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

----Ss. 100, 163, 156 & 66-A---Income Tax Ordinance (XLIX of 2001), S.170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund on assessment and appeal, etc.-- Credit of tax was only given to the extent of tax due---Refund was created on rectification application---Non-issuance of refund-- Proceedings initiated under S.66-A of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal---Once again refund was withheld on the pretext of verification of challans---Validity-- Withholding payment of refund, even after verification of challans, was indicative of mala fides falling under the domain of 'maladministration' as per S.2(3) of the Establishment of Office of Federal Tax Ombudsman' Ordinance, 2000---Federal Tax Ombudsman recommended that refund having accrued from the date of the assessment on 23-8-1999 be issued forthwith under S.170 of the Income Tax Ordinance, 2001 and additional payment for delayed refund be worked out under S.171 w.e.f. 7-9-1999 when the refund was created through rectification under S.156 of the repealed Income Tax Ordinance, 1979.

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

-----S. 2(3)---Maladministration---Support of illegal actions of the subordinate officer by the senior officers---Remarks of Federal Tax Ombudsman.

Latif Qureshi for the Complainant

Yasir Prizada, D-CIT for Respondent.

DECISION/FINDINGS

This complaint has been filed protesting against non-issuance of refund for the assessment year 1998-99. The Complainant is an `individual' who is a manufacturer and vendor of tin-containers.

2. Facts in brief are that the complainant existed at NTN 6-08-(sic) 3978531 since 1997. For the assessment year 1998-99 return, filed declaring Income at Rs.338,707, was processed on 23-8-1999 to determine Total Income at Rs.436,707. However, on the (sic) credit was given only to the extent of tax due, thus showing the result as "ND". Rectification application was then moved on 7-9-1999 requesting credit of tax paid/withheld at Rs.484,901 which was to result in a refund of Rs.417,112. Prompted by this request the Assessing Officer, after examining the original Challan and other evidence, worked out the refund at Rs.397,211 whereupon the complainant amended the claim for refund to this new figure. Instead of issuing refund, the IAC initiated proceedings under section 66-A of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) on 19-2-2002. Not agreeing with the explanation filed on 24-2-2002, the IAC passed the order on 29-2-2002 cancelling the assessment alleging that the taxpayer had furnished inaccurate facts and figures and that "it is a clear concealment case". This order, when challenged in appeal, was "annulled" by the Appellate Tribunal on 10-5-2000. Still no refund was issued despite request, dated 1-2-2002 and remainder on 18-2-2002, although verification, as required, was offered on 25-2-2000 and complainant was verbally promised refund after June, 2002. This was not honoured hence the complaint.

3. Para-wise comments, dated 30-10-2002 and 2-11-2002 by the R-CIT, Lahore deny 'maladministration' and blame the complainant for non-submission of proof about deduction of tax. The complaint is characterised as "baseless and without material evidence".

4. The AR pointed out that there is no order under section 103 of the repealed Ordinance to withhold the refund nor under section 104 to adjust the refund against any other tax liability. It was stressed that as per the provisions of section 100 of the repealed Ordinance, refund voucher should accompany the Demand Notice. In this connection reference was made to Circular issued by the R-CIT, Lahore on 11-12-1989 vide No.1177/PSS advising the officers to avoid 'coinciding the issue of refund with initiation of proceedings under section 65. Reliance was placed on the decision reported 1989 PTD 876 in re: Inayat Ullah where the learned Judge ruled that refund due should be issued unmindful of any pending proceedings. Reference was made to decision/findings reported as 2002 PTD 2734 in which it was observed that "IACs mostly issue show-cause notices under section 66-A alleging erroneousness and, prejudice to Revenue, or cause Assessing Officers to initiate proceedings under section 65 for additional assessment; and such like actions are obviously intended to forestall claims of refund". The learned counsel concluded by submitting that mala fide and 'maladministration' were manifest inasmuch as proceedings under section 66A having been annulled by the Tribunal, refund is once again held' up on -the pretext of verification.

5. The representative of the Revenue, Mr. Yasir Pirzada admitted that no order under section 103 of the repealed Ordinance was passed to withhold the refund which stand worked out on assessment order. However, he defended the conduct of the Department by adopting the same arguments as were communicated by the R-CIT in para-wise comments.

6. Discussion with the two representatives reveals clear mala fide and `maladminsitration' inasmuch as:--

(a)in the first assessment form prepared on 23-8-1999 the demand of Rs.67,689 was squared up by showing an equal amount as `tax paid' unmindful of the fact that in tote return claimed payment was Rs.484,807;

(b)when pressed for issuance of refund the delay was managed by seeking verification of payments on the pretext that some challans were illegible; and'

(c)frivolous proceedings under section 66-A were initiated which were annulled by the Appellate Tribunal concluding that the IAC reached a hasty conclusion and "the IAC was not justified to invoke the provisions of section 66-A."

It may be worthwhile to recall that the legislature enacted section 103 to preclude the loss of revenue in those cases where there was apprehension that the taxpayer, after obtaining refund, might- divest himself of all assets or may disappear thus rendering recovery if any impossible. The fact that despite initiating action under section 66-A, no order under section 103 was passed is indicative that there is no apprehension about the complainant disappearing or divesting himself of assets. Therefore, withholding payment of refund. even after verification of challans on 7-9-1999 and 25-2-2002, is indicative of mala fide falling under the domain of 'maladministration' as per clause (3) of section 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance.

It is pertinent to note that in spite of such glaring maladministration and actions contrary to law Mr. Qudratuallah the Regional Commissioner has filed two replies and justified the action taken by the Department. It is deplorable that senior officers do not wish to see reasons or do justice but support the illegal actions of the subordinate officer. This demonstrates lack of vision and a will to be fair and just. If the senior officers do not show wisdom to tackle the problem in an honest manner, they merely spoil the service structure in developing a negative, adversary and hostile attitude cowards the assessees. Such approach has spoiled the tax culture and such senior officers are responsible for creating mistrust, brining bad name to the Department. To support the Departmental action where it is patently wrong or to justify any mala fide action is not a sign of efficiency of a senior officer but on the other hand it should be treated a disqualification and lack of ability to control, educate and reform the subordinate officers and staff members.

7. It is, therefore, recommended that:--

(i)Refund having accrued from the date of assessment on 23-8-1999 be issued forthwith under section 170 of the Income Tax Ordinance, 2001.

(ii)Additional payment for delayed refund be worker: out under section 171 w.e.f 7-9-1999 when we refund was created through rectification under section 156 of the repealed Ordinance.

(iii)Compliance be reported within 30 days of the receipt of this order.

C.M.A./798/FTOOrder accordingly.