Mst. SHAHEENA ASGHAR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 479 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 65, 170R-71, 176, 122 & 102---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(b)---Refund---Self-assessment---Additional assessment---Additional payment for delayed refunds---Prosecution for unauthorized disclosure of information by a public servant---Maladministration---Income Tax assessment was made under self-assessment scheme---Refund was determined---No additional assessment was made---No prosecution for wrong information was started---No order for withholding the refund was passed---Withholding of refund illegally constituted maladministration within the meaning of section 2(3)(i),(b) and 2(3)(v) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 on account of inefficiency, inattention, negligence and inaptitude in performance of duties---Revenue authorities had failed to prove that non-issuance of the refund was bona fide and for valid reasons---Federal Tax Ombudsman therefore recommended that Refund due to the complainant be issued immediately by the Taxation Authorities and compliance report submitted within 30 days.

Muhammad Mushtaq, Advisor, Dealing Officer.

Iftikhar Shabbir, ITP for the Complainant.

Abdul Rehman Warriach, DCIT, for the Revenue.

FINDINGS/ DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The Complainant is an individual earning income from commission from Pakistan Steel Mills. For the assessment year 2002-2003 Income Tax assessment was completed under section 59(1) of the repealed Ordinance determined income at Rs.1,010,520 vide order dated 24-5-2003 and a refund of Rs.257,000 was determined.. The complainant made an application for issuance of refund on 11-11-2003 in the form prescribed under Rule 71 read with section 170 of I.T., Ordinance, 2001. An application for issuance of refund was also sent to Commissioner of Income Tax on 12-11-2003 and a reminder was forwarded to the CIT, MTU, on 23-1-2004 but in spite of these applications, refund has not been issued to date which constituted `maladministration' and caused grievance to the complainant.

2. In reply, the RCIT, Eastern Region, Lahore denied mat-administration. However, the RCIT conceded that the refund was created in this case. The RCIT pleaded that the refund could not be issued because the complainant claimed huge markup expenses paid to the Pakistan Steel Mills (Zonal Office, Lahore) at Rs.3,286,591 as against commission earned at Rs.4,814,510 for the year under consideration. The RCIT submitted that the complainant was simply a commission agent and did not require any capital investment for purchases so as to incur markup to the extent claimed. The RCIT has further submitted that notice under section 176 of the I.T. Ordinance 2001 has been issued to the Pakistan Steel Mills for obtaining further information. The refund will be issued after examining all the aspects of the case. The RCIT further submitted that CIT, MTU, has verbally informed the complainant that refund will be issued after it is established that the markup was paid in order to earn the commission income.

3. Mr. Iftikhar Shabbir, ITP, attended on behalf of the complainant and reiterated the contention made in the complaint. The AR submitted that, although Income Tax assessment was completed in this case under section 59(1) of the repealed Ordinance, the Taxation Officer issued notices under section 61 and examined various aspects of the case before the completion of assessment. Thus there was no justification now to withhold the refund on the pretext that markup paid by the complainant was to be examined. The AR further submitted that Pakistan Steel have already certified payment of markup to the extent of Rs.3,286,591 by the complainant for the period under consideration. Therefore, there was no reason to refuse issuance of refund by the Revenue Authorities.

4. Mr. Abdul Rehman Warriach, DCIT, attended for the Revenue. He reiterated submissions made by the RCIT in his parawise comments and submitted that information received from the Pakistan Steel indicated that, for the period 1-7-1999 to 30-6-2003, the complainant paid markup to the extent of Rs.5.450(m) as against commission receipts of Rs.4.230(m), indicating that the complainant had paid more markup to the .Pakistan Steel than the commission earned. It was abnormal and required detailed examination of various aspects of the case. The DR further submitted that the Commissioner is required to pass order under section 170(4) of I.T. Ordinance 2001 within 45 days of the receipt of the application for refund. If the CIT failed to pass such an order the complainant could file an appeal and there was no justification for filing of a complaint with the Federal Tax Ombudsman.

5. The complaint and the respondent's reply have been examined and rival arguments considered. The fact that refund already determined was not issued has not been denied by the Revenue Authorities. The RCIT submitted that refund could not be issued because certain information has been called for from the Pakistan Steel under section 176 of I.T. Ordinance. The DR submitted that information received from the Pakistan Steel disclosed discrepancies and indicated in para-4 supra. However, so far no action has been taken by the Revenue Authorities on the alleged discrepancies. No action under section 122 of the I.T. Ordinance, 2001 or 65 of the repealed Ordinance has been initiated. No order has been passed under section 102 of the repealed Ordinance withholding the refund. The fact remains that the determined refund has not been issued and withheld illegally. This is nothing but high handedness of the Revenue Authorities, which cannot be overlooked. It is pertinent to point out that the view of the Federal Tax Ombudsman that refund cannot be withheld on account of expected tax liability has been endorsed by the Honourable President of Pakistan on a representation made in complaint in C.No.36/2003. Withholding of refund illegally constitutes `maladministration' within the meaning of section 2(3)(i)(b) and 2(3)(v) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000 on account of inefficiency, inattention, negligence and inaptitude in performance of the duties. The Revenue Authorities have failed to prove that non-issuance of the refund was bona fide and for valid reasons.

6. It is therefore recommended.

(i) Refund due to the Complainant be issued immediately by the Taxation Authorities.

(ii) Compliance report be submitted within 30 days of receipt of these recommendations by the Revenue Division.

M.I./258/FTOOrder accordingly.