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

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Assessee a Co operative Housing Society---Status---Refund was determined by giving effect to the order of First Appellate Authority---Refund was withheld on the ground that judgment of the Supreme Court was awaited on the issue of `status' of the assessee as such refund created as a consequence of appeal to First Appellate Authority could not be issued---Validity---Refund created in consequence of relief by First Appellate Authority could not be withheld even by resort to 5.103 of the Income Tax Ordinance, 1979 because order for those years "was not subject-matter of appeal or further proceedings" ---Issue of status stood decided against Department up to High Court which had been challenged in Supreme Court and the same had no concern with the relevant assessment years---Matter sub judice before Supreme Court did not relate to the assessment years for which refund had been determined and claimed---Deliberate withholding or non-payment of refund falls under definition of "maladministration"-- Withholding of refund in absence of any order under 5.103 of the Income Tax Ordinance, 1979 aggravates "maladministration" due to an act of omission which was contrary to law, rules or regulations---Delay in issuance of refund, had entitled the taxpayer to sufficient compensation as per S.177 of the Income Tax Ordinance, 2001 and S.102 of the Income Tax Ordinance, 1979---Federal Tax Ombudsman recommended that undisputed refund of Rs.4,446,153, together with additional payment for delayed refund, be issued that it should be identified as to which authority was responsible for the unauthorized withholding of refund, which burdened the Government with additional payment under S.171 of the Income Tax Ordinance, 2001 that person. responsible for the infraction be suitably warned to be careful in future and that C.B.R. to direct the Tax Officers to file full particulars of any pending proceeding referred by them including the duly attested memo. of appeal, application or petition with the date of filing of- such proceeding and its present status.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 9----Jurisdiction, functions and powers of the Federal Tax Ombudsman---Bar of jurisdiction---Applicability---Bar of jurisdiction will apply only in cases where the subject-matter of complaint filed before the Federal Tax Ombudsman was the same in respect of which appeal before a Court of competent jurisdiction was pending on the date of presentation of complaint.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----S. 2(3)---Maladministration---Allegation---Proper hearing before entertaining complaint---Validity---Objection that allegation of mal administration be properly heard and conclusively established before entertaining complaint was frivolous and devoid of merit---Where allegation of maladministration was made and prima facie a case was made out on the facts stated in the complaint, notice was issued to the Department---No complaint could be considered and allegations of mal administration be properly heard and conclusively decided without issuing notice to the Revenue Division nor it could be decided without hearing-the Department.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)----

----S. 9(2)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Appeal before a Court of competent jurisdiction or Tribunal---Where. any party refers to any pending proceeding it will be required to supply full particulars including copy of the memo. of appeal, application or petition, date of filing and the present status of the proceedings.

Abrar H. Naqvi for the Complainant.

Nawab Khan, D-CIT for Respondent.

DECISION/FINDINGS

The complaint is regarding non-issuance of refund aggregating Rs.4,466,148 for the assessments years 1988-89 to 1995-96. The main points in the complaint are as under:--

(1)The assessee is a Cooperative Housing Society, its sources of income are profit on PLS account, Transfer and Registration fees, rental income and recovery of charges from members for facilities provided.

(2)The Assessing Officer gave the assessee, the status of limited company; and curtailed P&L Expenses to 20% of claim. The Income Tax Tribunal, Lahore gave in its judgment, that the assessee is an Association of Persons and that actual expenses should be allowed.

(3)Before waiting for confirmation of illegal demand at Appellate Forums the Income Tax Recovery Officers using coercive measures under section 92 recovered Rs.7,060,041 within days.

(4)The assessee after running from pillar to post, and painfully contesting the department at every stage has finally after completing the due process of law in 6 years has got the refund determined for Rs.4,446,148 (the correct figure is Rs. 4,446,153).

(5)The assessee has been approaching the Income Tax Officer since last six months for payment of refund, It is understood now that the assessee will not be paid the refund till the appeal of the Income Tax Department before the Supreme Court of Pakistan is decided.

In view of above it is prayed that Commissioner Income Tax, Companies Zone-II, Lahore be directed to pay-the refund.

2. In reply the respondent has submitted as follows:--

Preliminary Objections

(i)That the subject-matter is pending with the Supreme Court of Pakistan. Therefore, complaint falls out of, jurisdiction of Federal Tax Ombudsman in terms of section 9(2)(b) of the Establishment of the Federal Tax Ombudsman ordinance, 2000.

(ii)The applicant has failed to establish any 'maladministration' defined in the Federal Tax Ombudsman Ordinance.

(iii)It is urged that allegation of 'maladministration' be properly heard and conclusively established before entertaining the complaint.

On Merits

(a)Admitted to the extent that the refund at Rs.4,466,148 was determined under section 132/156 for the assessment years 1988-89 to 1995-96 after giving appeal effect to the latest appeal order of the learned CIT(Appeals), Zone-II, Lahore.

(b)The Complainant is a society registered under the Cooperative Societies Act, 1925. Status of a limited company was assigned in terms of section 2(32) read with section 2(16)(b) of, the Income Tax Ordinance, 1979. Status of Complainant was confirmed by the Commissioner of Income Tax (Appeals) as that of a company as assigned by the Department. Status of artificial juridical person was assigned by the Income Tax Appellate Tribunal. On appeal by the Department, Lahore High Court, Lahore also held vide order; dated 23-5-2000 that the complainant was not a company in terms of section 2(16)(b) of the Income Tax Ordinance, 1979.

(c)Against this judgment, the. Department has filed Civil Petition for. Leave to Appeal (CPLA No.2260/L/2000 before the Honourable Supreme Court of Pakistan. Judgment of-the Apex Court is awaited on the issue of status as such refund created as a consequence of appeal effect of, lower appellate authority cannot be issued.

3. Mr. Abrar H. Naqvi, Advocate appeared for the Complainant, to explain that the above refund came to be created on 13-6-2001 when the Assessing Officer passed a combined order under section 62/135 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) for six assessment years, 1988-89 to 1995-96. Therefore, the Complainant is entitled not only to refund but also to additional payment for delayed refund as per section 171 of the Income Tax Ordinance, 2000 (here referred as the Ordinance). The learned Counsel attacked the stand in Respondent's reply that the `status' of the Complainant (Company v. AOP) was contested before the Supreme Court of Pakistan where an application for leave to appeal is pending and that "refund created as a consequence of appeal effect of lower authorities, cannot be issued". According to. the AR, the issue concerning `status', related to assessments for 1996-97 and 1997-98 which were set aside by the CIT (Appeals) and had no relevance to the refund determined in the earlier six years. To support this assertion he brought on record CIT(A) consolidation order, dated 10-12-2001 where paragraphs 6 to 10 deal with the assessment years 1996-97 and 1997-98 whereas the refund was worked out as per direction in para 11 in respect of other six years. Consequently an order implementing this decision by the CIT(A), was passed on 13-6-2001 (ibid) on the basis of which refund is now claimed.

4. Mr. Nawab Khan, D-CIT appearing for the respondent admitted that there is no order by the Commissioner under section 103 of the repealed Ordinance, authorizing withholding of refund. He, however, pleaded that notwithstanding the fact that CIT(A) order, dated 10-12-2001 had become final for the assessment years 1988-89 to 1995-96, because non-filing of appeal by the Department to the Appellate Tribunal, the determination of 'status' by the Supreme Court may necessitate rectification of earlier assessments resulting in elimination or reduction of refund. Therefore, it was thought prudent not to issue the refund.

5. A consideration of the arguments by the two side and scrutiny of record reveals that there can be no dispute that the refund now created as a consequence of relief by the CIT(A) in the assessment years 1988-89 to 1995-96 cannot be withheld even by resort to section 103 of the repealed Ordinance because order for those years "is not subject-matter of an appeal or further proceedings". It also is evident that issue of `status', A though relevant to assessment years 1996-97 and 1997-98, stands decided against the Department upto the level of High Court which has been challenged in the Supreme Court and the same has no concern with the assessments for assessment years 1988-89 to 1995-96. Moreover, as alleged, not even `leave to appeal' has been granted by the Supreme Court. The matter sub judice before the Supreme Court does not relate to assessment years 1988-89 to 1995-96 for which refund has been determined and claimed. It is pertinent to point out that the bar of jurisdiction will apply only in cases where the subject-matter of the complaint filed before the Federal Tax Ombudsman is the same in respect of which appeal before a Court of Competent jurisdiction was pending on the date of presentation of the complaint. In the present case subject-matter of. the CPLA before the Supreme Court is different relating to assessment years 1996-97 and 1997-98 while the complaint relates to assessment years 1988-89 to 1995-96. The other objection that the allegation of maladministration be properly heard and conclusively established before entertaining the complaint is frivolous and devoid of merit. Where allegation of maladministration is made and prima facie a C case is made out on the facts stated in the complaint,, notice is issued to the department. No complaint can be considered and allegations of mal administration be properly heard and conclusively decided without issuing notice to the Revenue Division nor it can be decided without hearing the Department. The objections to jurisdiction are overruled.

6. It has been observed that the department frequently refers to pending proceeding in the Supreme Court, High Court or the Tribunal without furnishing its full particulars. In future where any party refers to A any pending proceeding it will be required to supply full particulars including copy of the memo. of appeal, application or petition, date of filing and the present. status of the proceeding.

7. Under these circumstances "deliberate withholding or non payment of refund" falls under the definition of 'maladministration' as per clause (v) of subsection (3) of section 2 of, the Establishment of the Office of Federal Tax Ombudsman Ordinance. In fact the withholding of the refund in the absence of any order under section 103 of the repealed Ordinance aggravates "maladministration" due to an act of omission which is contrary to law, rules or regulations. It is significant that this delay in the issuance of refund, has entitled the taxpayers to sufficient compensation as per section 177 of the Income Tax Ordinance, 2001 and section 102 of the repealed Ordinance. It is, therefore, recommended that:--

(i)The undisputed refund of Rs.4,446,153, together with additional payment for delayed refund, be issued.

(ii)It should be identified as to which authority was responsible for the unauthorized withholding of refund, which burdened the Government with additional payment under section 171 of Income Tax Ordinance.

(iii)Person responsible for the infraction as per (ii) above, be suitably warned to becareful in future.

(iv)C.B.R direct the Tax Officers to file full particulars of any pending proceeding referred by them including the duly attested memo. of appeal, application or petition with the date of filing of such proceeding and its present status.

6. Compliance report be submitted within 30 days of the receipt of this Order.

C.M.A./679/FTO Order accordingly.