RAVI GAS COMPANY (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1351 (2005)

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5A) & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Amendment of assessments---Withholding of refunds---Initiation of proceedings for amendment of assessment on the ground that assessments were finalized under normal procedure treating the complainant/assessee as manufacturer and tax deducted at import stage was adjustable which resulted in claimed refund, whereas income was to be assessed under Presumptive Tax Regime---Assessee contended that assessments for years 2000-01, 2001-02 and 2002-03 were finalized on 11-2-2002, 6-1-2003 and 28-6-2003 respectively, which could not be reopened under S.122(5A) of the Income Tax Ordinance, 2001---Contention of assessee in respect of tax years 2003, was that order dated 12-4-2004 under S.122 of the Income Tax Ordinance, 2001 had created refund and under S.122(4)(b) of the Income Tax Ordinance, 2001 it could be amended within one year after the Commissioner had issued the amended assessment, but notice to further amend the assessment was issued on 3-5-2005 and the re-assessment was not completed up to 30-6-2005 i.e. within the prescribed time and it could not be done now---Contention of assessee, in respect of tax year 2004, was that refund had been determined vide order dated 15-7-2005 which means that the notice under S.122 of the Income Tax Ordinance, 2001 for amendment of assessment stands withdrawn/cancelled and proceedings initiated under S.122 of the Income Tax Ordinance, 2001 amounted to maladministration---Validity--Complainant had submitted valid arguments---Ratio of decision of the President of Pakistan in C.No.36 of 2003 that refund could not be withheld on account of expected tax liability was applicable---Federal Tax Ombudsman recommended that the refund of Rs.1,03,71,247 pertaining to assessment years 2000-01, 2001-02, 2002-03 and tax years 2003 and 2004 be issued as per law.

2004 PTD 1901 ref.

2005 PTD 1316 and President's C.No.36 of 2003 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

M. Shahid Abbas for the Complainant.

Muhammad Tahir (DCIT) for Respondent.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX OMBUDSMAN.---The Income Tax assessments of Messrs Ravi Gas Company (Pvt.) Ltd. were completed for assessment years 2000-01 to 2002-03 and tax years 2003 and 2004 by the DCIT, Circle 10, Companies Zone-II, Lahore and a refund of Rs.1,03,71,247 was claimed. The complainant requested for issuance of refund but the concerned DCIT instead invoked section 122(5)(ii)(iii) of the Income Tax Ordinance, 2001 for reopening the completed assessments. The complainant has challenged these proceedings on the following grounds:-

(i) That under section 122 of the Income Tax Ordinance, 2001 read with section 65 of the repealed Income Tax Ordinance, 1979 any case can be reopened on the basis of information received after the completion of assessment and not before the assessment. In this case the judgment of Tribunal was available before the filing of return of relevant assessment year whereas the case in question is sub judice before Lahore High Court.

(ii) The assessments relating to years 2000-01 to 2002-03 have merged into order of CIT(A), so the DCIT cannot reopen the assessments.

(iii) The Karachi High Court has held in a case reported as 2004 PTD 1901 that misapplication of law and ignorance of law or decision of superior Courts would not furnish ground for reopening the assessments, hence the application of section 122 of the Income Tax Ordinance, 2001 is void ab initio and illegal.

(iv) In the proceedings under section 122 of the Income Tax Ordinance, 2001 the respondent has issued notice of demand under section 132 mentioning therein refund of Rs.29,42,594 relating to tax year 2004 which means filing of proceedings for assessment years 2000-01 of 2002-03 and for tax years 2003 to 2004.

(v) The impugned action of the Taxation Officer falls under the ambit of `maladministration' hence this complaint.

The complainant has requested that the respondent be directed to issue refund, voucher of Rs.1,03,71,247 along with appropriate compensation.

2. In the parawise comments the RCIT, Eastern Region, Lahore has raised the following preliminary objections:

(i) No maladministration is spelled out from the contents of complaint, hence it is not entertainable by the F.T.O. The complaint is against proceedings under section 122 of the Income Tax Ordinance, 2001 for which legal remedy of appeal is available to the complainant.

(ii) The action complained against is protected by section 3(i)(a) of the F.T.O's. Ordinance, 2000. Hence, the complaint merits dismissal.

(iii) Maladministration connotes some misbehavior such as perversion, arbitrariness, corrupt motive etc. Where in respect of a process or decision the law provides remedy before ordinary Courts and Tribunal, to F.T.O. has no jurisdiction.

On the factual side it is submitted that the position of assessed income is as per record. The claimed refund is subject to verification of original challans at the time of issuance of refund. The assessments in this case were finalized under the normal procedure treating the complainant as manufacturer and the tax deducted at import stage as adjustable which resulted in claimed refund of Rs. 1,03,71,247. Whereas the income of taxpayer is to be assessed under presumptive tax regime, therefore, the impugned proceedings are in accordance with the legal provisions.

3. In the hearing of the complaint on 12-9-2005 the complainant was represented by Mr. M. Shahid Abbas, Advocate and respondent was represented by Mr. Muhammad Tahir (DCIT) who reiterated the arguments contained in the parawise comments. The AR of the complainant submitted that as the assessments for years 2000-01, 2001-02 and 2002-03 were finalized on 11-2-2002, 6-1-2003 and 28-6-2003 respectively, therefore, they could not be reopened under section 122(5A) of the Income Tax Ordinance, 2001 in view of the judgment of the Karachi High Court reported as 2005 PTD 1316.

4. Regarding tax year 2003 he submitted that the Taxation Officer, Circle 10, Companies Zone-II, Lahore vide order dated 12-4-2004 under section 122 of the Income Tax Ordinance, 2001 had created refund of Rs.20,32,556 and under section S.122(4)(b) supra it could be amended within one year' after the Commissioner had issued the amendment assessment to the taxpayer. But in this case the notice to further amend the assessment was issued on 3-5-2005 and the re-assessment was not completed upto 30-6-2005 i.e., within the prescribed time and it cannot be done now.

5. The refund of Rs.29,42,591 has also been determined for tax year 2004 by the DCIT vide order dated 15-7-2005 which means that the notice under section 122 for amendment of assessment for tax year 2004 stands withdrawn/cancelled. So the complainant is entitled to the claimed refund and the proceedings initiated under section 122 of the Income Tax Ordinance, 2001 amount to `maladministration'.

6. The AR of the complainant has submitted valid arguments which counter the contentions of the respondent. Therefore, the preliminary objections raised by the respondent are overruled. The ratio of the decision of the President of Pakistan in C. No.36 of 2003 that refund cannot be withheld on account of expected tax liability is applicable to the instant complaint.

7. In view of the findings in the preceding para. it is recommended that:-

(a) The refund of Rs.1,03,71,247 pertaining to assessment years 2000-01, 2001-02, 2002-03 and tax years 2003 and 2004 be issued as per law.

(b) Compliance to be reported within 30 days from the date of receipt of the findings.

C.M.A./34/FTOOrder accordingly.