AKHTAR HASSAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1712 (2005)

Income Tax Ordinance (XXXI of 1979)---

----Ss.96, 59-A, 50(4), 50(4A), 80C, 143B---Income Tax Ordinance (XLIX of 2001), S.122(5A)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Assessee contended that department had given appeal effect and issued demand notice creating refund but the issue of voucher had been withheld without any justification---Department submitted that order creating refund was totally illegal and appeal had been filed before Income Tax Appellate Tribunal which made the issue sub-judice---Refund voucher was withheld till the decision of appeal---Validity---Department had filed an appeal before the Income Tax Appellate Tribunal against the order of First Appellate Authority from which the refund flowed---Matter being sub judice, it was not appropriate to give any finding which would pre-empt the decision of the case---Complainant/assessee should wait for the decision of the Income Tax Appellate Tribunal---Complainant/assessee had not been able to target any maladministration on the part of the Department---Investigation of the complaint was closed by the Federal Tax Ombudsman in circumstances.

Complaint No.882 of 2005 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Sh. Zafar-ul-Islam and Tanveer Ahmed for the Complainant).

Ahmad Shuja Khan (DCIT) for Respondent.

DECISION/FINDING

JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).---The complainant is authorized dealer of Messrs Pak Suzuki Motors Company Limited and earns income from commission as well as from rendering service. He filed return for assessment year 2001-2002 under the `self-assessment scheme' (SAS) declaring total net income at Rs.1,07,000 comprising of services rendered. A statement under section 143-B of the repealed Income Tax Ordinance, 1979 was also filed declaring commission receipts as full and final discharge of tax liability. The assessment was completed on 22-4-2004 accepting the declared income under SAS but credit of tax was allowed only equal to the demand on the basis of income declared whereas the complainant claimed deduction of Rs.1,07,970 under sections 50(4) and 5(7E/F). An application for rectification and refund voucher was filed on 14-6-2004. On demand by the Taxation Officer original electricity bills and telephone bills and certificate of deduction of tax were furnished. The Taxation Officer issued letter dated 11-1-2005 stating that the return of income was invalid. The complainant lodged Complaint No.56 of 2005 before the FTO which was disposed of with the observation that in view of statement made by the DR and the letter of the complainant's AR the case is closed and file consigned to the record. The complainant filed an appeal before the CIT(A), Multan against the order of the Taxation Officer which was decided in his favour. He submitted an application for giving appeal effect and issuance of refund voucher of Rs.1,10,840. In the meantime the IAC issued a notice dated 13-7-2005 for amendment of assessment order under section 122(5) as the assessment for the year 2001-2002 was erroneous and prejudicial to the interest of revenue. The grievance of the complainant is that the respondent has not issued the refund voucher as directed by the CIT(A). Non-obeyance of the order by the Taxation Officer and the I.A.C. tantamounts to `maladministration'. The original assessment dated 22-4-2004 under SAS stands merged with the appellate order which cannot be amended under section 122 of the Income Tax Ordinance, 2001. Thus the notice issued by the IAC is with mala fide intention. The complainant has requested that the necessary investigation may be held and the respondent be directed to issue refund voucher of Rs.1,10,840 for the assessment year 2001-2002.

2. The RCIT, Central Region, Multan in the parawise comments has submitted that the complainant filed Income Tax Return for the assessment years 2001-2002 claiming refund on account of tax deducted on incentive which was accepted under section 59A of the repealed Income Tax Ordinance, 1979 and income tax demand notices were issued. He also filed statement under section 143B for the same year claiming full and final tax liability deducted on commission receipts. This statement was also accepted and processed under section 80(C). The complainant filed a rectification application which was rejected by the Taxation Officer on the ground that the tax deducted under sections 50(4) and 50(4A) was the full and final discharge of tax liability and the case fell under the `presumptive tax regime'. The complainant filed an application in which the C.I.T.(A) directed acceptance of the contention of the complainant and to process the rectification application as per law. Again this order of the C.I.T.(A) the respondent has filed an appeal before the ITAT. In the meantime proceedings under section 122(5A) of the Income Tax Ordinance, 2001 have been initiated. It is urged that proper application of law does not tantamount to change of opinion. The respondent did not make any commitment with the complainant that the order in appeal would be implemented. The complaint is pre-mature and falls in the ambit of section 9(2)(b) of the Establishment of Office of FTO Ordinance, 2000.

3. In the hearing of the appeal on 18-10-2005 the complainant was represented by Sh. Zafar-ul-Islam, Advocate and Mr. Ahmad Shuja Khan (DCIT) represented the respondent. The parties reiterated the arguments contained in the pleadings. The AR of the complainant submitted that non-compliance of order CIT(A) despite determination of refund amounted to `maladministration'. The complainant was a well established company and there was no apprehension of non-reimbursement of the refund amount if the appeal was accepted. The respondent had given appeal effect and issued demand notice creating a refund of Rs.1,10,840 but the issue of voucher has been withheld without any justification. The DR submitted that the impugned order creating the refund was totally illegal and the respondent had filed an appeal before the ITAT which made the issue sub judice. Therefore, the refund voucher was withheld till the decision of the appeal. He referred to FTO's decision in Complaint No.882 of 2005 which was on all fours with the instant case. It was observed that under the circumstances the complainant should wait for appellate Tribunal's decision on the appeal of the Revenue which would determine as to whether or not the refund in question was admissible.

4. From the arguments of the parties and perusal of the record it transpires that the respondent has filed an appeal before the ITAT against the order of the CIT(A) from which the refund flows. As the matter is sub judice it is not appropriate to give any finding which would pre-empt the decision of the case. As decided in the case referred to in the preceding Para. the complainant should wait for the decision of the ITAT. Moreover, the complainant has not been able to target any mal administration on the part of the respondent. Therefore, the investigation of the complaint is closed and file consigned to record.

C.M.A./3/FTOOrder accordingly.