COMMODITY LINKS INTERNATIONAL, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2008 P T D 970
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs COMMODITY LINKS INTERNATIONAL, KARACHI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.1609-K of 2003, decided on 05/04/2004.
Income Tax Ordinance (XLIX of 2001)---
----Ss.114(6), 122 & 170(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Summary rejection of revised return and refund application without notice to and hearing complainant---Validity---Such rejection was violative of provisions of Ss.122(9), 170(4) of Income Tax Ordinance, 2001---Assessing Officer had committed maladministration as his order was perverse, arbitrary, unreasonable, unjust, biased and oppressive---No appeal was provided against impugned order, which did not relate to plain assessment---Federal Tax Ombudsman recommended to C.B.R. to direct concerned officer to decide refund claim strictly on merit within specified time after providing opportunity of hearing to complainant.
S. Asghar Abbas, Consultant (Officer).
Azhar Chaudhry for the Complainant.
Ejaz Asad Rasul, I.A.C. and Dr. Tariq Ghani, D.C.I.T. for Respondent.
FINDINGS/DECISION
JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant an individual derives income from export of rice and is an existing income tax assessee of Circle-08, Zone-C, Karachi on National Tax Number 11-08-0913635-5.
2. The complainant is aggrieved by the rejection of his revised return and refund application relating to the assessment year 2002-2003. The facts of the case are briefly stated as under:-
3. The complainant filed statement under section 143-B for the year 2002-2003 on account of export proceeds along with normal return declaring Nil income. The complainant claimed refund of Rs.11,98,024 in respect of the tax deduction made under section 50(7A) of the repealed Income Tax Ordinance 1979 by Messrs PASSCO on purchase of rice through public auction. The assessment was finalized under section 62 of the repealed Ordinance at Nil income and creating a refund of Rs.11,98,024.
4. The complainant thereafter filed a revised return of income under section 114(6) of the Income Tax Ordinance, 2001 for the same assessment year i.e. 2002-2003 showing Nil income and claiming refund of Rs.22,06,474 on the plea that Messrs PASSCO had provided a copy of another challan of deduction under section 50(7A) of Rs.10,08,450 which had not been claimed earlier. The complainant also filed refund application dated 20-8-2003 in accordance with the relevant provisions of the Income Tax Ordinance, 2001 for the issuance of refund of Rs.22,06,474. The Assistant Commissioner of Income Tax, Circle-08, Zone-C, Karachi vide his No.93 dated 20-9-2003 rejected the complainant's revised return as well as the refund application referred above. It is stated that a representation was made to the Commissioner of Income Tax Zone-C, Karachi against the arbitrary action of the taxation officer vide A.R's. letter dated 3-10-2003 and subsequent reminder dated 21-10-2003. A meeting was finally convened by the C.I.T. Zone-C on 11-11-2003 and the matter was discussed with the concerned I.A.C. and the complainant's A.R. Since no decision was taken by the C.I.T. the complainant was obliged to make the present complaint. It is alleged that the action of the respondents was without lawful authority, illegal, arbitrary, mala fide and against natural justice. The complainant has prayed for issuance of directions to the respondent to accept the revised return and issue refund voucher for Rs.22,06,474 by entertaining the refund -application dated 20-8-2003. He has further, prayed for payment of additional amount under section 171 of the Income Tax Ordinance, 2001.
5. The respondents have filed para wise comments raising therein the preliminary objection regarding jurisdiction in terms of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. It is pleaded that the assessment for the year 2002-2003 was completed under section 62 of the repealed Ordinance, 1979 at Nil income without examining the source of investment for purchases worth more than Rs.227 (M). The order was apparently erroneous and prejudicial to the interest of Revenue. It is further, pleaded that the revised return filed by the complainant under section 114(6) of the Income Tax Ordinance 2001 on 12-8-2003 declaring Nil income and enhanced claim of refund was to be processed under section 122 of the Income Tax Ordinance 2001 as the return could not be revised after completion of assessment. The final position regarding demand or refund would emerge after completion of proceedings under section 122. It is further, reported that in the original return filed declaring Nil income, tax deduction of Rs.11,98,024 only had been claimed which was deducted and deposited on 7-6-2003 by the withholding agent Messrs PASSCO. The details of realization of export proceeds available on record revealed that the last date on which export proceeds had been realized was 23-4-2002. This clearly indicated that the rice purchased on which the aforesaid deduction was made, was not exported and there was a strong possibility that the same had been sold in the local market. The income therefrom had not been declared by the assessee in his return of income. This needed to be examined. It is further stated that the complainant kept the department in darkness about the further claim of tax deduction till filing of revised return.
6. It is reiterated that the complainant could not revise his return as per provision of law after the completion of assessment for the year, and action under section 122 of the Income Tax Ordinance, 2001 was required to be taken to ascertain the factual position. The respondents have supported the action taken by the assessing officer as according to them it was in accordance with law. The Regional Commissioner of Income Tax Southern Region, Karachi has issued directions to the concerned Commissioner to get the proceedings of amended assessment finalized expeditiously within one month.
7. The case has been discussed with the representatives of both the sides. The Authorized Representatives of the complainant on the date of hearing of the complaint on 26-1-2004 furnished copies of show-cause notice issued by the Additional Commissioner of Income Tax Range-I, Zone-C, Karachi under section 122 of the Income Tax Ordinance, 2001 relating to the assessment year 2002-2003 and the explanation submitted by him dated 25-1-2004 in response to the aforesaid notice. It is alleged by the A.R. of the complainant that the show-cause notice was issued by the Additional Commissioner during the processing of the complaint which tantamounts to harassment of the complainant. He has challenged the validity and propriety of the show-cause notice on the ground that the issue was sub judice before the Honourable Federal Tax Ombudsman on a Compliant No.1609-K of 2003 against rejection of revised return filed under section 114(6), refund application under section 170(1) and non-issuance of refundable tax of Rs.2,206,476 wrongly collected under section 50(7A) of the repealed Income Tax Ordinance 1979. In such circumstances the issuance of the aforesaid notice reflected mala fide and arbitrary intention against the complainant. The Authorized Representative of the complainant in the aforesaid explanation dated 25-1-2004 has rebutted the objections raised in the show-cause notice issued under section 122 by the Additional Commissioner of Income Tax. The A.R. has also pleaded in the said explanation that the show-cause notice did not show as to under which specific clause of section 122, it was issued and whether all the prerequisite conditions for its issuance had already been complied. The complainant had not been intimated in writing that he had been under assessed or the other reasons and evidence for initiating the proceedings of concealment. The Authorized Representative of the complainant argued that the plea taken by the respondent that the return of income filed and assessed under section 62 of the repealed Ordinance could not be revised under section 114(6) of the existing Ordinance, 2001 was absolutely unfounded. Since section 57 of the repealed Ordinance did not exist at the relevant time and there was no bar in revision of return under the Income Tax Ordinance, 2001, the plea taken by the department in this regard was absolutely misconceived.
8. The departmental representative reiterated the pleas and arguments taken in the parawise comments submitted by the respondents. He argued that the revised return filed by the complainant under sub-section (6) of section 114 had to be processed under section 122 of the Income Tax Ordinance, 2001 as already communicated in the parawise comments filed by the department. He contended that the show-cause notice under section 122 of the Income Tax Ordinance, 2001 was issued by him on 13-1-2004 strictly in accordance with relevant provision of law. He also, argued that no mala fide can be attributed to the issuance of the said notice as the discrepancies obtaining on record were confronted to the complainant through the said show-cause notice. He also pleaded that if the complainant succeeds in explaining the objections and discrepancies with positive evidence and documents, the proceedings would be concluded without any adverse reference against the complainant. He assured that the matter would be decided strictly in accordance with law and the apprehensions expressed by the complainant's A.R. at this stage were absolutely unjustified.
9. The perusal of record shows that the complainant filed a revised return under section 114(6) of the Income Tax Ordinance, 2001 for the assessment year 2002-2003 on 12-8-2003 along with a forwarding letter No.AZ/C-07/2003-04 dated 12-8-2003 requesting therein the taxation officer Circle-08 Zone-C, for processing the return immediately in accordance with the relevant provision of law and issuance of the refund vouchers at the earliest. Since the revised return was filed under the relevant provision of Income Tax Ordinance 2001 the department followed the procedure provided in subsection (3) of section 122 of the aforesaid Ordinance. The discrepancies noted by the Additional Commissioner could only be confronted to the complainant under sub-section (9) of section 122 of the, Income Tax Ordinance 2001. The show-cause notice dated 13-1-2004 issued by the Additional Commissioner, Range-I, Zone-C, Karachi was in accordance with the aforesaid provisions of Income Tax Ordinance, 2001.
10. The examination of relevant record also shows that the Assistant Commissioner of Income Tax Circle-08, Zone-C, Karachi vide his letter No.93 dated 20-9-2003 summarily rejected the revised return and refund application filed by the complainant in utter violation of relevant provision of law. The complainant was not provided with an opportunity of being heard subsection (9), of section 122 before disposing of the revised return. Similarly the rejection of refund application was also absolutely unlawful as the statutory provision of subsection (4) of section 170 was not complied with. The content of subsection (4) are reproduced hererunder:-
"The Commissioner shall, within forty-five days of receipt of a refund application under subsection (1), serve on the person applying for the refund an order in writing of the decision {after providing the taxpayer an opportunity of being heard}."
11. This is a case of maladministration committed by the assessing officer as provided in subsection (3) of section 2 of the Federal Tax Ombudsman Ordinance, 2000. His order dated 20-9-2003 was perverse, arbitrary, unreasonable, unjust, biased and oppressive.
12. As regards the respondent's objection regarding jurisdiction terms of section 9(2)(b) of the aforesaid Ordinance it is to be pointed out that order for rejection of the amended return was passed without hearing the complainant which was contrary to law. It did not relate to plain assessment and no appeal is provided against such order. The claim for refund was also rejected without notice to the complainant nor any opportunity of hearing was provided to the complainant. The refund is claimed after assessment is completed. It is therefore does not relate to assessment. The objection is overruled.
13. In view of the above it is recommended as under:-
(i) The C.B.R. to direct the concerned taxation officer to decide the complainant's claim of refund relating to the assessment year 2002-2003 strictly on merit within 30 days after providing him an opportunity to present his case.
(ii) The compliance be reported within seven days after implementing the above recommendation.
S.A.K./248/F.T.O.Order accordingly.