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

----S. 9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Federal Tax Ombudsman was charged with the responsibility "to diagnose, investigate, redress and rectify any injustice done to a person through 'maladministration' by functionaries administering tax laws" ---Federal Tax Ombudsman had no jurisdiction to examine the validity of any order/direction by the President of the Central Board of Revenue or its functionaries.

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

----Ss. 66-A, 80C, 143B & 50(7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Non-compliance of President's direction within specific period-- Validity---Although proceedings initiated under S.66-A of the Income Tax Ordinance, 1979 did not suffer from maladministration, it admittedly existed in non-compliance of the direction of the President of Pakistan within the time specified therein---Was the duty of Central Board of Revenue and senior supervisory officer to ensure compliance with such order and direction and should not be left to the concerned officer alone---Had supervision been carried out this lapse would not have occurred---Federal Tax Ombudsman recommended that Central Board of Revenue devise a scheme or issue order regulating the compliance of orders and directions in time with strict supervisory control by senior officers who should also be answerable for non compliance of the order.

1999 SCMR 2189 ref

Saqib Bashir, ITP for the Complainant.

Pervaiz Alain, IAC and Shahid Jamil, Legal Adviser for Respondent.

DECISION/FINDINGS

These three complaints have been filed praying that CIT, Zone-C, Lahore be given instructions to issue refund due to each Contractor as under:---

2. The facts leading to the dispute are that the complainants were operating as Contractors to collect (a) Transfer of Property Tax and (b) Goods Exit Tax. On the basis of Returns of Income filed at Sheikhupura, refunds were determined, as above, in each case. When approached to issue refunds, the Department initiated proceedings under section 66-A of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) contending that prejudice was caused to revenue inasmuch as complainants were liable to tax liability under section 80C of the repealed Ordinance for which statements under section 143B should have been filed and tax deducted at source was to be the total/final discharge of liability; instead returns under section 55 were dubiously filed and those also in the Circle of Income Tax having no jurisdiction over the cases. The Contractors approached the Wafaqi Mohtasib, complaining that refunds were being withheld on the pretext of contemplated action under section 66-A. As per consolidated order dated 15-1-2001, the Wafaqi Mohtasib recommended: "the amounts of refund clamed by the said three Complainants be processed and issued within one month". The Department then filed a representation to the President of Pakistan who vide consolidated order, dated 21-2-2001 directed:--

.........Wafaqi Mohtasib Order is set aside. The appropriate authority of Income Tax should decide the matter within three months of the receipt of this order".

The Department, however, failed to decide the matter within three months as ordered by the President, hence it approached the President on 2-10-2002 for extension of time for implementation. During the pendency of this application this complaint was filed. The President passed order on 31-1-2002 as under:--

"The appropriate Income Tax Authority's failure to decide the matter within 3 months...:would not have the effect of reviving the Wafaqi Mohtasib findings, dated 15-1-2001...which have been set aside. The appropriate Income Tax Authority still has the jurisdiction to decide the matter...Nothing would, however debar the FTO to investigate the matter regarding authority's failure to decide within the limited time and to make appropriate recommendations"

It is now apprehended by the complainants that armed with this verdict, the Department "is now seeking to specially initiate action to change the original assessment orders, dated 30-6-1999" through action under section 66A of the repealed Ordinance in

the cases of all the three complainants hence the complaints. It has been prayed that all actions be stayed till the disposal of the complaint and department be ordered to make the refund.

3. The respondent in reply while denying validity of refund and justifying proposed action under, section 66-A of repealed Ordinance to retrieve the tax because determination of refund was secured by each of the three complainants by "filing return ....with mala fide intention with a view to hood-wink the Department fraudulently to avoid proper taxation.

4. The learned counsel for the complainants Mr. Saqib Bashir Advocate asserted that failure to take action within 3 months, as initially ordered by the President, resulted in reviving the assessments framed under section 62 whereby refunds already stood determined since June 1999. These should have been issued forthwith and Department's second approach to the President for extension of time after sleeping over it for 1.4 years, was a mala fide attempt to gain time. Relying on Supreme Court decision reported as 1999 SCMR 2189 it was averred "the jurisdiction vested in the President partakes of appellate jurisdiction" for the exercise of which "application of judicial mind is a must for reaching a fair and just, conclusion". Therefore, it was incumbent upon the President to extend an opportunity of hearing to the affected parties before passing any adverse direction more so when, with the lapse of period of 3 months, a vested right had accrued to the complainants. Reference was made by the learned counsel to FTO's decision finding in re: Gharibwal Cement and Dandot Cement Factories where, in identical circumstances, President's decision under section 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance) Findings/Decision on C. No. 709 of 2001 was exhaustively discussed to finally suggest that the "President's order passed on representation required revisitation and review". Attempt was made to demonstrate that judged on the criterion spelled out by the Supreme Court in 1999 SCMR 218, the order by the President was legally flawed.

5. As respects President's verdict that "appropriate authority's failure to decide the matter by itself amounts to 'maladministration' on the part of the authority Mr. Shahid Jamil Khan the learned Advocate for the department submitted that action has already been taken against the defaulting officer by removal from service as mentioned by the R-CIT in para 2 of his reply. Prime facie from the record it seems that Complainants were Contractors and as such according to the Department were liable to tax under section 80d of the repealed Ordinance and deduction at source under section 50(7) was to be the final discharge of--their liability. Further facts pressed by the department are that instead of filing Statements under section 143B the complainants filed returns under section 55 of the repealed Ordinance in a Circle which did not have jurisdiction over their cases. It has been alleged that determination of refund was subsequently `manipulated' with the connivance of the concerned officials who have since been subject to proper punishment. In these circumstances, the anxiety to retrieve revenue by resort to section 66A was natural and could not be termed mala fide but based on reasons which prevailed with the President when he observed: "the appropriate Income Tax Authority still has jurisdiction to decide the matter". The learned Advocate for the department assured that the complainants would be extended full opportunity in the envisaged proceedings.

6. The position emerges that subsection (2) of section 66-A itself prescribes, a period of 4 years for completion, of action "from the date of order sought to be revised". Therefore, except the Legislature, no authority, including the President, could curtail (or extend) that period. The direction by the President to complete the action within 3 months was an instruction to be respected and faithfully implemented. Therefore, the lapse to carry out such direction was to be identified for taking action against the tax employee responsible to implement the order which has already been taken: However, the time-limit, as specified by the Legislature in section 66A(2), was sagaciously not touched-nor could it be. It is not in dispute that time-limit for action under section 66A of the repealed Ordinance, and for amendment under section 122 of the Income Tax Ordinance, 2001, is still available counting from 30-6-1999, the date of order to be revised. In conclusion it is observed that no "maladministration" can possibly be attributed to proceedings under section 66A because these are to be completed so as to implement the President's direction, within the time allowed by relevant laws. Although the President has observed that the FTO has the authority to investigate the matter regarding the authority's failure to decide the case within the time-limit and to make appropriate recommendations, the Department has already investigated and awarded maximum punishment for the negligence in performance of duty. In this regard no further investigation is, needed. The Federal Tax Ombudsman is charged with the responsibility " to diagnose, investigate, redress and rectify any injustice done to a person' through 'maladministration' by functionaries administering tax laws". Quite obviously the FTO has no jurisdiction to examine, the validity of any order/direction by the President to the C.B.R. or its functionaries.

7. From the above discussion it is clear that although the proceeding initiated under section 66A does not suffer from maladministration, it admittedly existed in non-compliance of the direction of the President within the time specified therein. It is the duty of C.B.R. and senior supervisory officer to ensure compliance with such order and direction and should not be left to the concerned officer alone. Had supervision been carried out this lapse would not have occurred. It is therefore, recommended that:--

(i)C.B.R. devise a scheme or issue order regulating the compliance of orders and directions in time with strict supervisory control by senior officers who should also be answerable for non compliance. Supervisory control by senior officers who should also be answerable for non-compliance.

(ii)Compliance be reported within 60 days.

C.M.A./808/FTOOrder accordingly.