Messrs CORNPAK LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1207 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.96, 100, 102, 80C, 132 & 62---Income Tax Ordinance (XLIX of 2001), S.171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Additional payment for delayed refund---Adjustment---Maladministration---Complainant alleged that assessment for the year 1996-97 was finally made on 31-8-1999 and refundable amount was determined at Rs.22,25,216 which was to be issued within three months from the said date---Request for adjustment was not acceded to---Complainant prayed that direction be issued for adjusting the determined refund and additional payment for delayed refund against the demand for assessment year 2002-2003---Validity---Additional payment for delayed refund was payable to the complainant with effect from 1-12-1999---Maladministration was established---Federal Tax Ombudsman therefore recommended that Central Board of Revenue should direct the Taxation Officer concerned to work out the amount payable for delayed refund strictly in accordance with the provisions of section 171 of the Income Tax Ordinance, 2001 after adjusting against demand for the year, 2002-2003---Excess amount to be paid within 30 days of the receipt of order.

Abdul Razzak for the Complainant.

Ansar Ali, DCIT for Respondent.

FINDINGS/DECISION

The complainant a private limited company is an existing Income Tax Assessee of Large Taxpayers Unit, Karachi on National Tax Number 34-01-0700043.

2. The complainant has agitated that determined refund for the assessment year 1996-97 amounting to Rs.22,25,216 and additional payment for delayed refund @15% per annum amounting to Rs.11,12,606 was not adjusted against the demand of Rs.80,89,944 for the assessment year 2002-2003 despite repeated request in this regard. The complainant-company is also aggrieved by non-issuance of balance amount of refund at Rs.52,69,613 after adjustment of determined refund and additional payment relating to the assessment years 1998-99, 97-98, 96-97 and 93-94. The facts of the case are briefly stated as under:-

3. The original assessment for the year, 1996-97 was completed on 22-1-1997 whereby refundable amount was determined at Rs.8,01,283. The complainant filed appeal before the CIT (Appeals) who vide his order No.118, dated 20-3-1997 remanded the case to the Assessing Officer on the issue of application of section 80C on imported machinery which was subsequently taken back on lease from leasing company to which it was sold. The re-assessment was accordingly made under sections 132/62 of the repealed Income Tax Ordinance, 1979 on 31-8-1999 and refundable amount was determined at Rs.22,25,216.

4. It is stated that in view of amended provision of section 100 of the repealed Ordinance 1979 the determined refund was to be issued by the Department without receiving any application from the taxpayers in this behalf. The complainant has further stated that due to failure on the part of the Department to refund the amount of Rs.22,25,216 within three months from 31-8-1999, the complainant was entitled for additional payment under section 102 of the repealed Ordinance @ 15% per annum w.e.f. 31-11-1999 to the date of payment or adjustment against demand payable under section 54 for the assessment year 2002-2003.

5. It is alleged that the complainant's Authorised Representative vide his letter, dated 10-6-2003 requested the Commissioner of Income Tax Enforcement, Large Taxpayers Unit, Karachi for adjustment of the refund but the request was not acceded to and no adjustment was made. The photocopy of acknowledgement, dated 11-6-2003 of the said letter has been furnished in this regard. It is further, alleged that the A.R. of the Company /vide his letter, dated 23-1-2004 again requested the Commissioner of Income Tax for adjustment of refund against 15% of tax payable as provided under section 129(2) of the repealed Income Tax Ordinance, 1979 but no action has been taken on the said application so far. It is further, stated that the complainant-company was to pay an amount of Rs.80,89,944 against the demand payable for the assessment year 2002-2003 but the said amount was not paid on the ground that refund determined for the assessment years, 1993-94, 1996-97, 1997-98 and 1998-99 could be adjusted against the said demand. It is alleged that the Department has failed to adjust the determined refund and additional payment for delayed refund against the payable demand for the year 2002-2003. It is stated that after adjustment of the aforesaid demand an amount of Rs.52,69,613 was still refundable to the complainant. The complainant has prayed for issuance of directions to the respondents to adjust the determined refund at Rs.22,25,216 and additional payment for delayed refund against the demand payable under section 54 of the repealed Ordinance for the assessment year 2002-2003. It is also prayed that after adjustment of the tax payable for the year, 2002-2003, the balance refund of Rs.52,69,613 may also be issued.

6. The respondent has forwarded the parawise comments prepared by the Director General, Large Taxpayer Unit, Karachi. It is pleaded therein that the complainant was not entitled for additional payment for delayed refund as major portion of the refund had already been adjusted against the advance tax liability for the assessment years 2000-2001, 2001-2002 and 2002-2003 on the request of complainant-company. It is further stated that after adjustment of determined refund against advance tax liability for the years mentioned above, the balance refundable amount of Rs.3,79,702 was to be adjusted against demand relating to the assessment year 2002-2003. The respondents have provided the details of advance taxes against which the refundable amount was adjusted as under:-

It is further, reported that the balance refund of Rs.3,79,702 had been adjusted against demand for the assessment year 2002-2003. It is reiterated that the complainant's request for adjustment of refund was entertained and the refunds were adjusted against advance tax liability as stated above. The respondents have contended that the complainant's claim of additional payment for delayed refund was misconceived as the refund had already been adjusted against advance tax liability referred above.

7. The case has been discussed with the representative of both the sides. The Authorised Representative of the complainant has pleaded that refund of Rs.22,25,216 was determined on 31-8-1999 vide order under sections 132/62 of the Income Tax Ordinance, 1979 and this fact has been admitted by the respondents in the parawise comments. The adjustment was however, made by the Department on 31-12-2002 of Rs.18,45,914 and the balance refund of Rs.3,79,702 was to be adjusted against the demand for the assessment year 2002-2003. Thus the issuance of refund was delayed for a period of three years (31-12-2002 - 31-8-1999) and compensation was payable under section 102 of the repealed Ordinance, 1979. The Departmental Representative vehemently rebutted the observation of the Authorised Representative that adjustment of determined refund was made on 31-12-2002. He produced the details of adjustment of refund for the year 1996-97 amounting to Rs.22,25,216 as under:

8. The aforesaid dates of adjustment have been verified from the statements of Data Processing Centre. He has furnished photocopies of the statements of D.P.C.

9. The facts stated above clearly establish that the additional payment for delayed refund is payable to the complainant w.e.f 1-12-1999 to the dates of adjustment as confirmed by the D.P.C. The plea of the respondents taken in the parawise comments that the complainant was not entitled for any compensation for delayed refund has not been found correct. No plausible explanation has been offered by the respondents for ignoring the complainant's A.R.'s applications, dated 10-6-2003 and 23-1-2004 as alleged in the complaint. Maladministration is established and the following recommendations are accordingly made:-

(i) C.B.R. to direct the Taxation Officer concerned to work out the amount payable for delayed refund strictly in accordance with the provision of section 171 of the Income Tax Ordinance, 2001 and if any amount is payable after adjustment against demand for the year, 2002-2003, the same be paid within 30 days of the receipt of this order.

(ii) Compliance be reported within a week thereafter.

M.I./272/FTO????????????????????????????????????????????????????????????????????????????????????? Order accordingly.