Income-tax Ordinance (XXXI of 1979)---

----Ss.100, 103, 59, 59-A, 62 & 63---Constitution of Pakistan (1973), Art.199-- Withholding of refund voucher by Income-tax Officer---Effect---Assessment of specified year was modified in appeal and refund of excess amount deposited by assessee was ordered---Modified demand notice was issued to assessee without accompanying refund voucher---Validity---Provision of S. 100, Income Tax Ordinance, 1979 whereby assessee was entitled to be issued refund voucher (in terms of appellate order) alongwith demand notice are mandatory in nature while provision of S. 103, Income Tax Ordinance, 1979, which empowers Income Tax Officer to withhold refund vouchers is, discretionary subject to certain restrictions--- Income Tax Officer was not empowered to withhold refund in his discretion but was duty bound to issue refund voucher alongwith the demand notice, the moment same became due as a result of any order passed under Ss. 59, 59-A, 62 & 63, Income Tax Ordinance, 1979 or in appeal, revision etc.---Income-tax Officer could only withhold such refund, if he was of the confirmed opinion that assessee, after obtaining refund might disappear and department would suffer loss of revenue subject, however, to the prior approval of the Income-tax Commissioner---When Income Tax officer had neither passed any order recording his reasons for withholding the refund in spite of issuance of demand notice nor had he got prior approval of Commissioner in terms of S.103 of the Ordinance such withholding was not tenable in law---Income-tax Officer was directed by High Court to issue refund voucher to assessee alongwith demand notice in terms of S. 100, Income Tax Ordinance, 1979.

Muhammad Naeem Shah for Petitioner.

Shahbaz Butt for the Department.

ORDER

Brief facts of the writ petition are that the petitioner's income for the assessment year 1990-91 was assessed at Rs.6,03,364 by the respondent No.1 against the declared income of Rs.1,99,500. The petitioner's appeal assailed against the said order was accepted by the Commissioner of Income Tax (Appeals) vide Appeal Order No.2554/11 dated 19-2-1994 entitling the petitioner to a refund of Rs.2,17,612 for the said year. The petitioner filed an application for grant of appeal effect and the refund on 6-3-1994 before the respondent No. l in response to which a revised demand notice showing a refund of Rs.1,37,137 was issued by the respondent No.1; aggrieved by this demand notice; the petitioner on 10-6-1994 filed another application for grant of correct appeal effect and issuance of refund of Rs.2,17,612; consequently the desired demand notice was issued by the respondent No. l on 25-10-1994.

2. The learned counsel for the petitioner contended that the petitioner was entitled to be issued the refund voucher of Rs.2,17,612 alongwith the demand notice dated 25-10-1994 according to the provisions of section 100 of the Income Tax Ordinance, 1979; when confronted the learned counsel for the department/respondents had no answer for non-issuing the refund voucher alongwith the demand notice dated 25-10-1994.

3. Section 100 of the Income Tax Ordinance reads as under:-

"Refund on assessment and appeal, etc.--where as a result of any order passed under section 59, 59-A, 62 or 63 it appeal, revision, reference or other proceeding under the Ordinance (not being an order setting aside an assessment), refund of any amount becomes due to the assessee, the (Deputy Commissioner 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:

Provided that where a refund becomes due to an assessee, who had paid the tax under section 85 read with section 129, as a result of the decision of the Income Tax Appellate Tribunal sum at the rate of fifteen per cent. Annum shall be payable to him after three months from the receipt of such decision."

4.The C.B.R. in its Letter No.I.T.B.-3(5)/86, dated July 3,1994 clarified that the section 100 of the Income Tax Ordinance, 1979 was amended through Finance Act, 1985, whereby the condition of filing refund application was dispensed with in cases where refund is created by the assessing officer I.T.30. Refund voucher is, therefore, to be issued alongwith the assessment order/demand notice in all such cases.

5. The said letter emphasized that the IA.C. concerned would ensure compliance of instructions in their administratively controlled circles: The para.5 of the abevementioned circular/letter is reproduced as under:---

"The assessing officer would be held accountable for non-observance of these instructions, non-compliance therefore shall be treated a: `misconduct' and the defaulting officers proceeded against under Efficiency and Discipline Rules, 1973."

6. Though the I.T.O. is empowered under section 103 of the Ordinance to withhold the refund, with the prior approval of the Commissioner; where an order, giving rise to a refund is the subject-matter of an appeal or further proceeding. The reason behind section 103 has been explained by the C.B.R vide Circular No.4 of 1979 dated 23-8-1979 is as under:---

"The provision is intended to preclude loss of revenue in cases where i1 is feared that the assessee after obtaining refund might disappear to divest himself of all assets thus making recovery impossible of the department's appeal against the order giving rise to refund ultimately succeeds."

7. The provisions of section 100 of the Ordinance are mandatory in nature while of section 103 of the Ordinance are discretionary subject to certain restrictions. The I.T.O. is not empowered to withhold refund to his discretion but is duty bound to issue refund voucher alongwith the demand notice; the moment it becomes due as a result of any order passed under assertion 59, 59-A, or 63 the appeal, revision etc. the I.T.O. can only withhold the refund; if he is of the confirmed opinion that the assesses after obtaining refund might disappear and the department would suffer loss of revenue even subject to prior approval of the Commissioner. The issuance of refund voucher alongwith the demand notice is not a charity or concession to an assessee but is his statutory right. The I.T.O. in the present case has neither passed any order recording his reasons for withholding the refund in spite of the issuance of demand notice nor has got the prior approval of the Commissioner as required under section 103 of the Ordinance. The I.T.O. is not empowered to withhold refund voucher due to an assessee without recording well-founded reasons for non-issuing the refund; otherwise would be liable for proceedings under Efficiency AH Discipline Rules, 1973 for "misconduct".

8. 1 am constrained to remind the Chairman, C.B.R. to an extract from a telex, dated April 23, 1986 from him addressed to all Regional/Zonal Commissioners i.e.:--

"I have also promised that as required under the law refund vouchers where due will issue alongwith the current assessment orders. Kindly do make sure that the assurances are honoured."

9. The circulars issued by the C.B.R. are of binding nature on the functionaries of Income Tax Department; any deviation from the instruction contained in the circulars is nothing but misconduct.

10. In view of what has been discussed above the writ petition is accepted and the respondents are directed to issue the refund due to the assessee as per demand notice dated 25-10-1994 for the assessment year 1990-91 without any further delay; no order as to costs.

AA./U-39/LPetition accepted.