Mst. SOFIA ABIDA VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 487 (2004)

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.3 of 1994, dated 20-5-1984---Refund---Department failed to accord appeal effect to appellate order---After a lapse of nearly one and a half year the department had neither issued any revised demand notice nor IT-30s for the matter---Application was filed for payment or refund along with compensation but to no avail---Assessee contended that department be directed to issue refund vouchers and also pay compensation on account of delay in issuance of refunds---Validity---Refunds had been unduly and unjustly delayed on two accounts namely failure to give appeal effect to the appellate orders and to pass re-assessment order after the First Appellate Authority has set aside the original assessment order which became time-barred as a result of which the demand became unenforceable---Department did not care to process the cases at the appropriate time---All such factors led to the conclusion that complainant/assessee's refunds were withheld illegally, unjustly and arbitrarily---Even if some challans were missing the department could have asked for the same much earlier which they failed to do---Complainant/assessee was not only entitled to payment of original refund amounts but also to payment of compensation on account of delay in payment of refunds---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the competent authority to 'pay promptly the refunds in question after due reconciliation of the amounts involved for which purpose the complainant had agreed to produce the relevant challans; to pay compensation to the complainant under the provisions of S.102 of the Income Tax Ordinance, 1979 at the prescribed rate from the due dates on account of delay in payment of refunds; to counsel (in writing) the officials responsible for not giving appeal effect to the appellate orders within a reasonable time and not passing the re-assessment order for assessment year 1998-99, letting the case become time-barred to give in future appeal-effect to appellate orders within a reasonable time and finalize assessment within the prescribed limit so as to avoid hardship to the complainants.

Complaint No.253 of 2004 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment on production of accounts, evidence etc.---Demand without formal assessment order---Validity---Although it was claimed by the department that re-assessment was finalized resulting in demand but it was admitted that no formal re-assessment orders were issued nor was any demand issued or served---Re-assessment had to be made by specified date and was not formally made nor any demand was issued or served on the complainant as a result of which re-assessment become time-barred and outstanding demand against the complainant was baseless.

Mohammad Akbar Nagi, Advisor. Dealing Officer.

A.D. Randhawa for the Complainant.

Ahmad Shujah Khan, D.C.I.T. for Respondent.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH, (FEDERAL TAX OMBUDSMAN).---This complaint of `maladministration' is directed against the Revenue for its failure to accord-effect to appellate orders Nos.742 to 744 dated 31-3-2003 pertaining to Assessment Years 1996-97, 1997-98 and 1999-2000. It is alleged that even after a lapse of nearly 1 and year the respondent have neither issued any revised demand notices nor IT-30s, for that matter. The complainant filed an application dated 26-7-2004 for payment of refund along with compensation on account of delay in payment thereof but to no avail. It is pleaded that as no other remedy is available to the complainant, the department may be directed to issue refund vouchers and also pay compensation on account of delay in issuance of refunds due to the complainant.

2. In reply, the respondents have submitted that appeal-effect in respect of assessment pertaining to A.Ys. 1996-97, 1997-98 and 1999-2000 had been given vide DCRs Nos.4 to 6 dated 30-6-2004. The complaint was premature as the complainant failed to seek redress of her grievance at departmental forums i.e. I.A.C., C.I.T. and R.C.I.T. The application submitted on 27-2-2004 was being processed. The R.C.I.T. has reported the year-wise position as under:-

Assessment Year 1996-97

Payment of tax during 1996-97 stood at Rs.5692 as per IT-11. Since no proof of payment was attached, no effect was given on IT-30. As the complainant never claimed effect for the balance amount, the question of making refund did not arise.

Assessment Year 1997-98

The complainant had claimed in her return of income a refund of Rs.10,310 but did not enclose with the tax return any evidence of payment of tax nor did she enclose the requisite evidence with application dated 26-7-2004.

Assessment Year 1998-99

The assessment was set aside by C.I.T.(A) vide order dated 1-11-2002. Re-assessment was finalized vide DCR No.35 dated 30-6-2004 creating a demand of Rs.719,703. As a result of aforesaid demand the question of paying any refund or compensation, as claimed, did not arise.

Assessment Year 1999-2000

In the income tax return the complainant had claimed refund amounting to Rs.1770 only whereas she was claiming refund of Rs.56,269 vide application dated 26-7-2004 without disclosing any evidence in support of claim for higher refund.

Assessment Year 2001-2002

No refund was claimed as per income tax return as against refund of Rs.76,385 being claimed. The complainant did not submit any documentary evidence in support of her claim.

The application dated 26-7-2004 was received in the Circle office on 27-7-2004. No maladministration was committed. Complainant may be directed to furnish evidence in support of her refund claims to enable the department to process the cases.

3. During the hearing, the A.R. stated that had the respondent given-effect to C.I.T.(A)'s appellate orders Nos. 742 to 744 dated 31-3-2003 the complainant would have been entitled to refunds amounting to Rs.164,092 Rs.18,695 and Rs.56,269 for A.Ys. 1996-97.

1997-98 and 1999-2000 respectively. The D.R. argued that appeal-effect was given on 30-6-2004, IT-30s were prepared. Asked whether the orders giving appeal-effect or IT-30s were issued the D.R. stated that though lying on the file the orders/IT-30 could not be issued. The A.R. submitted that the respondents had failed to give appeal-effect to the appellate orders and unduly blocked refunds payable to the complainant. He also added that the original assessment for A.Y. 1998-99 was set aside by C.I.T.(A) vide order No.189 dated 1-11-2002 but the respondents did not issue any re-assessment order. As a result of which an amount of Rs.393,707 became payable to the complainant. He challenged department's contention that a demand for Rs.719,703 had been raised/issued by stating that the respondents neither made any re-assessment nor issued any demand notice nor it was ever served on the complainant and asked the D.R. to produce proof/evidence of issuance of demand notice or its service. He went on to clarify that during the year in question the income was first assessed at Rs.3,471,373, which was set aside by the C.I.T.(A), the department did not file any appeal nor did they issue/serve any re-assessment order or demand notice. The D.R. submitted that re-assessment was finalized in D.C.R. No. 35 dated 30-6-2004 resulting in a demand of Rs.719,703 but the A.R. challenged it by stating that re-assessment had become time barred as the Appellate authority had set aside the original assessment vide order dated 1-11-2002 and because the respondents had failed to finalize the assessment by 30-6-2004. When asked to produce proof of issuance of re-assessment order, demand and service thereof the D.R. could not produce any evidence to that effect and submitted that no such orders/demand notices were available on record. The A.R. also submitted that the complainant was entitled to a refund of an amount of Rs.56,269 for A.Y. 2000-01 because she had filed an application dated 26-7-2004 for rectification of order dated 30-6-2004 so as to claim credit of property tax, which was still pending decision with the department. He added that he was willing to submit challans of tax payments and when required.

4. The D.R. stated that in respect of some of the assessment years the amounts of refund claimed by the complainant needed reconciliation/verification which would be possible only if the complainant supplied payments challans. He suggested that the complainant's A.R. may be directed to join the reconciliation exercise with a view to determining the correct picture. He further added that complainant's application dated 26-7-2004 for rectification would be decided and the complainant should produce necessary challans to enable the department to settle the claim for the relevant assessment year.

5. The A.R. argued that apart from the amounts of refunds which were due to be paid to the complainant the respondents should pay compensation @ 15% from the due date i.e. 3 months from the date of appellate order or the date of assessment order. The D.R., however, contested payment of compensation because, according to him, refund claim was lodged for the first time vide application dated 26-7-2004. The A.R. argued that his claims were based on evidence of payment of tax and on the basis of appellate orders issued by the appellate authority giving relief to the complainant. Quoting section 100 of the repealed Ordinance he pressed for payment of compensation together with payment of original refund. The D.R. referred to C.B.R. Circular No.3/1994 dated 20-5-1984 according to which verification of challans was necessary because the original challans were required to be crossed out in front of the Assessing Officer. He also cited C.B.R. Circular No.5/2003 whereby refunds were required to be issued after verification.

6. The arguments of the parties to the dispute and the record of the case have been considered and examined. Clearly the respondents failed to give appeal-effect to appellate orders dated 31-3-2003 for A.Ys. 1996-97, 1997-98 and 1999-2000. The D.R., in fact, failed to produce the appeal-effect orders. Had the appeal-effect been given the complainant would have received its benefits. The Honorable F.T.O. in his order dated 10-8-2004 in complaint 253-L/04 took serious exception to department's failure to given appeal effect to orders of appellate authorities at the appropriate time and set out a time schedule by which the backlog of cases involving issuance of appeal-effect orders was to be cleared. It is also observed that for A.Y. 1998-99 the C.I.T.(A) had vide his order dated 1-11-2002 set aside the original assessment. Although it was claimed by the respondents that re-assessment was finalized vide D.C.R. No.35 dated 30-6-2004 resulting in a demand of Rs.719,703 the D.R. admitted that no formal re-assessment orders were issued nor was any demand issued or served. Clearly, the re-assessment had to be made by 30-6-2004 and was not formally made nor any demand was issued or served on the complainant as a result of which re-assessment became time barred. Thus the respondents' argument that a demand of Rs.719,703 was outstanding against the complainant is baseless. Not only that no appeal-effect was given to the appellate orders dated 30-3-2003 but no re-assessment was formally made or demand issued for A.Y. 1998-99. As for A.Y. 2000-01 the application for rectification of orders filed by the complainant was still pending decision. There is a need to reconcile the discrepancy between the amounts of refunds being claimed by the complainant and those being considered by the depart ment in respect of the A.Ys under consideration. The complainant's A.R. agreed that he would be prepared to support his client's claim of refund by supplying the relevant information/challans as and when required. Clearly respondents' failure to give appeal-effect to appellate orders dated 31-3-2003 despite lapse of long period of time depriving the complainant of the relief afforded therein and their failure to re-assess the liability for the year 1998-99 for which neither any re-assessment order was formally issued nor any demand was served on the complainant are acts which are illegal, arbitrary and unjust amounting to maladministration within the meaning of section 2(3) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000. As a result of maladministration complainant's refunds have been unduly and unjustly delayed on two accounts namely failure to (i) give appeal-effect to the appellate orders dated 31-3-2003 and (ii) pass re-assessment order for A.Y. 1998-99 after the C.I.T.(A) had set aside' the original assessment order vide his order dated 1-11-2002 which became time-barred as a result of which the so-called demand became unenforceable. The respondents did not care to process the cases at the appropriate time all of which leads to the conclusion that complainant's refunds were withheld illegally, unjustly and arbitrary as mentioned above. Even if some challans were missing the department could have asked for the same much earlier which they failed to do. The complainant is, therefore, not only entitled to payment of original refund amounts (amounts may be determined and reconciled with the complainant in a proper reconciliation exercise which was agreed to by both parties) but also to payment of compensation on account of delay in payment of refunds as per the appropriate legal provisions of law. Accordingly, it is recommended that the C.B.R. direct the competent authority to:

(i) Pay promptly the refunds due for A.Ys in question after due reconciliation of the amounts involved for which purpose the complainant had agreed to produce the relevant challans.

(ii) Pay compensation to the complainant under the provisions of section 102 of the Income Tax Ordinance, 1979 at the prescribed rate from the due dates on account of delay in payment of refunds.

(iii) Counsel (in writing) the officials responsible for (i) not giving appeal-effect to the appellate orders dated 31-3-2003 within a reasonable time and (ii) not passing the re-assessment order for A.Y. 1998-99, letting the case become time barred to give in future appeal-effect to appellate orders within a reasonable time and finalize assessment within the prescribed limit so as to avoid hardship to the complainants.

(iv) Compliance be reported within 30 days.

C.M.A./562/F.T.O.Order accordingly.