WORLDWIDE MOTORS (PVT.) LTD., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 833 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 66A, 156, 89 & 100---Income Tax Ordinance (XLIX of 2001), Ss.171 & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Appeal effect---Additional payment on delayed refund---Complainant had pleaded that due to departmental failure to give appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 the complainant had suffered hardship and harassment and a substantial amount of money of the company had remained locked up with the department---Income Tax Appellate Tribunal had cancelled order passed under Ss.62, 156 and 66A vide order dated 5-1-2003 (Assessment years 1994-95, 1995-96 and 1996-97)---Such order was served on the Commissioner of Income Tax on 31-1-2003---Claim of compensation under section 100 had to be given after three months of receipt of decision otherwise the complainant was entitled to compensation under Ss.100/102/171 of the Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001, legitimate request of the assessee thus was rejected---Lack of response and delay showed inefficiency and incompetence amounting to maladministration---Federal Tax Ombudsman recommended that order giving appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 be served on authorized representative of the complainant and refund due to the complainant for assessment year 1994-95 be paid together with compensation under section 171 of the Income Tax Ordinance, 2001.

S.A. Nasser, Dealing Officer.

M.D. Gangat, I.T.P. for the Complainant.

Dr. Tauqeer Irtiza, D.C.I.T. for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The main grievance of the complainant relates to the failure of the D.C.I.T., Circle-03, Companies Zone-IV, Karachi in not giving appeal effect to the Income Tax Appellate Tribunal Order I.T.A. No.752/KB of 1995-96 (Assessment year . 1994-95) and I.T.A. No.2048/KB of 1996-97 (Assessment year 1994-95). The assessee is also aggrieved by non-issuance of refund amounting to Rs.48,09,434 pertaining to the assessment year 1994-95 and has further claimed additional payment under section 100 of the Income Tax Ordinance, 1979 (Repealed).

2. The complainant is a Private Limited Company doing business in the name and style of Worldwide Motors Private Limited. The company is incorporated under the Companies Ordinance, 1984. It derives income from sales of vehicle of Mitsubishi Motor Corporation, Tokyo of which it is an authorized dealer in Pakistan. Income is also derived from foreign commission, interest and running of workshop for repair and service of vehicles.

3. The assessment in this case was completed under section 62 of the Income Tax Ordinance 1979 pertaining to the assessment year 1994-95 at a total income of Rs.9,07,546 on 28-2-1995 against declared loss of Rs.3,71,42,121. This order under section 62 was rectified under section 156 of the Income Tax Ordinance on 11-4-1995 and a loss of Rs.21,19,854 was determined. A refund of Rs.1,00,490 was created.

4. However, the concerned Inspecting Additional Commissioner of Income Tax Range-II, Companies-IV, Karachi on the directions of Additional Director of Inspection of Audit and exercising his power under section 66A of the Income Tax Ordinance, 1979 cancelled the order under sections 62/156 on 23-8-1995. The assessing officer gave effect to the order under section 66A and reassessed the income under sections 62/156/66A of the Income Tax Ordinance on 25-4-1996. The total income this time was determined at a sum of Rs.84,10,210 and tax demand of Rs.41,21,003 was created. For non-payment of tax demand on the due date additional tax under section 89 of the Income Tax Ordinance, 1979 was levied at a sum of Rs.5,31,522. The total tax liability thus worked out to Rs.46,52,525 out of which a sum of Rs.31,46,578 was adjusted.

5. The company had filed appeal against the order under section 66A before the Income Tax Appellate Tribunal and against the order under sections 62/156/66A of the Income Tax Ordinance, 1979 before the Commissioner of Income Tax Appeal Zone-IV, Karachi who confirmed the order under sections 62/156/66A of the Income Tax Ordinance after hearing the argument. The Income Tax Appellate Tribunal cancelled the orders under section 66A as well as under sections 62/66A/132 of the Income Tax Ordinance, 1979 vide I.T.A. No.752/KB of 1995-96 (Assessment year 1994-95) and I.T.A. No. 2048/KB, of 1996-97 (Assessment year 1994-95) order dated 5-1-2003.

6. The complainant's representative moved an application to the concerned Assistant Commissioner of Income Tax on July 12, 2003 with the request to give appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 and also to issue refund voucher under section 100 of the Income Tax Ordinance, 1979. No response to this request was made by the respondent. The A.R. of the-company again addressed a letter dated 29-8-2003 to the respondent to give appeal effect to the ITAT's order and issue refund voucher under section 100 of the Income Tax Ordinance, 1979. Even this application was not heeded and responded to. Yet another application dated 10-11-2003 was addressed to the Commissioner of Income Tax, Companies Zone-IV to direct the Deputy Commissioner of Income Tax, Circle-03 to give appeal effect to the Order of Income Tax Appellate Tribunal dated 5-1-2003 and issue refund voucher of Rs.48,09,434 together with additional payment as provided under section 100 of the Income Tax Ordinance. The efforts in this behalf again proved to be futile as no response was made.

7. The Authorized Representative has vehemently argued that the request to give appeal effect on several occasions were made in writing to the concerned officer but they were not answered and responded to. This was followed by personal visit but this effort also did not prove to be successful. It is in this background that this complaint has been filed. The Authorized Representative of the complainant has pleaded that due to departmental failure to give appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003, the complainant has suffered hardship and harassment and a substantial amount of money of the company which otherwise could have been used in the business remained locked up with the department due to ineptitude, inefficiency and incompetence of the respondent. This also establishes maladministration as defined under section 2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

8. The respondent in his parawise comments has pleaded that appeal effect in this case was given on receipt of application of the Authorized Representative dated 12-7-2003 vide D.C. No.00/130 dated 14-7-2003. It was further pleaded that since the complainant had not applied for issuance of refund on prescribed application as required by section 170 of the Income Tax Ordinance, 2001 refund could not be issued. It has also been stated in the parawise comments that the claim could not be accepted, as the matter is sub judice before the Honourable High Court, Sindh.

9. After having heard the parties concerned and having gone through the relevant records it transpires that the Income Tax Appellate Tribunal had cancelled order under sections 62/156/66A vide order dated 5-1-2003, in I.T.A. No.752/KB of 1995-96 (Assessment year 1994-95) and I.T.A. No.2048/KB of 1996-97 (Assessment year 1994-95). Even the reference application filed by the department in this case was rejected. The order of the Income Tax Appellate Tribunal was served on the Commissioner of Income Tax on 31-1-2003. The claim of compensation under section 100 had to be given after three months of receipt of decision, otherwise the complainant would be entitled to compensation @ 15% under sections 100/102/171 of the Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001. It is noted that the respondent is stated to have given appeal effect to the order on 14-7-2003 and revised order served on one Mr. Iqbal Khan on 3-9-2003. The service on Iqbal Khan has been disputed by the complainant. The Authorized Representative of the complainant had filed an application on 12-7-2003 requesting the respondent to give appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 and yet, another application was moved on 29-8-2003. The last letter to the respondent in this behalf is dated 10-11-2003. The circumstances prove that no appeal effect was given to the order of the ITAT and the service of order dated 14-7-2003 on Mr. Iqbal Khan does not merit consideration; otherwise the last application dated 10-11-2003 was not called for if the service was correct and proper. This letter was also not responded.

10. This is also to be noted that the orders of the Income tax Appellate Tribunal referred to above were served on the Commissioner of Income Tax on 31-1-2003. Although the appeal effect in this case is stated to have been given by the respondent on 14-7-2003, the said order has not been served on the Authorized Representative or on the assessee. The identity of Mr. Muhammad Iqbal Khan who is said to have received the order on 3-9-2003 is incorrect, otherwise the Authorized Representative would not have addressed letter dated 10-11-2003 to the respondent to give appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003.

11. In the parawise comments the respondent has stated that application for refund was not made on prescribed form as required under section 170 of the Income Tax Ordinance. The arguments given in this behalf are 41so not convincing. In the absence of service of order giving appeal effect was not served on the complainant it could not have mentioned the amount of refund. The Authorized Representative has produced sufficient evidence to show that the request for refund was made in writing. Repeated applications were given in this behalf but they were not responded. The legitimate request of the assessee was thus denied. The lack of response in this behalf and delay without reasonable ground shows inefficiency and incompetence of the department. Had it acted promptly within stipulated period by giving appeal effect and served the order on the complainant, the exchequer would have been saved of the additional payment under law. It is unfortunate to mention that due to lethargy and inefficiency the exchequer has been burdened by extra amount by way of payment of compensation to the assessee. The maladministration has thus been proved.

12. It is therefore recommended that:

(i) The order giving appeal effect to the order of the Income Tax Appellate Tribunal dated 5-1-2003 be served on the Authorized Representative of the company or on the assessee.

(ii) The Income Tax Refund due to the complainant for the assessment year 1994-95 be paid within 30 days of the receipt of this order together with compensation under section 171 of the Income Tax Ordinance, 2001 provided no stay order has been granted by the High Court.

(iii) Compliance be reported to this office within 45 days of the receipt of this order by the Revenue Division.

M.I./267/F.T.O.Order accordingly.