IRFAN KHAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2005 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 631 (2004)

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

‑‑‑‑Ss. 96 & 50(7B)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Refund‑‑‑Deduction of tax at source‑‑‑Issuance of certificate by the Bank‑‑‑Department did not issue refund on the ground that Bank had not verified the deductions and it was not known whether the tax even if deducted had been deposited to Government account and no challans of tax deposit were furnished‑‑‑Deductions and deposits could not be considered as verified ‑‑‑Validity‑‑‑Complainant/assessee had furnished a certificate from the Bank regarding deductions of tax from the rent payments made to the complainant/assessee and the assumption was in the complainant; assessee's favour unless it was established that it was a fake certificate‑‑ Deduction of tax from the rent paid by Bank to these .complainant/assessee could also be verified from the monthly cheques received by the complainant/assessee which Would show whether the amounts received were the entire rent as per rent agreement or were payments after deduction of rent‑‑‑If tax had been deducted from rent there was no reason to believe that the Bank would not have deposited it in Government account and in any case the complainant/assessee's obligation would have stood fulfilled‑‑‑No justification existed for keeping the petty amount of refund pending on the pretext of verification‑‑‑Federal Tax Ombudsman recommended that the refund of be paid to the complainant/co‑sharers unless it definitely established that the Bank certificate furnished by the complainant was not genuine.

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

‑‑‑S. 9‑‑‑Income Tax Ordinance (XXXI of 1979), S. 96‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman ‑‑‑Maladministra tion‑‑‑Refund‑‑‑If a refund was withheld without valid reason it would be a case of "maladministration" falling within the competence of the Federal Tax Ombudsman.

Muhammad Aslam Marwat for the Complainant.

Aurangzeb Khattak and Taza Khan, Taxation Officers for Respondent.

Mirza Muhammad Wasim, Advisor Dealing Officer.

FINDINGS/DECISION

The main points in the complaint are as under‑‑‑

(i) The complainant is an existing income‑tax and wealth tax assessee at Bannu.

(ii) The complainant's (income‑tax) case was assessed as an individual but after appeal, the income was to be assessed in the hands of the co‑sharers which was below taxable limit.

(iii) While the co‑sharers were assessed at below taxable limit for the assessment years, 1998‑99 to 2001‑2002 the wealth tax (actually income‑tax) of Rs.12,000 deducted by Habib Bank Limited was not considered nor refunded.

(iv) As per application, dated 11‑3‑2002 the Assessing Officer was requested to refund Income‑tax of Rs. 12,000 and wealth tax of Rs.9,041.

(v) Despite numerous requests/applications the department has delayed the issuance of refund on one pretext or another.

It has been prayed that the refund claim by the complainant be ordered to be refunded at the earliest.

2. In the respondent's reply the preliminary objection has been raised that no act of maladministration has been alleged. A reference has also been made in the reply to the President's order regarding the findings/decision in complaint No.845 of 2001 and a para from this order has been reproduced in the reply. On facts it is contended that the income‑tax refund could not be given for want of proof/verification regarding the tax deduction claimed by the complainant. As regards wealth tax deduction of Rs.9,041 it is stated in the reply that this has already been adjusted against the .wealth tax demand for the assessment years, 1994‑95 to 1997‑98. It is also stated that no application from the complainant is available on record but letters for verification of tax deduction have been issued and reply is awaited. It is stated that as soon as the deductions 'are verified the income‑tax refund shall be issued without further delay.

3. During the hearing it was explained by the counsel for the complainant that the joint property had been rented out to the Habib Bank Ltd. which had been deducting income-tax of Rs,500 per month from the 'rent 'under section 50 (7B) of the repealed Income Tax Ordinance, 1979. It was stated that since no income‑tax was payable by the co‑sharers of the property, total tax of Rs.12,000 deducted by the Habib Band Ltd. was refundable but the matter was being unnecessarily delayed by the department. The representative of the respondent admitted that no income‑tax was payable, by the co‑sharers of the properties and any tax deducted from the rent was refundable. It was, however, stated that Habib Bank Ltd. had not verified the deductions and it is not known whether the tax even if deducted, had been deposited in Government account. In this context, however, the complainant referred to a certificate issued by the Habib Bank Ltd., Preedy Gate Branch, Bannu certifying that for the period from July, 1997 to 30‑6‑1999 total income -tax of Rs.12,000 had been deducted and had been deposited with the National Bank of Pakistan, Bannu. The representatives of the respondent, on the other hand, stated that no challans of tax deposit were furnished and, therefore, the deductions and deposits could not be considered as verified. It was further stated that even the genuineness of the hand written certificate of the Manager, Habib Bank Ltd., Preedy Gate Branch was not established since it did not bear any date nor any details. With regard to wealth tax it was stated that no wealth tax refund was due to the complainant and the wealth tax payment of Rs.9,041 was adjustable against demand. The complainant's advocate, however, maintained that since tax had been duly deducted by the Habib Bank Ltd. from the rent paid to the co‑sharers there was no reason for not allowing the refund. With regard to wealth tax it was, however, admitted that the point contained in the complaint was not correct and that no wealth tax was refundable to the complainant.

4. The contentions of the two sides have been considered and as regards the respondent's preliminary objection the reference to the decision of the President relating to assessments against which appeal can be filed is quite misplaced because here it is not a case of a disputed' assessment but of refund due to the complainant as a result of appellate decision. Thus if a refund is withheld without valid reason it would be a case of maladministration falling within the competence of the Federal Tax Ombudsman. In the instant case the complainant has furnished a certificate from Habib Bank Ltd. regarding deductions of tax from the rent payments made to the complainant and the assumption is in the complainant's favour unless it is established that it was a fake certificate. No such definite plea has, however, been taken by the respondent. In fact deduction of tax from the rent paid by Habib Bank to the complainant can also be verified from the monthly cheques received by the complainant which would show whether the amounts received were the entire rent as per rent agreement or were payments after deduction of rent. If the tax has beets deducted from rent there is no reason to believe that Habib Bank Ltd. would not have deposited it in Government account and in any case the complainant's obligation would have stood fulfilled. Thus there is no justification for keeping the rather petty amount of refund pending on the pretext of verification.

5. In the light of the above, it is recommended that:‑‑

(i) The refund of Rs.12,000 be paid to the complainant/co‑sharers unless it is definitely established that the Habib Bank certificate furnished by the complainant is not genuine.

(ii.) Compliance be reported within 45 days.

C.M.A./104/FTOOrder accordingly.