Khawaja MAQBOOL ELAHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1280 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 59A, 50 & 102---Establishment of Office of Federal tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(v)---Refund---Appeal---Effect---Declared income---Self Assessment Scheme---Maladministra tion---Complainant claimed refunds for assessment years 2000-2001 to 2002-2003---Department had asserted that the refund for assessment year 2000-2001 was sub-jud4ce in appeal filed by the department before the Appellate Tribunal---For assessment year 2001-2002---Short documents notice was served upon the complainant---Taxation Officer had wrongly finalized the assessment under Self-Assessment Scheme under S.59A of the Income Tax Ordinance, 1979, for the assessment year 2002-2003---Verification of challans was awaited---Question of compensation did not arise---Federal Tax Ombudsman disposed of the complaint for assessment year 2000-2001, refund was created as a result of relief allowed by the Commissioner of Income Tax (Appeals) and the refund was enhanced---No provision of law existed under which refund could be withheld---Refund was to be paid together with additional payment under S.102 of the Income Tax Ordinance, 1979, S.171 of the Income Tax Ordinance, 2001---For assessment year (2001-2002) and (2002-2003) it was recommended that verification of tax deductions payments be completed within 30 days and refund be issued within 15 days.

Muhammad Anwar, Consultant (Dealing Officer).

Ch. Abdul Ghafoor, ITP for the Complainant.

Imtiaz Ahmad, DCIT for the Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The main points in the complaint involving refunds for the assessment years 2000-2001 to 2002-2003 are as under:---

(i) A refund of Rs.174,376 was determined vide assessment order for the year 2000-2001 passed under section 62 of the repealed Income Tax Ordinance, 1979 on 19-5-2003 and as a result of relief allowed by the C.I.T.(Appeals) vide his order dated 11-11-2003 the complainant became entitled to a refund of Rs.388,582.

(ii) For the assessment year 2001-2002 return was filed under Self-Assessment Scheme. Since no assessment order was made, it was deemed to have been passed on 30-6-2002 by operation of law. However an assessment order was passed on 28-6-2003 under section 59A of the repealed Ordinance. The tax deducted/ collected under section 50 was claimed by the complainant at Rs.893,516 but the assessing officer allowed credit of only Rs.47,260 i.e. to the extent of tax payable on the declared income, thus wilfully depriving the complainant of his legal dues amounting to Rs.846,256.

(iii) For the assessment year 2002-2003 return declaring income of Rs.1,667,848 was filed under Self-Assessment Scheme claiming a refund of Rs.543,051. The assessing officer failed to finalize the assessment and as such the order was deemed to have been passed on 30-6-2003 by operation of law. The refund of Rs.543,051 as claimed by the complainant was also deemed to have been created with effect from the said date.

(iv) The complainant is entitled to a total refund of Rs.1,777,889 pertaining to the years under consideration which has not been issued to him inspite of repeated requests.

It has been prayed that the respondent be ordered to issue refund for the years 2000-2001 to 2002-2003 to the complainant along with compensation.

2. In reply the respondent has stated as follows:

(i) For the assessment year 2000-2001 refund amounting to Rs.174,376 created on 19-5-2003 is subject to verification of tax payments from DPCs which is still awaited. As regards the further refund claimed on the basis of the order of the C.I.T. (Appeals) an appeal has been filed by the department before the Tribunal against the said order because the assessment was in accordance with the history of the case.

(ii) For the assessment year 2001-'4102 the return filed by the complainant on 1-10-2001 was not accompanied with c computation chart, trading and profit & loss account etc. A short documentary notice was therefore served upon the complainant on 15-1-2002 which was not complied with within due date. However the complainant submitted reply on 3-6-2002. The case did not, therefore, qualify under S.A.S. and the question of deemed assessment by 30-6-2002 does not arise. The taxation officer has wrongly finalized the assessment under section 59A instead of processing the case under normal law. The credit of full deduction of payments was not given as the assessee failed to furnish evidence of payment of tax.

(iii) The facts relating to assessment year 2002-2003 are admitted. However, complete challans were provided by the assessee on 4-12-2003 which were sent to the concerned D.P.U. on the same day for necessary verification which is still awaited. In the absence of verification of challans, credit of tax deducted cannot be given and refund cannot be created at this stage. The question of compensation does not arise as the refund has not been created.

(iv) The C.I.T. has reported that remedial measures under section 122 of the Income Tax Ordinance, 2001 are being taken to retrieve the loss of revenue for different years.

It is stated that no maladministration is involved and the complaint not being competent be filed.

3. The representatives of both sides attended. They were heard and relevant record was examined. The complaint is disposed of as under:

(i) Regarding assessment year 2000-2001 the respondent has not denied fact that a refund of Rs.174,376 was created on 19-5-2003 vide an order under section 62 and that as a result of the relief allowed by the C.I.T.(Appeals) vide his order dated 11-11-2003 the refund was enhanced to Rs.388,582. Obviously, while creating the refund of Rs.174,376 vide order dated 19-5-2003 the entire tax credit claimed by the complainant had been allowed. There is thus no merit whatsoever in the respondent's plea that the refund was being withheld pending verification of tax payments from the DPCs. Furthermore, the fact that the department has filed a second appeal before the ITAT does not affect the complainant's claim of refund resulting from the order of the C.I.T.. (Appeals) as there is no provision of law under which the refund can be withheld. The failure to pay the refund amounts to maladministration as defined in section 2(3)(v) of Ordinance No.XXXV of 2000. Refund is therefore to be paid to the complainant together with additional payment under section 102 of the repealed Ordinance/ section 171 of the Income Tax Ordinance 2001.

(ii) For the assessment year 2001-2002 the contention of the respondent is that due to non-compliance of short documents within time the case did not qualify under S.A.S. and the taxation officer had wrongly made assessment under section 59A on 28-6-2003 instead of processing the case under normal law. The plea is not tenable. According to para. 8(d) of the Self-Assessment Scheme for 2001-2002 in case of non-compliance of short documents notice the return shall be excluded from the Self-Assessment Scheme by passing a speaking order. It is evident that no such speaking order was passed by the assessing officer and the order under section 59A was passed instead on 28-6-2003. Thus even if the complainant's plea that the assessment should be deemed to have been made on 30-6-2003 is not accepted, the fact remains that an order under section 59A was passed on 28-6-2003 accepting the complainant's declared income, though assessment was made at `nil' demand and no refund was created. Thus as things stand the complainant's declared income for the year 2001-2002 stands accepted and refund, if any, has to be worked out after verification of tax payments/deductions.

(iii) For the assessment year 2002-2003 the D.R. stated that partial verification of challans had been received from the D.P.U. and refund would be issued as soon as the verification is completed. The D.R. could not point out any factor which could lead the C.I.T. to presume that loss of revenue was involved in the case on the basis of which action under section 122 could be taken. In any case there is no valid reason for withholding the refund, the issuance of which is, however, subject to verification of challans.

4. In view of the facts and circumstances of the case as discussed above, it is recommended that:

(i) Refund for the assessment year 2000-2001 be paid along with compensation in the light of the facts of the case discussed in para. 3(i) above.

(ii) Verification of tax deductions/payments for the assessment years 2001-2002 and 2002-2003 be completed by the assessing officer within 30 days and the refund be issued within 15 days of the completion of verifications.

(iii) Compliance in respect of (i) above be reported within 30 days in respect of (ii) above within 60 days.

M.I./256/F.T.O.Order accordingly.