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

----Ss. 66(1)(c), 59, 54 & 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Limitation for assessment in certain cases---Self-assessment---Refund---Order setting aside the assessment became barred by time, entailed necessary and unavoidable consequence that the return of income came to be. accepted under S.59 of the Income Tax Ordinance, 1979, by operation of law, which carried the. implication that any amount of tax paid, which exceeded the liability admitted under. S.54 of the Income Tax Ordinance, 1979, became refundable to the complainant/assessee---Department's plea that fresh "assessment will be finalized in accordance with law and facts in the shortest possible time" was not possible in law except that an IT-30 was to .be .prepared showing refund" for posting in the relevant record---Such having been denied, maladministration was manifest in multidimensional ways viz. (a) neglect in allowing the assessment to get time-barred; (b) inattention to the complainant/assessee's correspondence with regard to the payment of refund as evidenced by letters by the assessee addressed to, the TRO, ITO and CIT respectively; (c) loss 'of record some part of which was classified 'permanent' were all acts betraying inefficiency.

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

----Ss. 96, 66(1)(c), 54 & 59---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Non payment of---Assessment was set aside by the Appellate Tribunal which had not been finalized in accordance with law and became barred by time---Claim of refund by the assessee---Non-availability of record of Department---Effect---If the Department was not able to trace out the record, there was no way but to accept the assessment record presented by the complainant/assessee, as a basis to take further action to carry the matter to its logical and legal end---Federal Tax Ombudsman recommended that the complainant's tax liability be worked out on the basis of income declared in the Return and refund determined and paid promptly that tax liability of partners on the basis of their Returns be worked out to determine final liability refund and that additional payment for delayed refund he also worked out in the case of the complainant and its partners, and disbursed forthwith.

S. Athar Raza for the Complainant.

S.M. Ali, D.C.I.T, for Respondent.

DECISION/FINDINGS

The Complainant, a partner of defunct registered firm, ("Messer Muhammad Altaf, Azam Cloth Market Lahore) is aggrieved by non payment of refund and accuses the A-CIT, Circle 5 Zone A Lahore for delaying its issuance.

2. The complaint was received on 12-6-2002 and report was called from the Secretary, Revenue Division, who, vide letter, dated 20-7-2002, requested for extension of time for one month as the relevant record was not traceable as per CIT's report, dated 17-7-2002. This was allowed. In the meantime `interim report' dated 17-8-2002 from R-CIT, Lahore was forwarded by the Secretary, Revenue Division on 20-8-2002 intimating that a Committee has been formed to dig out the lost record. This was followed by another request on 13-9-2002 seeking further extension of time. This was allowed and the case finally came up for hearing on 12-11-2002.

3. The facts, briefly stated, are that the Complainant's case was set apart for detailed scrutiny for the Assessment year 1981-82. Assessment was framed on 21-4-1982 under section 62 of Income Tax Ordinance, 1979 (hereinafter called repealed Ordinance) estimating Sales at Rs.12,500,000 to which GP was applied at 4%, thus determining Income at Rs.465,000 (declared Rs.49800). This resulted in an aggregated Supper tax and Surcharge demand of Rs.133,3'7.5. The Complainant went in appeal upto the Income Tax Tribunal who set aside the assessment on 21-10-1990. However, during the pendency of appeal before the Tribunal, tae Assessing Officer imposed penalty on 25-4-1984 at Rs.182,270 under section 111 for concealment of income. Complainant's appeal against the penalty order was dismissed by the CIT(Appeal) but on further challenge the ITAT set aside the penalty order on 1-12-1974. The,, two set aside orders ought to have been taken up for fresh determination "within one year from the end of the financial year in which these orders were received". The Assessing Officer failed to appreciate this legal subtlety and action now initiated as said to be hit by limitation as per section 66(1)(c) of the repealed Ordinance.

During the pendency of appeal before the Appellate Tribunal following payments on, account of tax demand were made by the Firm and its Partners.

Paid by the Firm=Rs.255,160

Paid by the partner Muhammad Ishaq=49,938

Paid by Mr. Muhammad Altaf=19,981

Paid by Mr. Muhammad Afzal=6,037

Total=Rs.331,113

NB:--Detail of the payments and photostat copies of the Treasury Challan showing payment of tax have been furnished.

Being aware of the fact that the, Department could not reframe assessment for the year 1981-82, due to obstacle placed by the time limitation, the Complainant approached the ITO, Circle 05, Zone A, Lahore and CIT Zone A for refund of the abovementioned amounts but having failed has approached this Secretariat for redressal of his grievance.

5. The Counsel for the Complainant vehemently contended that since the Department failed to make re-assessment within one year of the setting aside of the order by the ITAT, any assessment made now will be illegal and the excuses by the respondent as respects issuance of refund as a mala fide cover-up of their own failing.

6. Mr. S.M. Ali, D-CIT, appearing for the respondent conceded outright, that despite best efforts records could not be traced out. He was, therefore, unable to advance arguments or lead evidence to rebut the Complainant's claim for refund. He, however, repeated the words of the R-CIT, as per comments, dated 27-9-2002, that "order of the learned ITAT was not received earlier and the question of creating refund does not arise as the assessment was not made. The set aside assessment will be finalized in accordance with law and facts in the shortest possible time".

7. For quick appreciation of law and the arguments developed on it, the relevant provision of the repealed Ordinance is reproduced here:--

"Section 66(1) Notwithstanding anything contained in section 64 and subsection (3) of section 65, where in consequence of, or to give effect to, any finding or decision contained in an order made under this Chapter or Chapter ...or any order made by any High Court or the Supreme Court of Pakistan in exercise of its original or appellate jurisdiction

(a)an assessment is to be made on any firm or a partner of any firm; or

(b)an assessment is to be made on the assessee or any other person; or

(c)an assessment has been set aside, in full or in part, by an order under section 132 or section 135 and no appeal is filed under' section 134 against such order or no (appeal filed)' under section 136 in respect thereof, as the case may be,

such assessment may be made at any time within .... and within one year in any case to which clause (c) applies, from the end of the financial year in which such order is received by the Deputy Commissioner.

(here underlined for emphasis)

It is not without significance that the term "such order is received by the Deputy Commissioner" does not specify the source from which the order is "received". This clearly implies that the order may be received by the D-CIT (i) directly from the Appellate Tribunal, or (ii) through the CIT, or (iii) through the Departmental Representative at the Tribunal, or (iv) it may even be supplied to him. by the taxpayer. On this view. letter, dated 19-12-1992 addressed by the Complainant to the D-CIT, Circle 5, assumes great importance because it carried the request to give effect to the ITAT's order for the assessment year 1981-82 and a copy thereof was supplied. Even if the ITAT order had not been received by the D-CIT through normal channel, on receipt of Complainant's letter of 20-12-1992, he should have attempted to find out the fate of appeal at the hands of the Tribunal and should have endeavoured to obtain a copy of the appellate order through 'normal or usual channel' followed by the Department. No such effort appears to have been made though undoubtedly on 20-2-1992 when the Complainant approached him, the D-CIT had come to have full knowledge of the contents of the appellate order. Counting from this date, the set aside order became barred by time on 30-6-1993 entailing the necessary and unavoidable consequence that the Return of Income (as filed) came to be accepted under section 59 of the repealed Ordinance by operation of law, which carried the implication that, any amount of tax paid, which exceeded the liability admitted ,under-section 54, became refundable to the Complainant. The respondent's plea that fresh "assessment will be finalized in accordance with law and facts in the shortest possible time" quite apparently not possible in law except teat an IT-30 is to be prepared showing refund for posting in the relevant record. Since this is being denied. Maladministration is manifest in multidimensional ways via:

(a)neglect in allowing the assessment to get time-barred,

(b)inattention to the Complainant's correspondence with regard to the payment of refund as' evidenced by letters, dated 2-4-1989 20-12-1992, 31-3-2000 and 30 1-2002, addressed to the TRO, ITO and the CIT respectively, and

(c)the loss of record some part of which are classified 'permanent'

are all acts betraying inefficiency which fall under the definition of maladministration' as defined in the FTO Ordinance.

8. It may be worthwhile to refer to section 126 of the Income Tax Ordinance, 2001 relating to Evidence of Assessment, subsection (1) whereof declares an assessment order as "conclusive evidence" as respects 'amount' and 'particulars' mentioned therein. Therefore, if the Department is not able to trace out the record, there seems no way but to accept the assessment record, presented by the Complainant, as a basis to take further action to carry the matter its logical and legal end.

9. It is, therefore, recommended that:

(i)Complainant's tax liability be worked out on the basis of Income declared to 85.49,800 in the Return and refund determined and paid promptly.

(ii)Tax liability of Partners on the basis of their Returns be worked out to determine final liability/refund.

(iii)Additional payment for delayed refund be also worked out in the case of the Complainant and its Partners, and disburse forthwith.

10. Compliance report be submitted within the 30 days of the receipt of this order.

C.M.A.651/FTO Order accordingly