Syed HUSSAIN ASIF VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 853 (2004)

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

----Ss.96, 56, 13(1)(aa) & 143-B---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Re assessment was completed at nil income but credit for payment made was not allowed in the I.T.30 Form on the pretext of verification of challan of payment and probe of investment of other party---Validity---Department was fully aware of the payment made by the complainant/assessee through pay order as demand was reduced in the subsequent reminder---Credit was not allowed without any lawful justification which amounted to maladministration---"Wilful error" in determination of refund was confirmed by non-response of the Assessing Officer to the applications of complainant/assessee---Department had not been able to resolve the issues during a period of about three and half years---Complainant/assessee's legitimate request for allowing the credit of payment and issuance of resultant refund had remained unattended for such a long time without any lawful justification---Such should not be further delayed' for meeting the future tax liability---Federal Tax Ombudsman recommended that the Central Board of Revenue to direct the concerned officer to decide the complainant's claim of refund for the year 1997-98 within thirty days.

Messrs" Berger Paints, Karachi v. C.B.R./Income Tax Department in Complaint No.1358-K of 2002 rel.

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

----S.96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Contention of the department that refund for the assessment year 1997-98 could not be determined or issued unless the assessment for the subsequent year 1998-99 was completed as it was likely to result in creation of substantial demand, was neither reasonable nor justifiable.

S.A. Asghar Abbas, Consultant (Officer).

Mehtab Khan for the Complainant.

Ejaz Asad Rasul, I.A.C. for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant an individual derives income as Octroi Contractor. He is an existing income tax assessee of Circle-1,, Zone-C, Karachi on " National Tax Number 11-01-0286199. The complainant is aggrieved by non-allowance of tax credit of Rs.10,00,000 for the assessment year 1997-98 which was resulted in unlawful delay in determination and issuance of refund. The facts of the case are briefly stated as under:-

2. The complainant filed statement under section 143B of the repealed Income Tax Ordinance, 1979 for the assessment year 1997-98 showing gross receipts at Rs.31,71,000 and deduction of tax at Rs.1,58,500. Notice under section 56 of the repealed Ordinance was issued on the basis of information that the complainant had made payment of Rs.80,50,000 to Union Council, Darsano Chano District Malir as bid money for obtaining Octroi Contract during the period relevant to assessment year 1997-98. Since the compliance was not made, assessment was completed ex parte under section 63 of the Income Tax Ordinance, 1979 on at an income of Rs.80,50,000 by making addition of Rs.80,50,000 under section 13(1)(aa) being un-explained investment. Tax demand of Rs.30,45,350 was created on completion of assessment.

3. The complainant preferred an appeal before the Commissioner of Income Tax (Appeals), Zone-VI, which was decided vide Appellate Order dated 18-3-1999 and the assessment made under section 63 was set aside for de novo assessment after proper notice to the appellant. It is stated that in the meantime the complainant paid an amount of Rs.10,00,000 vide pay order No.670437 dated 17-6-1998 drawn on Allied Bank of Pakistan Limited. The aforesaid payment was duly considered as in subsequent reminders the balance demand of Rs.20,45,350 was pressed by the taxation officer as against 30,45,350 created on completion of assessment. The complainant has filed photocopies of letters dated 8-8-1998 and 3-9-1998 in support of the said observation. The reassessment was completed on 23-6-2000 on NIL income but credit for payment of Rs.10,00,000 made through pay order, was not allowed in the relevant I.T.-30. The complainant requested the D.C.I.T. concerned vide his letters dated 22-11-2001 and 30-8-2002 to allow credit of Rs.10,00,000 and issue refund for the said amount. It is alleged that the D.C.I.T. neither acknowledged the aforesaid letters nor rectified the order by allowing credit for payment of Rs.10,00,000. The complainant's A.R. therefore, addressed a letter to the Commissioner of Income Tax, Zone-C, Karachi on 30-4-2003 requesting him to look into the matter and direct the concerned officer to allow credit of tax already paid through pay order. The Commissioner of Income Tax also did not bother to acknowledge the said letter and no instructions were issued by him to the assessing officer in this behalf. The complainant was left with no other alternative but to make the present complaint. He has prayed for issuance of directions to the concerned officer of the department to allow credit of tax paid amounting to Rs.10,00,000 and issue refund along with compensation.

4. The respondents vide letter No.2047 dated 2-12-2003 made a request for extension of time for 15 days to enable them to furnish a complete report/parawise comments. It is further stated in the said letter that the complainant's claim of refund needed examination of the record of another assessee namely Messrs Malir Corporation which, was a dormant case and the records were being traced from the dead record room. It is further stated that reassessment was made by the assessing officer under sections 132/62 of the repealed Income Tax Ordinance, 1979 on NIL income as the investment of Rs.80,50,000 was reportedly made by the another assessee Messrs Malir Corporation on behalf of the complainant. The credit of Rs.10,00,000 claimed to have been paid by the complainant in respect of original demand raised was not given on the I.T.-30 as the challan of payment was not received in the concerned circle. It is also reported that the perusal of 143B statement filed by the complainant for the year 1998-99 revealed that he declared total contract receipts at Rs.15,68,000,00 along with the tax deduction of Rs.45,63,636 and 45,97,669 and a sum of Rs.13,21,305 was claimed as refundable. The claim of refund on the basis of 143B statement required probe and scrutiny which was not done.

5. It is also stated that the assessing officer failed to examine the investment made in acquiring the second contract. In order to ascertain the factual position the assessment record of Messrs Malir Corporation was requisitioned but the same was reportedly not traceable in the circle. The explanation of the concerned record keeper was being obtained and the officer had also been directed to take necessary action for the recovery of the missing record. It is reiterated that the matter needed thorough examination for ascertaining the credit worthiness of both the parties regarding investments made by them in obtaining the contracts etc. It is reported that the matter was expected to be resolved within a fortnight and therefore extension of time was solicited.

6. The departmental representative has furnished a copy of parawise comments dated 20th December, 2003 during the course of hearing of complaint. It is reported that in order to verify the source of investment of bid money paid by the complainant at Rs.72,21,200 and 4,60,000 during the period relevant to the assessment year 1998-99 letters were issued to Messrs Malir Corporation and the complainant but no reply was received till date. In the absence of proper explanation regarding the investment there was every likelihood that the assessment might result into addition under section 13 of the repealed Income Tax Ordinance at Rs.76,81,200 and creation of substantial tax demand. It is further, stated that both the concerns i.e. Messrs Malir Corporation and Messrs Bin Qasim Corporation have closed their business and in case of creation of demand the recovery would not be possible. Notice under section 114 of the Income Tax Ordinance, 2001 has been issued to Messrs Bin Qasim Corporation for filing return of income tax for the year 1998-99 and in case the investment is not explained the resultant income tax demand would be adjusted against the refund for the year 1997-98. It is also pleaded that the genuineness of the refund 'claimed by Messrs Bin Qasim Corporation needed verification as the investment was wholly made by Messrs Malir Corporation during the year 1997-98.

7. It is reiterated that the refund claimed by the complainant cannot be determined at present unless the assessment for the year 1998-99 is completed and the demand likely to be created is adjusted against the excess payment claimed for the assessment year 1997-98. It is stated that the whole exercise would be completed within one month and the final position would be reported immediately thereafter.

8. The case has been discussed with the representatives of the complainant as well as department. The records of the case produced by the Departmental representative have also been examined.

9. The perusal of record shows that the complainant's allegation that credit for payment of Rs.10,00,000 made through pay order dated 17-6-1998 was not allowed in the relevant I.T.-30 without any justification is quite well founded. The plea taken by the respondents in this behalf that challan for payment was not received in the circle is not convincing. The payment was made through pay order No.670437 which was handed over in the office of the taxation officer concerned. The Data Processing Centre of the department at Karachi confirmed the payment on 20-6-1998 when the matter was referred to it by the assessing officer. The department was fully aware of the payment made by the complainant through the aforesaid pay order as in the subsequent reminders issued on 8-8-1998 and 3-9-1998 the outstanding demand was reduced from 30,45,350 to 20,45,350. It is therefore evident that credit for the aforesaid amount of Rs.10,00,000 was not allowed by the assessing officer without any lawful justification which amounts to mal administration as defined in Clause 4 of subsection (3) of section 2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. This "wilful error" in the determination of refund is further, confirmed by non-response of the D.C.I.T. concerned to the applications of the complainant's A.R. in this regard dated 22-11-2001 and 30-8-2002. The complainant has filed photo copies of the aforesaid letters along with the complaint. It is also established from the record that complainant's application dated. 30-4-2003 addressed to the Commissioner of Income Tax Zone-C, Karachi also failed to receive any positive response. He also did not bother to issue instructions to the concerned taxation officer for allowing credit of the aforesaid payment already made by the complainant on 20-6-1998. This is a glaring example of maladminis tration committed by the functionaries of the department.

10. The plea taken by the respondents in their comments dated 20th December, 2003 that refund for the assessment year 1997-98 cannot be determined or issued unless the assessment for the subsequent year 1998-99 is completed as it is likely to result in creation of substantial demand is neither reasonable nor justifiable. It is distressing to point out that the reassessment under sections 132/62 of the repealed Income Tax Ordinance, 1979 was completed on 23-6-2000 and the department has not been able to resolve the issues raised in the parawise comments during a period of about three and half years. The complainant's legitimate request for allowing the credit of payment of Rs.10,00,000 made during the year 1998 and issuance of resultant refund has remained unattended for such a long time without any lawful justification This should not be further, delayed for meeting the future tax liability as already held by the President of Pakistan in representation under section 32 of the Federal Tax Ombudsman Ordinance, 2000 in Complaint No. 1358-K/2002 in the case of (Messrs Berger Paints, Karachi v. C.B.R./Income Tax Department). The President has been pleased to observe as under:-

"The Federal Tax Ombudsman's findings that refund of tax cannot be withheld to cover the assessee's expected liability remains unexplained in the representation. Law Division's recommendation that the Federal Tax Ombudsman's recommendation is appropriated and well founded."

11. This is prima facie a case of maladministration and therefore it is recommended as under:---

(i) The C.B.R. to direct the concerned officer to decide the complainant's claim of refund for the year 1997-98 within 30 days and compliance be reported within a week thereafter.

C.M.A./211/F.T.O.Order accordingly.