VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 370 (2007)

Income Tax Ordinance (XLIX of 2001)---

----S. 170(2)(c)---Refund---Limitation of refund application---First Appellate Authority had found that according to S.170(2)(c) of the Income Tax Ordinance, 2001 the application should have been moved within two years period and since it was filed beyond that period, it had rightly been rejected by the Assessing Officer---Validity---Claim of refund could not be refused on account of limitation---Applications though were filed beyond the prescribed time limit yet the refund could be issued---Authorities below were not justified in rejecting the application of refund on account of limitation---Appellate Tribunal directed that the genuine refund, if any, due to the taxpayer should be allowed.

1998 PTD 2012; PTCL 1998 CL 354 (SC of Pak.) and 2004 CTLR (sic) rel.

Javed Iqbal Qazi for Appellant.

Sabiha Mujahid, D.R. for Respondent.

ORDER

This appeal has been preferred at the instance of the taxpayer assailing the CIT(A)'s order, dated 17-7-2006 whereby he had confirmed the action of the Taxation Officer regarding rejection of refund application having not been filed within the prescribed time limit.

2. Facts, giving rise to this appeal, are that the application filed by the taxpayer for issuance of refund was rejected being not filed within the time limit of two years as prescribed under section 170 of the Income Tax Ordinance, 2001. Before the learned CIT(A), it was pleaded that the time limit prescribed for submission of application for issuance of refund was `directory' and not `mandatory'. It was further argued that where there was no dispute about the entitlement of refund the department should have issued the refund voucher irrespective of the time limit. In support of his, contention reliance was placed on the following reported cases:--

(i) 1998 PTD 2012

(ii) PTCL 1998 CL. 354 (SC of Pak).

However, the learned CIT(A) did not agree and held that according to sub-clause (c) of clause (2) of section 170 the application should have been moved within the two years period and since it was filed beyond that period, it had rightly been rejected by the Taxation Officer. Consequently, the learned CIT(A) confirmed the action of the Taxation Officer, hence this appeal.

3. The learned AR strongly challenged the rejection of application for issuance of refund. He contended that since the Taxation Officer had not doubted the entitlement of the refund, it could not be withheld under any circumstances. According to him, any amount due from the Government never becomes time-barred and action of the officers below was unconstitutional and against the principle of natural justice. He argued that the superior Courts have been allowing the due refund irrespective of the time limit. In support of his contention he has placed before us copies of case-law (cited supra) already submitted before the learned First Appellate Authority. The learned DR, on the other hand, supported the findings of the authorities below and prayed for dismissal of the assessee's appeal.

4. We have heard the parties and perused the available record. The case-law produced at the bar was also perused. The taxpayer's claim was that the refund due could not be refused or withheld even if it was initiated through a belated application after the expiry of the stipulated period whereas the departmental contention was that since section 170 provided the limit of two years, therefore, the application cannot be allowed. It may be noted that the Tribunal is not empowered to hold a particular section as ultra vires of Constitution. Therefore, in order to dispose of the issue at hand, we have to take guidance from the earlier judgments of the superior Courts which would be the only appropriate course to decide the controversy.

5. In the case reported a as 1999 PTD 2012 the facts were that State Bank of Pakistan deducted income tax from the half yearly payment of interest on the securities and the petitioner after coming to know about the said deduction filed two applications before the Income Tax Officer contending that the said deduction is not provided by law. The Income Tax Officer dismissed the application with the opinion that the claim made on 20-8-1974 is barred by time and cannot be allowed in view of the provisions of section 50 of the Income Tax Act. It was in this context the Honourable Lahore High Court held as under:--

"The petitioner was not liable to pay income tax, therefore, was not governed by the provisions of Income Tax Act. He was making hectic efforts but all the respondents were misapplying their mind holding that the claim made by the petitioner is time-barred which was not time-barred as their original action of illegal deduction of income tax, from tax exempted security, was void ab initio, and arbitrary in nature, was not sustainable in law. Whereby any authority guided and governed by law exceeds jurisdiction and interferes in any person's right by passing a void order, this Court in the exercise of extraordinary jurisdiction can determine the rights of such party against, void order and writ jurisdiction is available to such party.

Therefore, I accept this writ petition, set aside the order passed by the respondents and direct the respondents to refund the illegal deduction of income tax Rs.2,250 and Rs.431,820 to the petitioner within a month of receipt of this judgment".

In another case reported as PTCL 1998 CL 354 the facts were that the appellant during manufacturing process of medicines paid duties to clear `salinomcycin', one of the main ingredients to be used in medicines. After a period of one and half years the appellant filed an application for refund which was rejected on the ground that the application was not filed within six months as provided in section 33 of the Act. It was in these circumstances that the Apex Court of the country after detailed discussion held as under:--

"In view of the case-law referred to hereinabove we are inclined to hold that the appellant's claim could not have been declined on the ground of limitation provided in section 33 of the Act for the reason already elaborated, inter alia, in para. 13(ii). In this view of the matter, in our view, it will be appropriate that the case is remanded to respondent No.2 i.e., the Collector of Customs with the direction to examine as to whether the appellant had fulfilled the conditions contained in the aforementioned S.R.O. If they had fulfilled the same, the denial of refund of the amount involved, would be violative of Article 24(1) of the Constitution which lays down that "no person shall be deprived of his property save in accordance with law". The appeal is, therefore allowed...."

In the case reported as 2004 PCTLR (sic) the Honourable High Court (Rawalpindi Bench) had again reaffirmed its view as narrated in the judgment cited supra i.e. PTCL 1998 CL. 354.

6. It is evident from the above judgments that the claim of refund cannot be refused on account of limitation. In all the three cases cited above, though the applications were filed beyond the prescribed time limit yet the Courts had directed issuance of the refund. Therefore, taking guidance from the same analogy, we are of the view that the authorities below were not justified in rejecting the application of refund on account of limitation. It is, therefore, directed that the genuine refund, if any, due to the taxpayer should be allowed.

7. The appeal filed at the behest of the taxpayer is accepted.

C.M.A./154/Tax (Trib.)Appeal accepted.