Messrs SARHAD PUNJAB GOODS FORWARDING AGENCY, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2006 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1761 (2004)

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

--Ss. 143, 102, 99(5), 96 & 50---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10(3)---Refund---Limitation---Complainant had prayed for issuance of refund after adjustment of wealth tax demand with compensation for delayed refund---Respondents had raised preliminary objection in terms of limitation as provided under section 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Document letters issued by Assessing Officer showed that he had called for some information to complete the refund procedure---Such information was already on record in the statements filed under section 143-B of the Income Tax Ordinance, 1979---Circle Assistant Commissioner of Income Tax had issued a letter in the year, 2004 whereby certain information and clarification was requisitioned from the tax payer relating to the claims of refund which had established that the issue relating to the claims of refund from years 1995-96 to 1999-2000 was not closed---Objection .about limitation was rejected by the Federal Tax Ombudsman in circumstances.

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

---Ss.50 & 96--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deduction---Excess deductions---Refund---Maladministration---Complainant's claim for refund was resisted on the ground that business was carried out by registered firm, complainant as individual was not entitled to claim refund and claim for refund of period 1990-91 to 1999-2000 was without legal basis as the tax paid/withheld was in full and final discharge of tax under the presumptive tax regime---Validity---Details of excess deduction and claims of refund were provided in all the statements filed under section 143-B of the Ordinance for the years 1995-96 to 1999-2000---Photocopies of all the applications for rectification along with evidence of receipt by the department were furnished by the complainant---Only one rectification application was admitted by the department--Maladministration was established---Federal Tax Ombudsman recommended the Central Board of Revenue to direct the Taxation Officer to make verifications regarding nature of the receipts, the prescribed rates of deduction and determine the amount of excess deductions made relating to the assessment years 1995-96 to 1999-2000 and resultant refund be issued after adjustment of outstanding wealth tax liabilities within 45 days.

Mazhar-ul-Hassan for the Complainant.

Ejaz Asad Rasul, IAC, Zone-C and Zia Agro, DCIT for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR, FEDERAL TAX OMBUDSMAN.---The complainant an individual derives income as transporter of goods and has been filing statements under section 143-B, of the repealed Income Tax Ordinance, 1979. Prior to assessment year 1995-96 the complainant was assessed as partnership concern. The firm was dissolved and Mr. Khalid Zaman succeeded to carry on the same business. He is an existing assessee of Circle-21 Zone-C, Karachi on National Tax Number 11-21-0676093.

2. The complainant is aggrieved by non-issuance of refund claimed for the assessment years 1995-96 to 1999-2000 by the taxation officer. The facts of the case are briefly stated as under.

3. The refunds have been claimed on account of excess deduction over and above the prescribed rate of deduction at 2% of the receipts. The tax deducted was final discharge of tax liabilities in terms of section 80C of the repealed Income Tax Ordinance, 1979. The details of refund claimed for the assessment years 1986-87 to 1999-2000 have been provided in the present complaint. The complainant's A.R. vide his letter, dated 5-5-2004 and 15-5-2004 has withdrawn the claim of refunds for the assessment years 1986-87 to 1993-94 on the ground that the refundable amounts had already been adjusted against the demand of the firm and partners. The details of refund claimed in the present complaint for the assessment years, 1995-96 to 1999-2000 are reproduced hereunder:--

4. It is alleged that while framing assessments under section 59-A as per I.T.-30 and demand notice, the taxation officers had given credit of tax to the extent of tax liability and did not bother to give credit of tax actually paid and therefore no refunds have been determined deliberately. It is further, alleged that for non-payment of wealth tax the respondents desired to charge additional tax under section 31(b)(i)(b) for the assessment years 1998-99 to 2000-2001 vide letter, dated 22-9-2003. The taxation officer was informed by the complainant' A.R. vide his letter No.21/43, dated 24-9-2003 that no additional tax could be charged as the refunds due to the complainant were more than the wealth tax liability and requested for adjustment of the same against wealth tax arrears. It is also alleged that the complainant had been submitting applications before the concerned authorities for determination of refundable amount but no action was taken by the department in this behalf. The photocopy of application No.25/43, dated 20-10-2003 addressed to the Commissioner of Income Tax Zone-C, Karachi has been provided along with the complaint. It is reiterated by the complainant that none of his applications for determination and issuance of refund was acknowledged by the department.

5. The complainant has prayed for issuance of directions to the respondents to issue the refund after adjustment of wealth tax demand with compensation as provided under section 102 of the repealed Ordinance, 1979 read with section 171 of the Income Tax Ordinance, 2001.

6. The respondents have filed parawise comments prepared by the Regional Commissioner of Income Tax, Southern Region, Karachi. They have raised preliminary objection in terms of limitation of time provided under section 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. It is stated that the application for determining refund for the assessment years 1990-91 to 1999-2000 was turned down by the taxation officer on 24-6-2002. The complaint was filed in the month of December, 2003 i.e. after a lapse of about 18 months and therefore it was barred by limitation of time. It is further, stated that wealth tax demand for the assessment years, 1994-95 to 2000-2001 aggregating to Rs.3,69,761 had not been paid by the complainant for which proceedings for recovery were initiated and the Assessing Officer showed his intention to charge additional wealth tax under section 31(b) of the Wealth Tax Act, 1963, the complainant took up the plea that refund was due to him which could be adjusted against the wealth tax demand. It is further, reported that the complainant had claimed refund on the basis that Zila Taxes paid at various Chungi Nakas should not have been included in the total receipts for determining full and final liability under the presumptive tax regime. The plea of the complainant that Zila Tax should not have been included in receipts was rejected on the ground that gross receipts without bifurcation stood covered under the presumptive tax regime whereby tax was levied as per the prescribed rates on the total receipts for the year which was full and final discharge of tax liability. It is pleaded that they complainant as an individual was not entitled to claim refund for the period in which the business was carried out by the registered firm. Further more it was clarified that complainant's claim of refund for the period from 1990-91 to 1999-2000 was without any legal basis as the paid/withheld was the full and final discharge of tax liability under the presumptive tax regime and the refund claimed by the complainant had been rejected by the concerned officer. It is further, pleaded that the complainant had always been filing statement under section 143-B for transport business. Since there was no excess deduction, the refund was not created by the department as explained by the Circle officer vide his letter, dated 22-1-2001, 27-3-2002 and 24-6-2002. It is reported that only one rectification application, dated 28-10-1998 was available on the record relating to the assessment year 1995-96. However, in response to letter, dated 18-10-2001, the Authorised Representative of the complainant submitted his reply vide letter, dated 22-10-2001 which was also accompanied by copies of various rectification applications filed from 18-3-1996 to 12-7-1999. It is conceded that a letter, dated 20-10-2003 was received in the office of the Commissioner of Income Tax Zone-C, Karachi who called for a report from the concerned Circle. The report was submitted on 18-11-2003 and on the basis thereof the complainant was informed that the issue of refund had already been decided vide taxation officer's letter, dated 24-6-2002. It is also pleaded that the cases cited by the complainant were not relevant to the facts of the case under consideration. The respondents have reiterated that only one rectification application, dated 28.-10-1998 was available on record, which duly responded by the Circle officer. It is also pleaded that the basis of rejection of complainant's claim of refund was discussed in the letter, dated 24-6-2002. Since the case was covered by the provision of section 80C no refund was due to the assessee and therefore the question of additional payment did not arise.

7. The case has been discussed with the above cited representatives of both the sides. The records of the case produced by the departmental representatives have also been examined. He has however, expressed his inability to produce assessment records for the period prior to the assessment year 1995-96 on the plea that complete records were not traceable for the said period.

8. The complainant's A. R. has filed rejoinder, dated 12-2-2004 on receipt of parawise comments filed by the respondents. As regards the preliminary objection regarding limitation of time in terms of section 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance 2000, it is stated that the plea taken by the respondents that complainant's request for rectification and determination of refund for the years 1990-91 to 1999-2000 was finally disposed of by the Assessing Officer through his letter, dated 24-6-2002 was absolutely unfounded. The then Taxation officer Dr. Erfa Iqbal, through the aforesaid letter called for certain informations and had threatened that in case the said informations were not filed the claim of refund could not be entertained. This could not be considered as "refusal". In compliance of the aforesaid letter, dated 24-6-2002 the complainant's A.R. vide his letter No.12/41, dated 16-7-2002 had filed entire informations as requisitioned by her. It is further, pleaded that had the matter be enclosed, why, the respondents called for informations and details as per letter bearing No. TO/Cir.21/ 2003-04/561, dated 14-1-2004. Since the matter was not finalized by the Assessing Officer through the aforesaid letter, the provision of section 10(3) of the Federal Tax Ombudsman Ordinance, 2000 were not applicable.

9. The Authorised Representative has reiterated that seven applications for rectification had been made which remained unresponded by the Taxation Officer Mr. Mazhar-ul-Hassan, the A.R of the complainant argued that the request for excluding Zila tax from the total receipts was fully justified in view of the decision of the Income Tax Appellate Tribunal vide No.1233/KB, dated 11-11-2002. However, since this issue was involved only in one assessment year i.e. 1995-96 the claim has been withdrawn. He has filed an application on 15-5-2004 in this regard. The Authorised Representative has further, stated that excess deduction of tax was made specially by two parties and the details thereof have been provided as under:--

10. The perusal of letter No.551, dated 24-6-2002 issued by the Assistant Commissioner of Income Tax, Circle C-21 shows that the observations of the complainant's A.R. regarding limitation of time in terms of section 10(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 carry weight and are quite well founded. E In the `subject' it is clearly mentioned that the said letter was issued for the assessment years 1998-99 to 2000-2001. The Assessing Officer has referred to his letter No.465, dated 27-3-2002 wherein the following observations were made:

"The above cited letter states that Zila tax paid to various Chungi Nakas of the District should not be included in the receipt and hence should not be taxed.

This is for kind information that no expenses are allowed in case of presumptive income. Therefore the question of giving consideration to Zila tax dose not arise. It is further, stated in your letter, dated 12-7-1999 that many tax deducting authorities have deducted much more tax as required under the law, in assessment years 1996-97, 1997-98 and 1998-99."

11. It is pertinent to point out that the impugned letter, dated 24-6-2002 related to the assessment years 1998-99 to 2000-2001 whereas the issue of Zila Tax as referred above related to only one assessment year i.e. assessment year 1995-96. The letter, dated 24-6-2002 has been F drafted in a very careless manner and the informations sought from the complainant were not clear. The complainant was required to furnish the following informations:--

12. It is also noted that the aforesaid informations were already on record in the statements filed under section 143-B of the Income Tax Ordinance, 1979 for the assessment years 1995-96 to 1999-2000 and there was no necessity to requisition such information again from the complainant. The Complainant's A.R. has furnished photocopies of statements filed under section 143-B for all the years along with the chart which provided the following informations:--

The Assistant Commissioner of Income Tax has concluded his letter, dated 24-6-2002 as under:--

"In the absence of this information it is impossible for this office to determine the ground on which you are claiming the refund.

In the light of above cited facts, you are hereby intimated that your request for .refund for the assessment years 'under consideration, cannot be entertained."

13. The aforesaid findings cannot be considered as final disposal of complainant's claim for the assessment years 1995-96 to 1999-2000.

14. Notwithstanding the above facts, the issuance of letter No.56, dated 14-1-2004 by the Assistant Commissioner of Income Tax, Circle-21, Zone-C, whereby certain informations and clarifications have been requisitioned from the taxpayer also establishes that the issue relating to the claims of refund was not closed. In such circumstances the preliminary objection raised by the respondents is rejected and the complaint is entertained for investigation.

15. The respondent's observation that there was no excess deduction and therefore the refund was not determined by the Assessing Officer is not supported by the facts obtaining on record. In all the statements under section 143-B for the years, 1995-96 to 1999-2000 the complainant provided the details of excess deduction and claimed refunds accordingly. The details of refund claimed on the basis of 143-B statements have already been referred above. The respondents have only acknowledged one application for rectification, dated 28-10-1998 whereas the complainant has furnished photocopies of all the applications for rectification along with the evidence of receipt by the department. Maladministration is established and the following recommendations are therefore made:

(i) The C.B.R. to direct the Taxation officer to make verification regarding nature of receipts, the prescribed rates of deduction and determine the amount of excess deductions made relating to the assessment years 1995-96 to 1999-2000.

(ii) The resultant refund be issued after adjustment of outstanding wealth tax liabilities within 45 days of the receipt of this order.

(iii) The compliance be made within a week thereafter.

?M.I./347/FTO???????????????????????????????????????????????????????????????????????? ??????????? Order accordingly.