GULF EDIBLE OILS (PVT.) LTD. VS FEDERATION OF PAKISTAN, 2001 PTD-KARACHI-HIGH-COURT-SINDH 3956 (1999)

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

‑‑‑Ss.96, 100 & 102‑‑‑Refund‑‑‑Interpretation of Ss.96, 100 & 102 of the Income Tax Ordinance, 1979.

(b) Administration of justice‑‑

‑‑‑Judicial forums are not the tax collectors of the State.

Mushtaq Ali v. Government of Sindh PLD 1998 Kar. 416 rel.

(c) Income‑tax‑‑‑

‑Fiscal machinery‑‑‑Need of taking optimum measures for confidence building of taxpayers emphasized.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.96 & 100‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Refund‑‑‑Refund becoming due to the assessee was to be paid immediately irrespective of assessee having made any claim or not in that behalf.

Elahi Cotton v. Federation of Pakistan 1997 PTD 1555 irrelevant.

Inayatullah v. I.T.O. 1989 PTD 876; Farida Mirza v. I.T.O. 1992 PTD 173; Noor & Sons v. I.T.O. 1993 PTD 58&2; Unique Enterprises v. A.C.I.T. 1995 PTD 749; C.B.R.'s Letter No. I.T.B‑3(5) of 1986, dated 3‑7‑1994 and Afzal Construction Co. v. v. Chairman, C.B.R. 1995 PTD 1248 rel.

Sirajul Haque Memon for Petitioner.

Nasrullah Awan for Respondents.

Date of hearing: 17th December, 1999.

JUDGMENT

DR. GHOUS MUHAMMAD, J.‑‑‑Since short point is involved in this petition, by consent the entice petition is being disposed of at Kutcha Peshi stage through this judgment.

2. The syntax of facts giving rise to this present petition are that the petitioner, a private limited company incorporated under the Companies Ordinance, 1984 and engaged in the manufacture of Ghee and Edible Oil, filed its return for the assessment year 1998‑99, while declaring a loss of Rs.21,713. Furthermore, the petitioner claimed a refund of Rs.13,706,032 as it had experienced deductions of income‑tax at source under section 50 (1) of the Income Tax Ordinance, 1979 (hereinafter ‑referred to as the 1979 Ordinance) to the tune of Rs.12,995,801. The Assessing Officer i.e. respondent No.2 framed the assessment under section 62 of the 1979 Ordinance at the income of Rs.11,091,240 while creating a demand of Rs.4,991,058. The demand of Rs.4,991,058 was adjusted against the amounts of deduction at source under sections 50(4) and 50(5) of the 1979 Ordinance i.e. Rs.7,10,231 and Rs.12,995,801. After such adjustment the petitioner became entitled to refund, which was, however, denied by the respondent No.2, on the score that the entire amounts of deductions at source under section 50 of the 1979 Ordinance represented in the form of challans were being verified. Against the assessment order the petitioner preferred a first appeal under section 129 of the 1979 Ordinance to the C.I.T. (Appeals) and collaterally moved an application under section 156 before the respondent No.2 by way of rectification claiming full credit of the deduction at source under section 50 of the 1979 Ordinance and issuance of consequent refund. The respondent No.2 rectified the mistake by framing an order under section 156, whereby full credit was given to the deduction at source under section 50 of the 1979 Ordinance, pursuant to necessary verification of challans and a refund of Rs.85,87,261 was determined and created after a further adjustment of Rs.3,49,538 as liability against an alleged demand under section 52 of the 1979 Ordinance. The order under section 156 of the 1979 Ordinance is dated 14‑1‑1999 and has accompanied a form bearing No.I.T. 30‑C wherein the refund of Rs.85,87,261 stands determined and created. However, no refund has been issued till date.

3. A counter‑affidavit of M. Ashraf Ali, Assistant Commissioner of Income‑tax, Circle‑C II, Companies, Karachi although bearing C.P. No.1673 of 1999 has been filed wherein references have been invited to paras.54 and 5.7 of "the Supreme Court judgment" without giving its reference or citation. However, we have been able to trace the same to be references from Elahi Cotton v. Federation of Pakistan 1997 PTD 1555. It is most unfortunate that the observations made in that judgment, which are referred to pertain to the Protection of Economic Reforms Act, 1992 having no bearing or relevance to the present case. In para. 5 of the counter‑affidavit it has been stated that the Supreme Court has left the question of determination refund to the opinion of the hierarchies of the 'Department. The reference invited in the counter‑affidavit is totally incorrect and most unfortunate since the Hon'ble Supreme Court is being misquoted haphazardly. It is completely incorrect to suggest that come what may the Courts should not interfere even when created refund are being denied by the Department. No plausible reason has been reflected in the counter‑affidavit to deny the refund in this case.

4. We have heard Mr. Sirajul Haque Memon, the learned counsel for the petitioner and Mr. Nasrullah Awan, learned counsel for the respondent. Equally the record and the law on the subject have been looked into.

5. Mr: Sirajul Haq has contended that once the refund was created and determined in I.T. 30‑C the refund voucher of the determined amount should have been accompanied the I.T. 30‑C without even the necessity of filing a separate application for refund and giving of numerous reminders; it .is contended that the failure to issue the refund is mala fide, unlawful and unconstitutional. Mr. Nasrullah Awan, on the other hand has opposed the grant of this petition.

6. Under section 96 of the 1979 Ordinance, where the tax paid exceeds the assessed or charged tax, the assessee becomes entitled to a refund. Before 1985 the law envisaged filing for applications for refund, however, after the advent of Finance Act, 1985 section 100 was substituted whereby any refund which becomes due to an assessee consequent upon passing of "any order under sections 59, 59‑A, 62 or 63 or in appeal, revision or other proceedings under the Ordinance", the Assessing Officer has to immediately refund the amount "irrespective of whether he has or has not made any claim in that behalf". The mandate of law in the share of section 100 is very clear. The moment an amount of refund, becomes due upon passing of an assessment, appealable or revisional order or any order in any proceedings envisaged under the 1979 Ordinance the right to receive the refund voucher is created automatically without any need to further apply for refund. The wisdom of the law makers is crystal clear; while any tax evader is not to go scot free, any assessee, who may have paid in excess is entitled to expeditious refund. The amendment in section 100 was thus introduced, so as to alleviate the miseries of the tax payers, who found themselves unable to receive their legitimate refunds till some underhand deal was struck with venal incumbents. Despite the amelioration rendered by the statutory amendment in the shape of the new section 100, which has very emphatically cured the mischief, the tax collectors, as in' the instant case, are still found to abuse their powers with attempt to nullify the amendment. While dealing with fiscal matters, we have experienced arguments advanced by some of the learned counsel appearing for the Revenue to the effect that in case the recovery of tax is declared to be unlawful it would gravely undermine the interest of the exchequer. The argument is quite unconvincing. This Court or any other judicial forum, including the forums created by the 1979 Ordinance, are not the tax collectors of the State. This Court or any other like forum has to look into the legality of the tax and its procedure. If found to be lawful the same is to be upheld, while otherwise declared to be ultra vires with passing of consequential order. This is the mandate conferred by Article 77 of, our Constitution (1973), whereby tax is only to be imposed in accordance with law. We are also reminded of Mushtaq Ali v. Government of Sindh PL D 1998 Karachi 416, wherein Wajihuddin Ahmed, C.J. (as he then was) while writing for the Court in an unequivocal terms had very correctly observed that no one could be made to pay more than what was due from him and any system which would encourage or condone the extraction of money, not permissible by law, would need to be corrected".

7. A lot is misunderstood. Tax collectors in the pursuit of their unrealistic collection targets and up in complete oblivion with regard to the legality' of their actions. This method, very oft practised, is wholly counter?productive. The tax targets are achieved though only momentarily, but a greater damage is done. The tax collector finds his confidence absolutely shattered in the fiscal machinery. It is needless to emphasise that law is to be followed, in letter and spirit if there is to be confidence building of the assessees. Tax evaders to be dealt with an iron hand, however, the tax payers are not to be harassed. In case honest tax payers are unlawfully harassed it would lead them to adopt devices not countenanced by law. Thus, optimum measures are to be taken for the confidence building of tax payers.

8. Coming to the controversy at hand, in Inayatullah v. I.T.O. 1989 P TD 876 a learned Single Judge of the Lahore High Court applied section 100 of the 1979 Ordinance, in allowing a writ petition where the amount of refund was clearly mentioned in the I.T. 30‑A Form. It was held that once a refund becomes due to an assessee, the Income Tax Officer is bound to refund the same irrespective of the fact whether he has or has not made any claim in that behalf. In Farida Mirza v. I.T.O. 1992 PTD 173 a Division Bench of this Court held that the provisions of the 1979 Ordinance did not envisage making of an application for refund, which was not a precondition for issuance thereof. It was further observed that the provisions of the 1979 Ordinance placed a responsibility on that Department to make the payment. Also additional refund of 15% for the delay in making the refund was ordered. Noor & Sons v. I.T.O. 1993 PTD 582 is a case where a learned Single Judge of the Lahore High Court awarded 15 % compensation under section 102 of 1979 Ordinance for delayed refund. It was observed in that case that where the refund of the excess amount was wrongly withheld and assessee was found entitled to the same, he would become entitled to the payment of further sum under section 102 which provision of law was self?-executory and no further direction was necessary to entitle the assessee to get the said amount. In Unique Enterprises v. A.C.I.T. 1995 PTD 749 a learned Single Judge of the Lahore High Court observed that section 100 of the 1979 Ordinance whereby the refund voucher had to be issued alongwith the demand note was mandatory in nature. It was further observed that the Income Tax Officer was not empowered to withhold refund in his discretion but was duty bound to issue the refund voucher alongwith the demand notice. The said judgment also makes a note of C.B.R.'s Letter No.I.T.B‑3(5) of 1986, dated 3‑7‑1994, wherein it is provided that the need to make an application for refund stands obviated in view of the new section 100 and that non7observance of section 100 would render an officer to face disciplinary action. In Afzal Construction. Co. v. Chairman, C.B.R. 1995 PTD 1248, it was, inter alia, held that the payment of compensatory refund under section 102 was obligatory, where the refund was not paid within three months from the date it becomes due.

9. As the refund of Rs.85,87,261 had been created and determined and the same has not been issued we had directed the respondents upon an application of the petitioner to deposit the same .with the Nazir of the Court with reluctance our order was eventually complied.

10. In this case Rs.85,87,261 has been created and determined as refund in favour of the petitioner. The I.T. 30‑C Form also reflects, the same after the order under section 156 has been passed by the respondent No.2 himself. There is no legitimate reason left to withhold the refund under section 100 nor any spelt out by the respondent. The withholding of the refund is found to be mala fide and completely without jurisdiction: In these circumstances the petition is allowed as prayed and with costs. The petitioner is not only entitled to the refund of Rs.85,87,261 but also compensatory additional refund @ 15 % under section 102 of the 1979 Ordinance as the provision of section 102 is self‑executory. In consequence the Nazir of this Court is directed to release Rs.85,87,261 to the petitioner or its representative immediately. The respondents are directed to determine the compensatory refund under section 102 @ 15 % strictly in accordance with law after giving opportunity to the petitioner or its counsel. The amount determined is to be paid to the petitioner without any delay. The latter exercise is to be completed within a week of announcement of this judgment.

H.B.T./G-76/K??????????????????????????????????????????????????????????????????????????????????? Petition allowed.