(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 96, 97 & 99---Scope and application of Ss. 96, 97 & 99. In a situation visualised in section 96 Income Tax Ordinance, 1979, a person only had suffered deduction of tax, although his income was far below the taxable limit, he must, therefore, get his amount back without going through the rigorous exercise of assessment proceedings. What he has to do in such circumstances is to file his claim within two years after the end of the assessment year to which the refund relates. On receipt of such application the I.T.O. has to carry out necessary verification and determine the amount of refund. Section 97 visualizes a situation where income of any person is included in the income of another person. Such another person shall be entitled to a refund in respect of such income which was included in his income. Subsection (2) of section 97 discusses a situation where refund is not claimed due to incapacity, insolvency, liquidation, death or any other cause then his legal heir shall be entitled to claim such refund. Section 98 deals with refund, where salaries are paid in arrears. In all the above cases since the I.T.O. has to make inquiries to verify facts, and to determine the exact amount of refund, a period of limitation has been set forth in section 99(2)(a) and (b) of the Income Tax Ordinance as the cases involved in such refunds are of regular assessees. Whereas section 100 exclusively deals with refund created as a result of assessment or appeal.

(b) Income Tax Ordinance (XXXI of 1979)--

----Ss. 100 & 99---Refund on assessment or appeal---Once the Income-tax Officer, as a result of assessment or after giving appeal effects to the orders of the superior authority, determines the refund on I.T. 30, there is neither any necessity of a refund application nor any period of limitation is involved.

The heading given to section 100 is "refund on assessment or appeal". Once the I.T.O., as a result of assessment or after giving appeal effects to the orders of the superior Courts, determines the refund on I.T. 30 there is neither any necessity of a refund application nor any period of limitation is involved.

What happens when assessment results in the creation of demand and tax becomes payable. The I.T.O. enforces recovery and values the tax levied. But when the assessment results in refund, the I.T.O. informs the tax-payer through a notice a/s 85 conveying the amount of refund determined. After the determination of refund and intimation sent to the tax-payer through a notice of demand, there does not remain any justification of withholding the refund or asking the assessee to apply and when an application is made, the I.T.O., starts verification. This is not fair. It is not only unjust and unwarranted but borders on the realm of harassment. It is an exercise in futility to nullify what has already been verified and determined. That amount which has been determined has to be paid to the assessee and the I.T.O. must not indulge in determining and re-determining such refunds. There will be no end to it.

Shahid Jamal, D.R. for Appellant.

Muddassir Shah for Respondent.

Date of hearing: 24th January, 1990.

ORDER

MANZURUL HAQ, ACCOUNTANT MEMBER.--These two departmental appeals have been filed against the order of the learned AAC, `F Range, Karachi in which setting aside of the two orders for the years 1980-81 and 1981-82 under section 99(3), is being contested.

Mr. Shahid Jamal, the learned D.R. submitted that returns for the assessment years 1980-81 and 1981-82 were filed under the SAS and were assessed under section 59(1) of the Income Tax Ordinance, on 7-3-1981. As a result of such assessments refunds were determined as under:-

Application for refund was made on 21-3-85. It is submitted that both the applications are barred by limitation as the assessee should have applied for refund by 30-6-1983 i.e. within two years of the feminisation of assessment under the provisions of section 99 of the Income Tax Ordinance, 1979, which reads as under:--

"99. Form of a application disposal of claims for refund and limitation.---(1) An application for refund under sections 96, 97 or 98 shall be made in the prescribed form and verified in the prescribed manner.

(2) An application under subsection (1) shall be made,---

(a) in any case to which subsection (2) of section 96 applies, within one year of the end of the income year in which the advance or loan is repaid; and

(b) in other cases, within two years of the end of the assessment year to which it relates."

He further submitted that citation of the amended section 100 of the Income Tax Ordinance by the learned AAC was not relevant as it came into force by the Finance Act, 1985. The learned AAC by setting aside the order under section 99(3) has revived the limitation period which he was not competent to do, he argued.

The learned AAC in his impugned order made the following observation:

"Records have been perused. It is apparent that the refund had duly been quantified and assessed. In view of the change in law and the factual position the refund assessed as a result of assessment proceedings would no longer then be hit by the time of 2 years as stipulated under section 99(2)(b) requiring application to be made within two years. The change has done away with the requirement of making application by the appellant and falls under the broad grouping of machinery section. The impugned order is hereby set aside. The ITO shall call for evidence viz. challans, bills of entry, etc. and issue the refund."

Mr. Muddassir Shah, the learned counsel, started his arguments with the scheme of Chapter No. 10 under the head "refund and tax credit" and pointed out that section 99 which stipulates limitation period of two years applies only to refund cases mentioned in sections 96, 97 and 98 and not to refunds created as a result of assessment proceedings under section 59(1), 62 or 63. In short, he pointed out, section 99 does not apply to refunds determined as a result of regular assessment or cases decided in appeal.

Mr. Shahid Jamal, the learned D.R. replying to the arguments of the learned counsel pointed out that section 99 is of universal application and covers all assessments.

We have heard the arguments of the learned representatives. We feel inclined to agree with the contention of the learned counsel that once refund is determined as a result of assessment proceedings or in consequence of relief allowed in appeal, revision, reference, section 100 of the Income Tax Ordinance does not allow the ITO to ponder in whether to allow or not to allow refund. He does not agree with the learned DR that determination of refund as a result of assessment on IT-30, is not the final round. The assessee must make a formal application for refund and the ITO after examining the application may call for any such evidence which, in his opinion, is essential to dispose of the claim.

We do not agree with this view. Legislature can ill-afford to allow such triviality. During the course of assessment proceedings the ITO is expected to have examined all the documents, original challans, etc. essential for the determination of refund. As a result of such exercise refund is determined and. worked out on IT-30. Any subsequent exercise carried out to determine refund will render the earlier one finalised in assessment proceedings redundant.

Now let us turn to explain the scheme of Chapter 10 dealing with refund and tax credit:--

"Section 96. Refund.---(1) Where any person satisfies the Income tax Officer that the amount of tax paid by him, or on his behalf, for any year exceeds the amount with which he is properly chargeable .under this Ordinance for the year, he shall be entitled to a refund of the amount so paid in excess.

(2) Where any advance or loan, to which sub-clause (e) of clause (20) of section 2 applies, is repaid by an assessee, he shall be entitled to a refund of the tax, if any, paid by him as a result of such advance or loan having been treated as dividend under the aforesaid provision.

Section 97. Persons entitled to claim refund in certain cases_(1) Where the income of any person is included under any provisions of this Ordinance in the total income of any other person, such other person only shall be entitled to a refund under section 96 or section 98, as the case may be, in respect of such income.

(2) Where any person is unable to claim or receive any refund under section 96 or section 98, as the case may be, on account of incapacity, insolvency, liquidation, death or any other cause, his legal representative or the trustee, or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.

Section 98. Refund where salary 9c is paid in arrears ---Where, by reason of---

(a) income chargeable under the head `salary' being paid in arrears or in advance; or

(b) any interest chargeable under the head `Interest on securities' being received in arrears, an assessee's total income is assessable at a rate higher than that at which it would otherwise have been assessed, the Income-tax Officer may, on an application made by the assessee within one year of the date of receipt there, determine the tax payable as if the said income or interest had been received by him during the income year to which it relates and many refund the amount of tax, if any, paid in excess thereof."

In a situation visualised in section 96, a person only had suffered deduction of tax, although his income was far below the taxable limit, he must, therefore, get his amount back without going through the rigorous exercise of assessment proceedings. What he has to do in such circumstances is to file his claim within two years after the end of the assessment year to which the refund relates. On receipt of such application the I.T.O. has to carry out necessary verification and determine the amount of refund. Section 97 visualises a situation where income of any person is included in the income of another person. Such another person shall be entitled to a refund in respect of such income which was included in his income. Subsection (2) of section 97 discusses a situation where refund is not claimed due to incapacity, insolvency, liquidation, death or any other cause, then his legal heir shall be entitled to claim such refund. Section 98 deals with refund where salaries are paid in arrears. In all the above cases since the I.T.O. has to make inquiries to verify facts, and to determine the exact amount of refund, a period of limitation has been set forth in section 99(2)(a) and (b) of the Income Tax Ordinance as the cases involved in such refunds are of regular assessees. Whereas section 100 exclusively deals with refund created as a result of assessment or appeal. The heading given to section 100 is "refund on assessment or appeal". We are thus clear in our mind that once the I.T.O. as a result of assessment or after giving appeal effects to the orders of the superior Courts, determines the refund on I.T. 30 there is neither any necessity of a refund application nor any period of limitation is involved.

What happens when assessment results in the creation of demand and tax becomes payable. The I.T.O. enforces recovery and values the tax levied. But when the assessment results in refund, the I.T.O. informs the tax-payer through a notice under section 85 conveying the amount of refund determined. After the determination of refund and intimation sent to the tax-payer through a notice of demand, there does not remain any justification of withholding the refund or asking the assessee to apply and when an application is made, the I.T.O. starts verification. This in our view, is not fair. It is not only unjust and unwarranted but borders on the realm of harassment. It is an exercise in futility to nullify what has already been verified and determined. That amount which has been determined has to be paid to the assessee and the I.T.O. must not indulge in determining and re-determining such refunds. There will be no end to it. Even the provision of original section 100 before its substitution by the Finance Act, 1985 reads as under:--

"100. Refund on assessment and appeal. etc.---Where as a result of any order passed under sections 59, 59A, 62 or 63 or in ' revision, reference or other proceedings under the Ordinance (not being an order setting aside an assessment) refund of any amount becomes due to the assessee, the income-tax Officer shall, except as otherwise provided in this Ordinance, refund the amount to the assessee irrespective of whether he has or has not made any claim in that behalf."

Even the CBR in a number of circulars, issued from time to time, has elaborated the necessity of avoiding this duplicity.

In view of above discussion we hold that there was no necessity of any refund application since the respondent's claim for refund stood settled under the provisions of section 100 of the Income-tax Ordinance. He is entitled to the refund accordingly.

The appeals fail and are hereby dismissed.

M.BA./1216/T

Appeals dismissed.