WAZIR INDUSTRIES (PVT.) LTD., KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2008 P T D 991
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs WAZIR INDUSTRIES (PVT.) LTD., KARACHI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.1636-K of 2003, decided on 03/04/2004.
Income Tax Ordinance (XXXI of 1979)---
----Ss.100 [as amended by Finance Act (I of 1985)], 102(2)(a), 135 & 171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Claim for determined refund with compensation @ 15 %---Non-issuance of refund and compensation---Validity---Filing of application to claim refund created on assessments under Ss.59, 59(a), 62 & 63 of Income Tax Ordinance, 1979 or by giving appeal effect no longer requirement of law---Order of Tribunal was received by authority on 30-6-2001---Period of compensation would be calculated after expiry of 3 months from 30-6-2001---Compensation would be payable to complainant for period from 1-10-2001 till date of payment---Additional payment for delayed refund would be made under S.171 of the Income Tax Ordinance, 1979---Inordinate and unlawful delay in issuance of such refund and compensation was contrary to law, arbitrary, unreasonable, unjust, biased, oppressive and discriminatory---Federal Tax Ombudsman recommended to C.B.R. to direct concerned officer to issue refund due to complainant with specified time along with additional payment for such period till date of payment as admissible under S.171 of the Ordinance.
Complaints Nos.329-K of 2002, 67-L of 2003, 181 of 2003, 234 of 2002, C-354-K of 2002 and C-93-K of 2002 ref.
Asghar Abbas, Consultant (Officer).
Raza Merchant for the Complainant.
Tauqeer Irtaza, D.C.I.T. for Respondent.
FINDINGS/DECISION
JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant a private limited company, engaged in the business of manufacturing and sale of plastic goods components/ button etc. is an existing Income Tax Assessee of Circle-03, Companies Zone-IV, Karachi, on National Tax Number 28-03-0699110.
2. The complainant company is aggrieved by non-issuance of determined refund for the assessment year 1995-96 along with the compensation @ 15% by the taxation officer concerned. The facts of the case are briefly stated as under:-
3. The company filed return of income for the assessment year 1995-96 declaring loss of Rs.8,88,367. The tax paid/deducted during the relevant year was Rs.19,17,427 which included tax on commercial imports at Rs.10,87,559. The remaining amount of Rs.8,29,868 was claimed as refundable. The assessment was made under section 62 of the repealed Income Tax Ordinance on an income of Rs.1,92,88,231 which was subsequently rectified under section 156 of the said Ordinance on 11-6-1997 and total income was determined at Rs.1,70,85,797 creating a demand of Rs.91,27,934. It is further, stated that the whole demand was recovered through coercive measure including publication of the complainant's name as "defaulter" in the` National Newspapers before the decision of the Income Tax Appellate Tribunal. The demand paid/ adjusted was Rs.84,50,480 out of which Rs.47,47,000 was paid under section 85 of the repealed Income Tax Ordinance 1979. The balance amount of Rs.37,03,480 was paid under section 50 or adjusted against refundable amount. The details are furnished as under:-
| Paid under section 85 of the Income Tax Ordinance 1979 | Rs. 4,747,000 |
| Paid under section 50 of the Income Tax Ordinance 1979 | Rs. 1,917,427 |
| Refund -- Assessment Year 1989-90 | Rs. 244,785 |
| Refund -- Assessment Year 1993-94 | Rs. 622,352 |
| Refund -- Assessment Year 1996-97 | Rs. 527,908 |
| Refund -- Assessment Year 1997-98 | Rs. 391,008 |
| | Rs. 8,450,480 |
4. The complainant's appeal before the Commissioner of Income Tax (Appeals) failed. The company however, filed second appeal before the Income Tax Appellate Tribunal which allowed substantial relief to the complainant and consequently refund of Rs.55,89,078 was determined vide order under section 135 dated 10-10-2001.
5. It is alleged that the complainant addressed several letters to the Regional Commissioner of Income Tax, The Commissioner of Income Tax, The Inspecting Additional Commissioner of Income Tax and the concerned Deputy Commissioner of Income Tax requesting them to issue refund of Rs.55,89,078 but none of the aforesaid authorities ever responded to the complainants letters and the refund voucher has not been issued so far. The complainant has provided Photostat copies of the letters referred above. It is further stated that the complainant had intimated the departmental officials that the Honourable Federal Tax Ombudsman in similar cases had not only directed to issue the refund immediately but also directed to pay compensation as admissible under the law. It is further, alleged that the Authorized Representative of the complainant visited the officers of the Deputy Commissioner of Income Tax and his supervising officers repeatedly with the request to expedite the issuance of refund. The A.R. of the complainant was finally informed that the orders under section 99(3) of the repealed Income Tax Ordinance 1979 had been forwarded to the Commissioner of Income Tax Office and was asked to follow the routine procedure/requirements otherwise he would not be able to receive the refund vouchers. It is reiterated that despite all possible efforts refund voucher for already determined refund on 10-10-2001 have not been issued till date. This is certainly contrary to law, arbitrary, unreasonable and involves administrative excesses falling under the definition of maladministration. The complainant has prayed for issuance of directions to the respondents to issue refund of Rs.55,89,078 along with compensation @ 15%.
6. The respondents have forwarded parawise comments prepared by the concerned Commissioner of Income Tax, Companies Zone-IV, Karachi. It is conceded therein that the appeal effect was given on 10-10-2001 and in consequence to Income Tax Appellate Tribunal's order No.1298-KB of 1996-97 dated 21-5-2001 a refund of Rs.55,89,078 was created. It is reported that out of the said refund an amount of Rs.4,32,596 had already been adjusted against demand relating to the assessment years 1990-91 and 1994-95. It is also pleaded that the complainant was also liable to pay additional tax under section 89 of the repealed Ordinance for delayed payment of tax for the assessment years 1990-91, 1991-92 and 1994-95. Thus total amount of refund has claimed by the complainant was not correct. It is further, stated that the balance amount of refund after accounting for the additional tax liability was being processed and would be issued shortly. The respondents have also reported that the letters referred to by the complainant are not verifiable from the record.
7. It is pleaded that the complainant's case falls within the ambit of section 100 read with section 102 of the repealed Income Tax Ordinance, 1979 as the refund was created in consequence to the Income Tax Appellate Tribunal's order and not on application of the complainant. Similarly the claim of compensation was also to be dealt within the light of provisions of sections 100 and 102 of the repealed Ordinance. It is further, stated that in the case under consideration the order of the Income Tax Appellate Tribunal which resulted in creation of refund was received by the Deputy Commissioner of Income Tax on 30-6-2001 and refund became due to the complainant from the said date. It is further, stated that as per Proviso of section 100 of the Income Tax Ordinance, 1979, compensation was allowable only on the payment made under section 85 of the repealed Income Tax Ordinance, 1979. The complainant had paid Rs.47,47,000 under section 85 of the Income Tax Ordinance 1979 out of which Rs.9,43,848 were adjusted against the tax liability for the assessment year 1995-96 and the balance on which compensation could be worked out to Rs.38,03,152. The order of the Income Tax Appellate Tribunal was received by the D.C.I.T. on 30-6-2001 and the period of three months expired on 30-9-2001. The refund order was made on 10-10-2001 in the form of appeal effect and corresponding I.T.30 dated 10-40-2001.
8. It is stated that section 102 of the repealed Ordinance clearly provided that the compensation was allowable only for the period starting from the expiry of three months from the date on which the appeal order is received by the Deputy Commissioner of Income Tax, up to the date, the refund order is made.
9. It is pleaded that in the case of the complainant the date of receipt of ITAT's order by the D.C.I.T. was 30-6-2001 and the refund order was made on 10-10-2001 and therefore, the compensation was to be paid from 1-10-2001 to 10-10-2001. The respondents have denied the allegation that any official of the department contacted the complainant and asked him to follow the procedure otherwise proceedings could be initiated under sections 65/66A. It is prayed that the complainant's claim of refund as worked out may not be accepted, as the same is not supported by facts and law. However the refund due was being worked and would be issued shortly.
10. The case has been discussed with the representatives of both of the sides. The complainant's Authorized Representative filed rejoinder controverting therein the arguments taken in the parawise comments submitted by the respondents. He contended that the observations of the respondents regarding the period for which compensation was payable was absolutely misconceived and ill-founded. This issue has been resolved by the Honourable Federal Tax Ombudsman in a number of complaints and copies of orders in Complaints No.329-K of 2002, 67-L of 2003, 181 of 2003, 234 of 2002, C-354-K of 2002 and C93-K of 2002 etc. have been filed. The departmental representative reiterated the pleas taken in the parawise comments. As regards the complainant's allegation that despite repeated reminders issued to the taxation officer and his supervising authorities the refund which had already been determined has not been issued so far, the respondents have tried to absolve themselves of any responsibility in this regard by merely stating that the correspondence referred by the complainant was not verifiable from available record. The complainant's A.R. has filed photocopies of the letters referred in para No.8 of the complaint along with the copy of peon book regarding service of the said letters/reminders. The very fact that the refund for the year under consideration which was determined vide order under section 135 dated 10-10-2001 has not been issued so far, confirms the aforesaid allegations of the complainant. This is prima facie a case of maladministration committed by the concerned officers of the department.
11. The contention of the department that since refund order was passed on 10:10-2001 vide order under section 135 referred above, the compensation was payable only for the period from 1-1-2001 to 10-10-2001 is absolutely misconceived and unfounded. Section 100 of the repealed Income Tax Ordinance 1979 was amended by Finance Act 1985 whereby filing of refund application under section 99(1) was dispensed with in cases where refund was created on assessments under sections 59, 59(a), 62, 63 or by giving appeal effect. The Central Board of Revenue had already clarified the position vide Board's letter No.I.T.B.3(5)/86 dated 3rd July, 1994 which is reproduced as under:-
"Section 100 of the Income Tax Ordinance, 1979 was amended through Finance Act 1985 whereby the condition of filing refund application was dispensed with in cases where refund is created by the assessing officer on I.T.30. Refund voucher is, therefore to be issued along with the assessment order/demand notice in all such cases."
The complainant's case is covered by clause (a) of subsection 2 of section 102 of the repealed income Tax Ordinance 1979 which provides as under:-
"In any case where the refund is required to be made in consequence of any order on an appeal or a revision or (an appeal) to the High Court or an appeal to the Supreme Court on the date of receipt of such order by the (Deputy Commissioner);"
12. It is not disputed that the impugned order of the Income Tax Appellate Tribunal was received by the Deputy Commissioner of Income Tax on 30-6-2001 and therefore, refund was due to the complainant from the said date i.e. 30-6-2001 and the period of compensation is to be calculated after the expiry of three months from the aforesaid date. The compensation is therefore, payable to the complainant for the period from 1-10-2001 to the date of payment.
13. It is pertinent to point out that the additional payment for delayed refund is to be made to complainant under section 171 of the Income Tax Ordinance 2001 which provides as under:-
"171 Additional payment for delayed refunds.---(1) Where a refund due to a taxpayer is not paid within three months of the date on which it becomes due, the Commissioner shall pay to the taxpayer a further amount by way of compensation at the rate of fifteen per cent per annum of the amount of the refund computed for the period commencing at the end of the three months period and ending on the date on which it was paid."
14. The facts stated above already establish that the inordinate and unlawful delay in issuance of refund and compensation is contrary to law, arbitrary, unreasonable, unjust, biased, oppressive and dis criminatory as defined in clause' (b) of subsection 3 of section 2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.
15. It is therefore, recommended as under:-
(i) C.B.R. to direct the taxation officer concerned to issue the refund due to the complainant for the assessment year 1995-96 within 30 days of the receipt of this order along with additional payment for the period 1-10-2001 to the date of payment as admissible under section 171 of the Income Tax Ordinance, 2001.
(ii) The compliance be reported within a week thereafter.
S.A.K./245/FTOOrder accordingly.