing the withdrawal of the case and classification of the FIR as “C-Class.”
The notification read:
“The Director, FIA Karachi Zone, has been pleased to accord permission for cancellation of case FIR No. 32/2025 dated 29.10.2025 … as well as classification of case as ‘C-Class’ and submission of discharge report … against the then chairman FBR (1) Syed Muhammad Shabbar Zaidi.”
This means that the FIA no longer considers Zaidi a suspect, and the agency will submit a discharge report to the relevant court, effectively closing the case.
Shabbar Zaidi’s Response
While an official statement from Zaidi had not been released at the time of reporting, sources close to the former FBR chairman indicated that he had rejected all allegations since the FIR surfaced. Zaidi reportedly maintained that all refunds issued during his tenure were processed “within the framework of law and under collective decision-making.”
Zaidi, known for his strong stance on tax reforms and policy transparency, had long been an advocate of expanding the tax base and curbing illegal money flows in Pakistan’s economy. Supporters argue that the case against him appeared politically motivated or administratively misconstrued.
Reactions and Implications
The FIA’s rapid reversal has sparked debate in political and business circles. Critics have questioned the credibility of the initial investigation, suggesting that the agency may have acted hastily without verifying documentation. Others argue that such withdrawals damage the public’s confidence in accountability institutions.
Legal analysts note that the ‘C-Class’ classification indicates that investigators found no incriminating evidence against the accused. This category is typically used when allegations are proven false, based on misunderstanding, or lack legal standing.
Meanwhile, senior tax officials say the incident underscores the need for procedural clarity in handling refund authorisations, which often involve multiple departments and approval layers within the FBR.
A Controversial Legacy
Shabbar Zaidi’s tenure as FBR chairman was marked by bold but controversial reforms aimed at digitising tax systems and curbing corruption. His tenure, however, was also marred by resistance from within the bureaucracy and private sector pushback over new compliance rules.
Despite the turbulence, Zaidi remains a respected name in Pakistan’s financial and policy circles. The FIA’s withdrawal of this case may now pave the way for a reassessment of his legacy — as both a reformist and a figure occasionally caught in institutional crossfire.
