VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 738 (2009)

(a) Income Tax Ordinance (XLIX of 2001)---

----S.170---Refund---Taxation Officer, instead of determining the refund had entered into contents of assessment while deciding the application filed by the assessee under S.170 of the Income Tax Ordinance, 2001---Validity---Refunding Authority had no jurisdiction to determine the legality of a return or the scrutiny of the claim of profit and loss account---Such was only the field of a assessing authority as under the scheme of Income Tax Ordinance, 2001 the work had been distributed to two separate departments---Assessing authority and Refunding Authority had been assigned distinct work with clear and unambiguous jurisdiction---Facilitation Division, Information Processing Department, Enforcement Division etc; all had separately defined jobs---Job of audit was totally with Audit Division and they could not issue refund; likewise Refunding Authority had nothing to do with assessment or assessment work----Order of First Appellate Authority was vacated and order passed by the Taxation Officer under S.170 of the Income Tax Ordinance, 2001 was set aside with the direction to make fresh order in accordance with law determining the refund of assessee according to the assessment order and issue the refund in accordance with law unless any other proceedings had been initiated against him till the service of order.

2007 PTD 1780 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.115---Workers' Welfare Funds Ordinance (XXXVI of 1971), S.4---Finance Act (I of 2008), Preamble---C.B.R. Circular No.13 of 2008 dated 23-10-2008---Persons not required to furnish return of income---Tax year 2007---Levy of workers' welfare fund---Validity---Assessing Officer was not authorized to charge worker's welfare fund unless corresponding amendments were made in S.4 of the Workers' Welfare Funds Ordinance, 1971---Amendments in this regard had been made through Finance Act, 2008 effective from 1-7-2008 which was not applicable for the year under review---Order of First Appellate Authority in respect of workers' welfare fund was vacated and the workers' welfare fund charged by the Taxation Officer was deleted and appeal filed by the assessee for the tax year 2007 was allowed by the Appellate Tribunal.

2003 PTD 1530 rel.

M. Imran Rashid for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

ORDER

Out of these two appeals filed by the assessee one is against the impugned order of the learned CIT(A) dated 16-1-2008 for the Tax Year 2004 on the following grounds:---

(1) That the first appellate authority was not justified to confirm the findings of the taxation officer that revised return filed on 15-1-2007 was valid to the extent of income from other source at Rs.292,350 while passing order under section 170.

(2) That the CIT(A) failed to appreciate the facts of the case and erred to confirm the action of the taxation officer ignoring the binding decisions of the higher appellate courts.

(3) That the first appellate authority erred to confirm the order of the taxation officer determining the legality of the return that had already acquired the status of an amended assessment order.

While the second appeal is against the impugned order of the learned CIT(A) dated 8-7-2008 for the Tax Year 2007 on the following grounds:---

(1) That charge of WWF for the reasons other than the ones confronted in the show-cause notice bearing No. 939 dated 22-4-2008 was challenged and the learned CIT(A) without any justification confirmed the orders of the assessing officer.

(2) That the first appellate authority was not justified to confirm the order with the findings that no amendment was required to be made in section 4(4) to charge WWF.

(3) That charge of WWF by the taxation officer and its confirmation by the first appellate authority are unlike the directions of the FBR contained in their Circular No.13 of 2008 in which it has been clarified that WWF is not chargeable in PTR cases for the Tax Years 2007 and 2008.

We have heard the learned representatives from both the sides and have also perused both the impugned orders of the learned CIT(A) and the Taxation Officer.

Regarding the tax year 2004 we have found that the Taxation officer instead of determining the refund has entered into contents of the assessment while deciding the application filed by the assessee under section 170 of the Ordinance, 2001. In this regard the learned counsel representing the appellant has contended that the Taxpayer derives income from processing and sales/export of cloth. Statement under section 115(4) of the Ordinance, 2001 was filed. Subsequently, the taxation officer issued a notice under section 114(4) to the effect that the appellant has filed statement under section 115(4) whereas he was required to file normal tax returns under section 114(4) of the Ordinance, 2001. In response to that notice the taxpayer filed return of income and the statement under section 115(4) was also revised by excluding the amount shown on account of supply of goods. However, subsequently the returns were again revised on 25-7-2007. According to the learned counsel the revised statement filed under section 115(4) on 30-12-2006 and revised return filed on 25-7-2007 acquired the status of amended assessment orders under section 122(3) of the Ordinance, 2001. The application for refund of excess deduction/collection on the prescribed form was also filed. The taxation officer has processed the claim of refund of excess payments and has passed order under section 170 on 14-11-2007. In its order it has been observed that revision of statement was not warranted in view of clause (41A) of Part IV of the Second Schedule and return filed on 25-7-2007 (incorrectly written as 15-1-2007) was valid to the extent of income from other sources. According to the learned counsel the taxation officer consequently treated the supply of goods under PTR and charged tax accordingly, without any justification as the taxation officer has no discretionary powers to consider one part of the return as valid and the other part to be invalid while deciding the application of refund under section 170 of the Ordinance, 2001. In this regard, the reliance has been placed on the decision of this Tribunal reported as 2007 PTD (Trib.) 1780 wherein it has been held that:--

"Taxation officer assigned with the duty of issuance of refund may not have the power to make an assessment as the determination of the legality of a return, scrutiny of the claim of profit and loss were part of assessment proceedings and such process could not be allowed to be done by refunding authorities under section 170."

The learned CIT(A) has also upheld the treatment meted out by the taxation officer without considering the legal position. On the other hand, the learned D.R. has supported the impugned orders of the officers below she has contended that both the officers below have given full justification for the treatment meted out by them.

After considering the rival arguments and going through the decision of this Tribunal referred by the learned counsel for the assessee reported as 2007 PTD (Trib.) 1780, we are of the view that the refunding authority has no jurisdiction to determine the legality of a return or the scrutiny of the claim of profit and loss account. It is only the field of the assessing authority as under the scheme of the new Ordinance, 2001 the work has been distributed to two separate departments, assessment authority and refunding authority have been assigned distinct work with clear and unambiguous jurisdiction. Facilitation Division, Information Processing Department, Enforcement Division etc. all had separately defined jobs. The job of the audit is totally with Audit Division and they could not issue refund. Likewise the refunding authority had got nothing to do with assessment or assessment work. In view of this legal position we find force in the contention raised by the learned counsel for the assessee. Consequently, the impugned order of the learned CIT(A) for the Tax Year 2004 is vacated and the order passed by the Taxation Officer under section 170 of the Ordinance, 2001 is set aside with the direction to make fresh order in accordance with law determining the refund of assessee according to the assessment order and issue the refund in accordance with law unless any other proceedings have been initiated against him till the service of this order.

Regarding the tax year 2007 we have found that the taxation officer has levied the Workers' Welfare Fund. For this year the learned counsel representing the appellant has placed before us a Circular No. 13 of 2008 dated 23rd October, 2008 issued by the Federal Board of Revenue wherein in para. 2 of this circular it has been said that:---

"The FBR has taken up the matter with the Labour and Manpower division (W.W.F. Wind) and has pointed the deficiency. The aforesaid Division has accordingly agreed that the status quo be maintained in PTR cases and demand of WWF for the tax years 2007 and 2008 may not be created, as it will not be maintainable by the appellate authority."

In the next para-3 it has further been said that

"the said lacuna, however, has been removed vide the Finance Act, 2008. In the wake of this amendment levy of WWF may be pressed, wherever exigible in Tax Year 2009."

Even otherwise, we have found that the Hon'ble Lahore High Court in its decision reported as 2003 PTD 1530 has already held that the assessing officer is not authorized to charge WWF unless corresponding amendments are made in section 4 of the WWFI Ordinance and undisputedly the amendments in this regard have been made through Finance Act, 2008 effective with effect from 1-7-2008 which is not applicable for the year under review. Keeping in view these facts and circumstances of the case the impugned order of the learned CIT(A) in respect of WWF is vacated and the WWF charged by the taxation officer is deleted. The appeal filed by the assessee for the tax year 2007 is allowed.

Both the appeals filed by the assessee for the tax year 2004 and 2007 are decided in the manner as indicated above.

C.M.A./18/Tax(Trib.)Appeal accepted.