PAN ASIA FOOD PRODUCTS (PVT.) LTD., HATTAR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1292 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.80-DD, 50(5) & 103---Income Tax Ordinance (XLIX of 2001), S.170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Intended reference---Sub judice---Deletion of tax---Withholding refund--Appellate effect---Minimum tax---Tax Collected under S.50(5) of the Income Tax Ordinance, 1979 was considered as minimum tax under S.80-DD of the Ordinance and was deleted on appeal---Refund was created---Complainant. prayed for issue of refund along with compensation---Department had opposed the request as it had filed appeal and complainant had filed writ petition which was pending adjudication and prayer to issue refund was premature---Validity---Commissioner was bound in duty to follow the decision of the Tribunal notwithstanding the fact that reference was filed by the department under S.124-A of the Income Tax Ordinance 2001---Reasons put forward by the department did not exist---Departmental appeal was dismissed and writ petition was withdrawn---Withholding the refund amounted to maladministration---Federal Tax Ombudsman recommended that the refund of relevant year be issued along with compensation.

Muhammad Anwar, Consultant, (Dealing Officer).

Tahir Razzaq Khan, F.C.A. for the Complainant.

M. Nasir Khan, DCIT, Peshawar for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---This is a complaint relating to non issuance of refund of Rs.5,498,167 resulting from the order of Commissioner of Income Tax (Appeals) dated 9-7-2002 for the assessment year 2000-2001. A complaint filed earlier (C.No.1254/2002) on this issue was investigated and vide decision dated 6-5-2003 the refund was considered to be due to the complainant but since the complainant had filed a writ petition before the High Court of Peshawar treating the matter subjudice, the case was closed. The complainant after withdrawing the writ petition has filed this complaint.

2. Brief facts of the case are that the complainant enjoys tax exemption under clause (118C) of the 2nd Schedule to the repealed Income Tax Ordinance, 1979 for a period of 8 years extending upto the assessment year 2003-2004. A new section 8ODD was inserted in the repealed Ordinance through Finance Act 1999 to be applicable from the assessment year 2000-01 which envisaged minimum tax on the import of edible oil as raw material. In the case of the complainant the tax collected under section 50(5) amounting to Rs.5,498,167 was considered as minimum tax under section 8ODD. On' appeal by the complainant, the C.I.T.(A) vide his order dated 9-7-2002, relying on the decision of the Sindh High Court in case of Messrs Reema Cooking Oil Mills Ltd. deleted the tax levied under section 80DD. The complainant filed an application for refund on 14-10-2002 which remained pending till 15-5-2003 when the complainant issued a reminder but no action was taken before filing of this complaint. It is stated that as in the Income Tax Ordinance, 2001 there is no parallel provision to section 103 for withholding refund as endorsed by C.B.R. in its circular letter dated 19-9-2002, the department is deliberately withholding the refund. The complainant prays for issue of refund along with compensation @ 15% for the period of delay.

3. In reply the respondent has stated that since the issue of applicability of tax under section 80DD was subjudice at ITAT level in departmental appeal and in writ petitions filed by other ghee mills in Peshawar High Court issuance of refund at this stage was premature. It is further stated that refund was created as a result of order of C.I.T.(A) which was contested in 2nd appeal pending for decision. The refund application of the complainant was rejected by the Taxation Officer vide order under section 170(4) dated 22-11-2002 stating that the decision of Sindh High Court in case of Reema Cooking Oil was misinterpreted by the C.I.T.(A) in his order dated 9-7-2002 which was contested in appeal before ITAT.

4. The representatives of both sides were heard. The A.R. of the complainant pointed out that the departmental appeal had meanwhile been dismissed by the Appellate Tribunal, Peshawar Bench vide order dated 21-7-2003 and he furnished a. copy of the said decision. He argued that since the order of the C.I.T.(A) resulting in refund was upheld by the Tribunal and the complainant had also withdrawn the writ petition, the plea of the respondent that the matter was subjudice was not correct and there existed no justification for delaying the refund. The respondent's representative stated that the department would file a reference to the High Court against the order of the Tribunal within the stipulated time which had not so far expired. In its order dated 21-7-2003 the Tribunal has discussed the decision of Sindh High Court in case of Reema Cooking Oil and decision of the Supreme Court in case of Elahi Cotton Mills and have observed that Economic Reforms Act XII of 1992 though earlier in time sequence overrides the provisions of section 80DD. The observation is reproduced as under:--

"So in the light of the above discussions and reason, we are of the view that department has failed to make out any case for acceptance of their appeals on merit, whereas the arguments advanced and cases law referred on behalf of the respondents support the contentions of assessee wherein it has been held that when the legislature has given its attention to a separate subject and made a provision for it, the presumption is that a subsequent general enactment is not intended to interfere with special provision unless it manifests that intention very clearly, whereas in the present situation in the absence of any specific provision that section 80DD will prevail over the Economic Reforms Act XII of 1992, later statute i.e. Economic Reforms Act XII of 1992 though earlier in time consequence will prevail over section 80DD of the general statute. We, therefore, upheld the deletion of tax under section 80DD as a consequence of which, all the departmental appeals on this issue stand dismissed."

5. In view of the above discussion and the fact that refund of Rs.5,498,167 was duly created by giving effect to the order of the C.I.T.(Appeal) on 10-8-2002, there exists no reason' for any further delay in issuance of refund. Perhaps the department is not issuing refund for the reason that a reference was intended to be filed before the High Court. However even filing of reference does not afford a justification for withholding refund. This very situation has specially taken care of by legislating section 124A of the Income Tax Ordinance, 2001 which reads:-

"124A. Power of tax authorities to modify orders, etc.---(1) Where a question of law has been decided by a High Court or the Appellate Tribunal in the case of taxpayer, on or after first day of July 2002, the Commissioner may, notwithstanding that he has preferred on appeal against the decision of the High Court or made on application for reference against the order of the Appellate Tribunal, as the case may be, follow the said decision in the case of the said taxpayer insofar as it applies to said question of law arising in any assessment pending before the Commissioner until the decision of the High Court or of the Appellate Tribunal is reversed or modified.

(2) In case the decision of High Court or the Appellate Tribunal, referred to in subsection (1), is reversed or modified, the Commissioner may, notwithstanding the expiry of period of limitation prescribed for making any assessment or order, within a period of one year from the date of receipt of decision, modify the assessment or order in which the said decision was applied so that it conforms to the final decision."

It is clear that under section 124A the Commissioner is duty bound to follow the decision of the Tribunal notwithstanding the fact that reference has been filed by the Department. The department has not placed any material to show whether any reference has been filed by it. Even if it has been filed the legal position remains the same as stated above, the department's contention regarding intention to reference and pendency of writ petition filed by the complainant have no force. The complainant had withdrawn his writ petition.

6. Further there is no provision in the Ordinance, 2001 parallel to section 103 of the repealed Ordinance 1979 for withholding refunds. The application for refund was rejected for the reason that the department was in 2nd appeal before the Tribunal and the complainant had filed a writ petition in Peshawar 'High Court. These reasons also do not exist now because the departmental appeal has been dismissed and the complainant had withdrawn the writ petition before filing this complaint. No other apprehension has been spelled out by the department as could be made basis for withholding the refund. The action of the department is thus contrary to law as also against the instructions of the C.B.R., thus causing cognizable maladministration.

7. It is therefore recommended that:---

(i) Refund for the assessment year 2000-2001 be issued to the complainant within 15 days along with compensation under the law.

(ii) Compliance be reported within 30 days.

M.I./343/F.T.O.Order accordingly.