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

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Refund---Excess payment/deductions-- Non-creation/payment of refund---Lame excuses---Remarks of Federal Tax Ombudsman.

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

-----S. 96---Establishment of office of. Federal Tax Ombudsman Ordinance (XXXV of 2000)---Refund---Withholding the refund of Association of Persons with a view to adjust the same against the yet to be created demand of tax against a member of Association of Persons-- Validity---Refund payable to Association of Persons had been adjusted against demand outstanding against one of its members---Disregard for law was manifest by the Assessing Officer's act of withholding of refund of Association of Persons with a view to adjust the same against the yet to be created demand of tax against a member of Association of Persons---Such action fell within the definition of maladministration as defined-in S.3 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that, refund of Rs.194,643 should be issued to the Complainant/assessee-- Association of Persons without delay for which rectification under S.156 of the Income Tax Ordinance, 1979 may be necessary, all Assessing Officers should be directed to examine whatever documentary evidence they desire in respect of payment/deduction of tax during the process of the assessments so as to give full and final credit on the IT-30, all credits for tax paid/deducted should be accounted for in the calculation on IT-30 and no further verification be called once the IT-30 is signed and result recorded in (Demand and Collection Register).

Javed Iqbal for the Complainant.

Ghulam Rasool, DCIT for Respondent.

JUDGMENT

The complaint is against non-payment of refund amounting to Rs.294,643 for the Assessment Years 1997-98 to 1999-2000. It is admitted that out of gross refund at Rs.877,443 a refund voucher for Rs.282,800 was issued on 7-5-2001. Another sum of Rs.3,00,000 was refunded on 21-7-2001 thus leaving an amount of Rs.294,643 still due for release to the complainant. It is alleged that:--

"Instead of allowing refund, as promised in May, 2001, Wealth Tax assessment for the Assessment years 1996-97 to 1999-2000 have been re-opened and the original assessments have been cancelled by the concerned Additional Commissioner of Income Tax/Wealth Tax". In addition to show-cause notice for reopening the Income Tax assessment for the years 1994-95 and 2001-2002 have also been served. These proceedings have been initiated on flimsy grounds and the legally due refund has been withheld without justifiable reasons. This exemplifies the highhanded and arbitrary attitude of Departmental functionaries which has deprived the petitioner of legitimate claim of refund. It is, therefore, prayed that the department may be directed to issue necessary refund voucher and stop mala fide practice initiated recently."

Respondent's reply, was received on 27-9-2001 vide Reference No.RCIT/J/85/F.T.O./1342, dated 6-9-2001, emphatically denying the allegation that Wealth Tax assessments in the case of Mr. Muhammad Arshad, the Complainant Member of the AOP were re-opened just for the sake of withholding the refund payable to him. It also has been contended that no refund for the year 1999-2000 could be created in the absence of proof for deduction under section-50(4) and the Complainant was being requested by the Assessing Officer to furnish the original challans for purpose of verification. It was explained that assessment for the year 1996-97 had to be re-opened under section 65 of the Income Tax Ordinance, 1979 and on reassessment income can be determined at Rs.625,010 resulting in a tax demand of Rs.197,125, but credit for tax said to have been deducted under section 50(4) could not be allowed for want of. proof. The complainant-assessee is being asked to furnish the original tax challans. In para. 4, the respondent has summoned up his reply as under:--

"Correct to the extent as:--

(i)Refund for the assessment years 1997-98 and 1998-99 amounting to Rs.282,800 and Rs.401,666 created., No refund for the assessment year 1999-2000 was created as discussed in para. 2 above.

(ii)Refund of Rs.282,800 for the assessment year 1997-98 was issued to the assessee in May, 2001:"

Para. 5 of the reply states that refund at Rs.300,000 out of the total refund worked at Rs.401,666 for the assessment year 1998-99 has already been issued on 21-8-2001. However, a sum of Rs.101,666 was retained to cover the expected Wealth Tax demand against Mr. Muhammad Arshad (a Member of AOP) and was subsequently adjusted against total Wealth Tax demand of Rs.182,872 for the assessment years 1996-97 to 1999-2000 which left a sum of Rs.81,206 payable by him. In the concluding para of the reply it has been categorically affirmed: "presently, no refund is due to the assessee and refund, if any, will become due to the assessee for the assessment year 1999-2000 after rectification and adjustment it will be issued forthwith".

The rival arguments were heard. The complainant successfully established with the help of documentary evidence, that as on 7-5-2001 an aggregate refund of Rs.294,643, was still due to him even after disbursement of refund at Rs.282,800 for the year 1997-98. The respondent's report and the arguments by its representative evidently appeared to be based on lame excuses and unconvincing reasoning. If an Assessing Officer does not feel satisfied with the evidence produced as respects payment .of tax at the time of regular assessment or with the evidence submitted alongwith a Return the same should be immediately called for, before the finalization of assessment. If the amount of tax deducted/paid is found to be equal to the tax payable the net result is bound to ND (not demand). But in those cases where the quantum or payment/deduction posted in the relevant column of the IT-30 is more than the tax payable the amount of excess payment/deduction should be mentioned in the relevant columns of the IT-30 as "refundable". Unfortunately, the practice despite being highly unethical, has gained so wide currency that instead of writing refund on IT-30, the words "N.D." are non-chalantly written. When the tax-payers came forward to press for refund, all sorts of evasive excuses are advanced such as insistence for the original challans of payment, or other proof of deduction. This detestable practice riot only causes harassment but breeds contempt against the department. This phenomena is very much present in the complaint in hand also. That precisely is the reason why the respondent reported that no refund was created for the year 1999-2000.

Another glaring illegality is that the refund payable to the complainant AOP has bean adjusted against the demand outstanding against one of its Members (Muhammad Arshad). Still severe disregard for law is manifest by the Assessing Officer's, act of withholding refund of the AOP with a view to adjust it against the yet to be created demand of tax against Mr. Muhammad Arshad; a member of the AOP in respect of assessments for 1994-95 and 2000-2001. Mr. Ghulam Rasool the DCIT appearing for the respondent found it difficult to defend this illegal conduct of the Assessing Officer. Such, blatant disregard of law surely falls within the definition of maladministration as defined in section 3 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. It is, therefore, recommended that:--

(1)The refund of Rs.194,643 should be issued to the complainant AOP (Messrs Olympia Motors, 37-A, Jail Road, Lahore) without delay for which rectification under section 156 of the Income Tax Ordinance may be necessary.

(2)All Assessing Officers should be directed to examine whatever documentary evidence they desire in respect or payment/deduction of tax, during the process of the assessments so as to give full and final credit on the IT-30.

(3)All credits for tax paid/deducted should be accounted for in, the calculation on IT-30 and no further verification be called once the IT-30 is signed and result recorded in DCR (Demand and Collection Register).

Compliance report be sent to this Secretariat within 30 days of the receipt of this order.

C. M.A./741/FTOOrder accordingly