1995 P T D 1248
[Lahore High Court]
Before Ch. Khurshid Ahmad, J
M/s AFZAL CONSTRUCTION COMPANY and others
Versus
THE CHAIRMAN, CENTRAL BOARD OF REVENUE/ THE SECRETARY and others
Writ Petition No. 6034 of 1994, heard on /01/.
th
April, 1995. (a) Income Tax Ordinance (XXXI of 1979)---
----S. 103---Refund---Withholding of---Refund could only be withheld where the assessment orders giving rise to such refund were the subject matter of an appeal or further proceedings under the Income Tax Ordinance, 1979.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.103---Constitution of Pakistan (1973), Art.199---Refund---Withholding of---Constitutional petition---Refund can be withheld till the time to be determined by the Commissioner who has to specify the period---No such time was determined nor the same was pleaded in the Constitutional petition-- Order by the Commissioner according permission to Income Tax Officer to pass an order withholding the refund, therefore, was illegal---Order of withholding of refund of assessee being a clear mala fide act on the part of the department, said order was declared as without lawful authority by the High Court.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss.102(3) & 103---Refund---Withholding of---Where the Commissioner had failed to specify any period for withholding of refund under S.103, Income Tax Ordinance, 1979, provision of S.102(3) of the said Ordinance, would be of no help to the department, for indefinite period could not be allowed to be excluded.
(d) Income Tax Ordinance (XXXI of 1979)---
----Ss.102(1)(2)(a)(b)(c)&103---Constitution of Pakistan (1973), Art.199-- Refund---Withhodling of---Compensation---Payment of---Constitutional petition---Payment of compensation was obligatory if the refund was not paid within a period .of three months of the date on which it became due according to S.102(2)(a)(b)(c) of the Income Tax Ordinance, 1979---Where the riders under S.103, Income Tax Ordinance, 1979 had been found to be mala fide and without lawful authority, assessees were declared to be entitled to refund of undisputed specified amount alongwith compensation under S.102 of the Ordinance.
Agha Ali Imran Mirza for Petitioner.
Zahid Pervaiz for Respondents.
Date of hearing: 17th April, 1995.
JUDGMENT
The petitioners are registered firm carrying on business of construction as contractors under the name and style as mentioned in the heading of the petition. They were assessees of Income Tax and deduction of tax at source under section 50(4) of the Income Tax Ordinance was made and after assessment the following amounts were found due for refund:---
| 1984-85 | Rs. 41,911 |
| 1985-86. | Rs.213,421 |
| 1986-87 | Rs.216,822 |
| 1987-88 | Rs.182,611 |
| 1988-89 | Rs. 40,937 |
| 1989-90 | Rs. 23,402 |
| 1990-91 | Rs 4 980 |
| Total: | Rs.774.084 |
2. It has been contended by the learned counsel for the petitioners that the aforementioned amount was being illegally retained by the department and that the petitioners were not only entitled to the refund thereof but also to compensation under section 102 of the Income Tax Ordinance, 1979, till the date of refund and as per computation by the petitioners the amount of compensation was in the sum of Rs.7,45,441.
3.The learned counsel for the respondents has contested the amount of refund due and according to him only Rs.6,79,615 were due for refund but the same were withheld by the Income Tax Officer vide his order, dated 26-5-1988 which, according to him, had been passed after obtaining the approval of the Commissioner of Income Tax Zone `A'. The impugned order of withholding the refund, according to the learned counsel for the respondents; was passed by a competent officer with jurisdiction and there was no illegality. He has also questioned the maintainability of the present writ petition.
4. Narrating the facts resulting in the issuance of withholding order it has been stated that on 30-7-1987 a letter was addressed to the assessee/petitioner to explain his position regarding the amount shown outstanding against the firm, payable to the creditors. As the said letter was not responded to the Income Tax Authorities were obliged to withhold the refund of amount due. While supporting the impugned order the learned counsel for the respondents submitted that the assessment proceedings for the assessment year 1986-87 under section 65 of the Income Tax Ordinance, 1979 were pending and that the said officer was nursing a hope that substantt4l demand shall be raised, which, according to him, was not possible to be recovered in case the refund was issued. As the proceedings for additional assessment were pending the impugned order, according to the learned counsel for the respondents, was within the jurisdiction of Income Tax Officer and no mala fide could be attributed to him.
5_ The orders under section 103 of Income Tax Ordinance are to be seen in the context of the facts of each case. In the present case the impugned order was passed on 26-5-1988 and the same could only be applied to the amount due for refund on that date. Section 103 of Ordinance (Supra) reads as under:---
"103. Power to withhold refund in certain cases:
Where an order giving rise to a refund is the subject matter of an anneal or further proceedings under this Ordinance the Deputy Commissioner may with the prior approval .of the Commissioner withhold the refund till such time as the Commissioner may determine:'
The plain reading of the section shows that the refund could only be withheld in case where the assessment order giving rise to such refund was the subject matter of an appeal or further proceedings under the Ordinance. In the present case the department has failed to show that there was any appeal pending regarding assessment years 1984-85,.1985-86, 1986-87, 1987-88 and 1988-89. The proceedings under section 65 of the Ordinance were challenged by the present petitioners in the High Court, vide Writ Petition No.2980/88 which is still pending but it is admitted that this Court was pleased to issue stay against further proceedings in the said matter. The learned counsel for the parties, however, agree that for the present, additional assessment had become barred by limitation under the law.
6.Section 103 of the Ordinance lays down the withholding of the refund till the time to be determined by the Commissioner. In the present case no time was determined neither the same was pleaded in the written statement, fled by the respondents in the present writ petition. The order by the Commissioner Income Tax according permission to I.T.O. to pass an order withholding the refund was illegal. According to law the order as such should mention the specified period. No assessee could be kept at the tenter-hooks for an unspecified time. The law does not permit the department to keep the refund pending for indefinite period. The facts show clear mala fide on the part of the department and as such the withholding of refund is declared as without lawfulauthority.
7. The question of compensation under section 102 of the Ordinance Supra is next to be determined. The entitlement to compensation has also very strongly been opposed and subsection (3) of section 102 has been relied upon. Subsection (3) of section 102 of the Income Tax Ordinance reads as under:---
"(3). In computing the period for which the further sum referred to it subsection (1) is payable the period for which the refund is which the under section 103 shall be excluded:
There is no dispute regarding the powers of the Commissioner Income fixing time limit for withholding the payment of refund but in the present the Commissioner failed to specify any period for withholding refund and in my view subsection (3) of section 102 of the Ordinance was of no help to the department. Indefinite period cannot be allowed to be excluded.
8. Under subsection (1) of section 102 of the Ordinance the payment of compensation was obligatory if the refund was not paid within a period of three months of the date on which it becomes due according to clauses (a), (b) and (c) of subsection (2) thereof. In the present case the riders under section 103 of the Ordinance have been held to be mala fide and without lawful authority and as a consequence the petitioners are declared to be entitled to compensation under the law.
9. The writ petition is allowed and the impugned order of withholding of refund dated 26-5-1988 is declared to be without lawful authority. The respondents shall refund an amount of Rs.6,79,615 which, according to the department itself, was due for refund and shall also pay compensation thereon according to law. The claim of Rs.94,469 claimed to be due as refund by the petitioners and refuted by the department shall be decided by the respondent department in accordance with law. The respondents are directed to make payment of the undisputed amount of refund due, with compensation within the period of two months to the petitioners.
10. No order as to cots.
M.B.A./A.826/L Petition accepted.