OIL TRADE (PVT.) LTD., FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1539 (2002)

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

‑‑‑‑Ss.87 & 53‑‑‑Additional tax for failure to pay advance tax‑‑‑Appeal‑‑ Order for additional tax was set aside for .de novo proceedings‑‑‑Appeal to Tribunal by Department was dismissed‑‑‑De novo proceedings‑‑‑Order under Ss.87/135, Income Tax Ordinance, 1979 creating the same additional tax demand as before‑‑‑Complaint to Federal Tax Ombudsman on the ground that alleged default under S.53 of the Income Tax Ordinance, 1979 was not mentioned in the assessment order passed under S.62 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Plea that order under S.87 of the Income Tax Ordinance, 1979 was against the law could not be considered at this stage‑‑‑Complainant had nowhere denied that it had committed default under S.53 of the Income Tax Ordinance, 1979 and the plea regarding pending refund was also not relevant to the period during which the default was committed under S.53 of the Income Tax Ordinance, 1979‑‑‑No intervention was called for by the Federal Ombudsman in the circumstances.

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

‑‑‑‑Ss.89, 104, 135 & 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Charge of additional tax for failure to pay tax or penalty‑‑‑Refund, adjustment of towards demand‑‑‑Assessment year 1990‑91‑‑‑Demand created was payable by 11‑6‑1991‑‑‑Refunds in respect of assessment years 1988‑89 and 1987‑88 were created as on 16‑2‑1991 and 29‑1‑1992 respectively‑‑ Adjustment‑‑‑Additional tax under S.89 for the period 11‑6‑1991 to 30‑3 1992 was charged ‑‑‑Validity‑‑‑On the due date of payment of demand for the assessment year 1990‑91 the refund had already been created and in the light of provisions of S.104 of the Income Tax Ordinance, 1979, the Assessing Officer should have adjusted this refund against the demand‑‑ Refund created on 29‑1‑1992 should also have been adjusted against the demand and since the refund was more than the demand, there was no default on the part of the assessee from 29‑1‑1992 onwards‑‑‑Additional tax payable under S.89 for the period from 11‑6‑1991 to 29‑1‑1992 on the tax demand for the assessment year 1990‑91 as reduced by the amount, of refund for the assessment year 1988‑89‑‑‑Federal Tax Ombudsman recommended that order under S:89, dated 30‑11‑2001 for the assessment year 1990T91 be rectified under S.156 in accordance with the above observations.

Sirajuddin Khalid, A.R., for the Complainant.

Amjad Khattak, IAC Range‑III, Companies Zone, Faisalabad for Respondent.

DECISION/FINDINGS

This is a complaint relating to additional tax levied in the complainant's case under section 87 of the Income Tax Ordinance for the assessment years 1990‑91 and 1991‑92 and under section 89 of the Ordinance for the assessment year 1990‑91. The facts of the case as given in the complaint and ascertained during the hearing are as follows:

(i)Assessments for the years 1990‑91 and 1991‑92 were made under section 62 of the Income Tax Ordinance in the complainant's case on 30‑5‑1991 and 30‑4‑1992 respectively.

(ii)Subsequently an order under section 87 of the Income Tax Ordinance was passed on 13‑11‑1993 levying additional tax of Rs.13,901 and Rs.14,152 for the assessment years 1990‑91 and 1991‑92 respectively for non‑compliance of the provisions of section 53 of the Income Tax Ordinance.

(iii)On the same date viz. 13‑11‑1993 another order was passed under section 89 of the‑Income Tax Ordinance levying additional tax of Rs.1,09,577 for failure to pay the income‑tax demand resulting from the order under section 62 for the assessment year 1990‑91 by the specified date.

(iv)In an application tinder section 156 of the Income Tax Ordinance dated 28‑11‑1993 the complainant pointed out that the charge of additional tax was not valid because the default had not been mentioned in the main order under section 62 of the Income Tax Ordinance. It was also pointed out in the application that immediately on receipt of the demand notice dated 12‑6‑1991 pertaining to assessment year 1990‑91 it was requested that the demand be adjusted against refund for the years 1987‑88 and 1988‑89 but no action was taken on the complainant's request. It was also stated that as had already been requested earlier additional payment due to the complainant under section 102 for late payment of refund be adjusted against the additional tax levied.

(v)In a brief reply to the application under section 156 the Assessing Officer only stated that the application was not tenable in the eyes of law and was, therefore, rejected.

(vi)The complainant filed an appeal against the rejection of application under section 156 and the CIT (Appeals) vacated the rejection order under section 156 as well as the orders under sections 87 and 89 and directed that the matter be examined de novo. The department filed second appeals before the Income Tax Appellate Tribunal on the ground that orders under sections 87 and 89 were not appeal-able. The departmental appeals were, however, dismissed vide ITAT order dated 28‑6‑2001. A show cause notice dated 7‑11‑2001 was then issued to commence the de novo proceedings under sections 87 and 89 as had been directed by the CIT (Appeals).

(vii)The complainant filed a reply dated. 21‑11‑2001 to the show cause notices but fresh orders under sections 87/135 and 89/135 were passed on 30‑11‑2001 creating the same additional tax demand as before.

2. In the complaint the same objection to levy of additional tax under section 87 amounting to Rs. 13,901 and Rs. 14,152 for the assessment years, 1990‑91 and 1991‑92 has been raised as had already been taken before the Assessing Officer as well as the CIT (Appeals) viz. that the alleged default under section 53 was not mentioned in the assessment order passed under section 62. The fact, however, is that the CIT (Appeals) did not hold the levy of additional tax to be invalid and only vacated it for de novo proceedings. If the complainant had any objection to the order of the CIT (Appeals) it could have filed a second appeal before the Tribunal. The plea that the orders under section 87 were against the law cannot, therefore, be considered at this stage. As regards the factual position, the complainant has no where denied that it had committed default under section 53 of the Income Tax A Ordinance and the plea regarding pending refund is also not relevant to the period during which the default was committed under section 53. No intervention is, therefore, called for as far as the orders under section 87 for the assessment years 1990‑91 and 1991‑92 are concerned.

3. Coming to the question of additional tax levied under section 89 for the assessment year 1990‑91, the fact is that assessment for this year was made on 30‑5‑1991 and a demand of Rs.5,61,242 was created which was payable by I1‑6‑1991. The payment was actually made on 30‑3‑1992 and additional tax of Rs.1,09,577 was, therefore, charged under section 89 for the period 11‑6‑1991 to.30‑3‑1992. It is, however, seen from the record that the following refunds were created under section 135 as a result of the orders of the Income Tax Appellate Tribunal in the complainant's case:

The entire refund was paid to the complainant on 26‑7‑1992 but the fact is that on the due date of payment of demand for the assessment year 1990‑94 viz. 11‑6‑1991 the refund of Rs. 1,37,594 had already been created and in the light of the provisions of section 104 of the Income Tax Ordinance the Assessing Officer should have adjusted this refund against the demand. As regards the refund of Rs. 7,44,061 it was treated on 29‑1‑1992 i.e. about two months prior to the date of 30‑3‑1992 up to which the additional tax has been calculated. This refund should also have been adjusted against the demand and since the refund was more B than the demand there was no default on the part of the complainant from 29‑1‑1992 onwards. Additional tax under section 29 would, therefore, be payable under section 89 for the period from 11‑6‑1991 to 29‑1‑1992 on the tax demand for the assessment year. 1990‑91 as reduced by the refund of Rs. 137,594 for the assessment year 1988‑89.

4.In the light of the above, it is recommended that:

(i)The order under section 89 dated 30‑11‑2001 for the assessment year 1990‑91 be rectified under section 156 in accordance with the observations contained in para. 3 above.

(ii)Compliance be reported within 30 days.

C.M.A./M.A.K./241/FTO

Order accordingly.