Messrs AL-MAKKAH COLD STORAGE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 3010 (2002)

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

‑‑‑‑Ss.59(1) & 104‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self‑assessment‑‑‑Adjustment of previous years refund‑‑‑Validity‑‑‑Self‑Assessment Schemes were framed by the Central Board of Revenue under S.59(1) of the Income Tax Ordinance, 1979 but the schemes have to operate within the general framework of the Income Tax Ordinance, 1979 and it was totally wrong to say that adjustment of refund against admitted tax liability could not be allowed because the Self‑Assessment Scheme did not .contain such a specific provision as it was quite unnecessary to include such a provision in the Self‑Assessment Scheme in the presence of the clear provisions of S. 104 of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss.104 & 59‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Adjustment of refund‑‑‑Self -assessment‑‑‑Refund adjustment mentioned in the Scheme for one year and not in the Scheme for other years did not mean, that S.104 of the Income Tax Ordinance, 1979 had ceased to operate in the context of the Self‑Assessment Schemes for those other years.

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

‑‑‑‑Ss. 59(1), 61, 62 & 104‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self‑assessment‑‑‑C.B.R. Circular No.4 of 2001 dated 18‑6‑2001‑‑‑Self‑Assessment Scheme‑‑ Adjustment of earlier years refund‑‑‑Return was excluded from Self- Assessment Scheme on the ground that tax had not been fully paid under S.54 of the Income Tax Ordinance, 1979 with the return and adjustment of earlier years refund was not permissible under the Self‑Assessment Scheme‑‑‑Validity‑‑‑Assessing Officer was not justified in excluding the complainant's income‑tax return for the year 2001‑2002 from the Self- Assessment Scheme‑‑‑Federal Tax Ombudsman recommended that the complainant's return for the assessment year 2001‑2002 be accepted under Self‑Assessment Scheme.

Javed Iqbal for the Complainant.

Zafar Abbas, DCIT and Zulfiqar Ahmad, S.O. Circle II, Sahiwal for Respondent.

DECISION/FINDINGS

This is a complaint relating to the exclusion of the complainant's return of income for the assessment 'year 2001‑2002 from the Self- Assessment Scheme for that year and against the commencement of assessment proceedings under normal law for the said year. The main points in the complaint are as under:‑‑‑

(i) The complainant filed an income‑tax return for the assessment year 2001‑2002 declaring income of Rs.208,885 on which tax of Rs.15,767 was payable.

(ii) The tax liability of Rs.15,767 was paid as under:‑‑‑

(iii) The Assessing Officer has issued notices under sections 61 and 62 of the Income Tax Ordinance on the presumption that the return did not qualify for assessment under Self‑Assessment Scheme as tax had not been fully paid under section 54 with the return. He is of the view that adjustment of earlier years refund is not permissible under the Self‑Assessment Scheme contained in C.B.R.'s Circular No.4, dated 18‑6‑2001.

(iv) The Assessing Officer's view is quite misconceived as the adjustment of refund is clearly permissible under section 104 of the Income Tax Ordinance. The income‑tax return form contained in rule 190 of the Income Tax Rules also has a separate column for showing refund adjustment claimed by the assessee against admitted tax liability.

(v)The Assessing Officer's action in excluding the complainant's return from the Self‑Assessment Scheme is void and illegal.

In the light of the above the complainant has prayed for necessary intervention in the matter.

2. The respondent's reply has been received, and the representatives of the complainant and the respondent have been heard. The main points in the respondent's reply are as under:‑‑‑

(i) No provision of adjustment of refund against tax payable under section 54 was contained in the Self‑Assessment Scheme for 2001‑2002 although such a provision was contained in para. 10 of the Universal Self‑Assessment Scheme for the year 1999‑2000.

(ii) It is true that section 104 provides for adjustment of refunds and the income‑tax return also contain the necessary column. Since, however, the Self‑Assessment Scheme for the year 2001‑2002 was framed under" section 59(1) of the Income Tax Ordinance and it did not provide for such adjustment, the action of the Assessing Officer was quite valid.

(iii) The fact that no adjustment of refund against admitted liability under section 54 was provided in the Self‑Assessment Scheme 2001‑2002 is all the more evident from the fact (as indicated above) that such adjustment was specifically allowed in the assessment year 1999‑2000 for which year para. 10 of the relevant Circular read as follows:‑‑‑

"Definite amount of refund already determined by the department can be adjusted against the liability under the USAS at the option of the assessee."

(iv) The proceedings in the case have been kept pending as according to the complainant he is seeking clarification from the C.B.R.

(v) No "maladministration" is involved in the case.

3. The complainant's AR stated during the hearing that no reference was actually made to C.B.R. in view of the clear provisions of law. The arguments of the two sides have been considered and the contentions of the complainant have been found to be quite valid. It has already been noted that section 104 of the Income Tax Ordinance clearly provides for adjustment of refund against tax liability. The complainant's AR has also correctly pointed out that the income‑tax return form contains column 15(d) for claiming refund adjustment against admitted tax liability payable with the return. It is true that Self Assessment Schemes are framed by

the Central Board of Revenue under section 59(1) of the Income Tax Ordinance, but obviously the schemes operate within the general framework of the Income Tax Ordinance and it is totally wrong to say that adjustment of refund against admitted tax liability cannot be allowed in .the complainant's case because the Self-Assessment Scheme 2001‑2002 does not contain such a specific provision.. It is in fact quite unnecessary to include such a provision in the Self‑Assessment. Scheme in the presence of the clear provisions of law but the respondent has laid considerable emphasis on the fact that while adjustment of refund was clearly provided in the universal Self -Assessment Scheme of 1999‑2000, the said provision has been omitted from 'the Self‑Assessment Schemes of subsequent years. The fact, however, that refund adjustment was mentioned in the scheme for one year and not in the scheme for other years does not mean that section 104 of the Income Tax Ordinance has ceased to operate in the context of the Self‑Assessment Schemes for those other years. It may also be added that perhaps the reason why the provision of refund adjustment was specifically mentioned in the universal Self‑Assessment Scheme of 1999‑2000 was that the Scheme contained certain concessionary tax provisions and the resultant income‑tax payable against twenty‑six levels of inc6me from Rs.50,000 to Rs.500,000 was indicated in a Table e.g. tax on Rs.50,000, Rs.100,000, Rs.300,000 and Rs.500,000 was given at Rs.1,250, Rs.6,250, Rs.41,250 and Rs.101,250 etc. It seems that since unlike other years a table was given in USAS 1999‑2000 which specified the tax against various levels of income, the C.B.R. considered it necessary to clarify that even though the tax payable against various incomes had been specifically shown in the USAS, any refund due to the assessees was still adjustable against the tax demand shown in the Scheme. It was thus only a reaffirmation of an existing legal position. The C.B.R. neither has the power nor was it obviously its intention to lay down that refund adjustment is not allowable against tax payable under the Self‑Assessment Schemes for years other than 1999‑2000.

4. In the light of the above, it is concluded that the Assessing' Officer was not justified in excluding the complainant's income‑tax return for the year 2001‑2002 from the Self‑Assessment Scheme for that year. It is, therefore, recommended that:

(i) The complainant's return for the assessment year 2001‑2002 be accepted under S.A.S.

(ii) Compliance be reported within 30 days.

C.M.A./M.A.K.440/FTO Order accordingly.