AHMAD JAUHARABAD (PVT.) LTD., FAISALABAD VS SECRETARY, REVENUE-DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 125 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.103‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss‑9 & 10(4)‑‑‑Withholding of refund‑‑ Power to withhold refund in certain cases ‑‑‑Complainant/assessee contended that the proposal of Assessing Officer to withhold the refund was vindictive with a view to deprive the complainant of his legitimate claim to refund due after the decision of First Appellate Authority and refund could only be withheld, if there was an apprehension that the assessee might disappear after disposing of its assets and rendering the recovery impossible if the departmental appeal against the order, giving rise to refund ultimately succeeded‑‑‑Complainant was a private limited company running a huge industry with a lot of capital and fixed assets and there was no apprehension that the assessee will disappear after obtaining the refund‑‑‑Validity‑‑From examination of facts and contentions of the parties, it was clear that the department had filed appeal before the Tribunal and the matter was sub judice‑‑‑Central Board of Revenue had taken note of the fact that at times, appeals without merit were filed either to forestall any claim or to avoid the responsibility of taking decision involving refund and other contentious matter‑‑‑Central Board of Revenue was obliged to scrutinize such cases to avoid hardship to the assessee‑‑‑Central Board of Revenue was advised by the Federal Tax Ombudsman to scrutinize the case and decide as to whether department was justified in filing appeal and issue necessary instructions before 15‑7‑2002‑‑‑Complaint/Case was closed by the Federal Tax Ombudsman.

Masood Ishaq for the Complainant.

Manzur Ahmed, D.C.I.T. for (respondent.

FINDINGS/DECISION

Allegations is made in this complaint for undue delay caused in issuing following refund due on the basis of order rioted hereunder:

2. Brief facts regarding the allegation of delay in issuing refund. ..Maimed to be due are that complainant's profits and gains from the industrial undertaking set up by the company have enjoyed exemption under clause (118D) of Part I of the Second Schedule to the Income Tax Ordinance, 1979 till assessment year 1998‑99. It declared gross profit @ 14.2% of sales amounting to Rs.145,909,238 in 1998‑99 while gross profit @ 19.79% was declared on sales of Rs.84,480,213 for 1999‑2000. The D.C.I.T. accepted the declared sales but found the rate of declared gross profit to be low without recording any parallel case where gross profit was declared or assessed at a higher rate.

3. The D.C.I.T. however, discarded the declared gross profit without recording any discrepancies in the claims on account of the cost of sales. An ad hoc addition of Rs.833,995 was made to the declared gross, profit. An appeal was filed and the CIT (Appeals) found the ad hoc addition unwarranted and deleted it. He also allowed relief in other disallowances made by the D.C.I.T. out of various claims of overhead expenses.

4. However, second appeal has been filed before the Income‑tax Appellate Tribunal by the department on 9‑4‑2002 while the complaint has been filed on 12‑4‑2002. The R.C.I.T., Central Region, Multan in his reply to notice under section 10(4) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 has submitted that refund order for assessment year 1999‑2000 is sub judice. He has further submitted that the Officer concerned has proposed to withhold the refund under section 103 of the Income Tax Ordinance which is under process.

5. "It is submitted by the learned counsel for complainant that the objection of department regarding jurisdiction of Federal Tax Ombudsman is not 'correct as the complainant has not filed complaint against the assessment order. Rather the complaint is against non issuance of refund. According to the learned counsel, the concerned Deputy Commissioner of Income‑tax has proposed to the C.I.T. to withhold the refund after filing of complaint to the Federal Tax Ombudsman. The counsel has submitted that the proposal of D.C.I.T. to withhold the refund is vindictive with a view to .deprive the complainant of his legitimate claim to refund due after the decision of C.I.T. (Appeals). Furthermore, the refund can only be withheld, according to the counsel if there is an apprehension that the assessee might disappear after disproving its assets and rendering the recovery impossible if the departmental appeal against the order, giving rise to refund ultimately succeeds.

6. It is submitted on behalf of the complainant that they are a private limited company running a huge industry with a lot of capital and fixed assets. There is no apprehension that the assessee will disappear after obtaining the refund. He has cited the decision of the Federal Tax Ombudsman in Complaint No. 156/L of 2001: 2002 PTD 824, in which in the same circumstances, the department was ordered to issue the refund.

7. It is prayed on behalf of the complainant that recommendation may be made for issuance of refund alongwith compliance under section 102 of the Income Tax Ordinance, 1979. The learned counsel, therefore, submits that the process initiated for withholding the refund under section 103 is perverse, arbitrary, unjust and oppressive falling under the definition of maladministration cognizable under the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

8. From examination of the facts and contentions of the parties, it is clear that the department has filed appeal before the Tribunal and the matter is sub judice. It has been observed and C.B.R. has taken note of the fact that at times, appeals without merit are filed either to forestall any claim or to avoid the responsibility of taking decision involving refund and other contentious matters. In these circumstances, it is the duty of the C.B.R. to scrutinize such cases to avoid hardship to the assessees. The C.B.R. is advised to scrutinize the case and decide whether department was justified in filing appeal and issue necessary instructions before 15‑7‑2002.

9. With these observations, the case is closed.

C.M.A./488/FTO Order accordingly.