SPEL FUJIYA LTD., LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2011 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1296 (2009)

Income Tax Ordinance (XLIX of 2001)---

----S. 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10---Refund claim---Complaint against non-compliance of direction to grant refund claim---Federal Tax Ombudsman had decided/recommended that department should issue as per law the refund claim of the complainant for tax year in respect of each I.T.-30 Form or order determination of refund of the complainant---Department filed review petition against said decision/ recommendation praying that impugned recommendation be reviewed and its operation stayed---Recommendations in the complaint had been made after due consideration and with conscious mind while dealing with all the objections and pleas raised by department and no error or omission was apparent on the face of record---Negligence and arbitrariness in the discharge of duties and responsibilities on the part of department stood established---Department did not process the case on merit and had delayed the disposal of refund claim of the complainant---Allegation of maladministration of department, was established---Review petition by the department being devoid of merits was rejected making recommendation that officers responsible for defiance of show-cause notice, be identified and directed to show-cause within 21 days as to why proceedings of contempt may not be initiated against them under provisions of S.16 of Establishment of Office of Federal Tax, Ombudsman Ordinance, 2000 and that compliance be reported within 21 days from the receipt of recommendation by the Secretary Revenue Division.

2004 PTD 2915 ref.

Haji Ahmad, Advisor, Dealing Officer.

Waheed Shahzad Butt, Authorized Representative.

Munim Sultan, Advocate/LA Javed Shahryar, Additional Commissioner, Ms. Samia Ijaz, DCIT, Ms. Sairah Bano, DCIT, Babar Chohan DCIT, Ali Mansoor ACIT, Adnan Khan ACIT, Ehsanur Rehman Sh., Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.-The respondent filed Review Petition on 14-3-2009 against the following decision in Complaint No.1620-L/08 dated 26-11-2008.

"Respondent should issue as per law the refund claim of the complainant for the tax years in respect of each I.T. 30 form or order determining refund of the complainant. Compliance to be reported within 30 days from the date of receipt of the findings".

2. It was contended by the respondent that the credit of deduction of tax was allowed to the complainant in the I.T. 30 on the basis of claim in the returns of Income Tax and photo copies of challans/certificates. However, at the time of issuance of refund the original challans had to be verified and cancelled to avoid duplication. On receipt of the refund application, the Department completed the verification process and issued refunds vide two separate vouchers of Rs.5,34,068 and of Rs.18.169. For processing of balance refund the original challans were requisitioned which the complainant did not provide. He insisted to accept the claim on the basis of credit given in I.T.30. It was therefore prayed by the respondent that the impugned Recommendations be reviewed and its operation stayed in the meanwhile:

3. The complainant submitted comments on the Review Application challenging the assertions of the Department and stated that mala fide intent of the respondents was visible from the illegal and arbitrary stance communicated through Review Application and that the same had been filed to deprive the complainant of its lawful right of refund of excess payments. The respondents were not willing to dispose of bona tide claim of the complainant and issue refund. They even did not comply with the show-cause notice dated 3-2-2009 and instead filed Review Application. Further, the disposal of refund claim of Rs.5,34,068 was not relevant to the instant complaint.

4. Dr. Javed Shahryar; Additional Commissioner, Ms. Samia Ijaz, DCIT, Mr. Saber Chohan DC1T, Mr. Ali Mansoor ALIT, Ms. Sairah Bano DCIT, Mr. Adnan Khan ACIT, Mr Ehsanur Rehman Sh. Advocate and Mr. Munim Sultan Advocate represented the respondents and assailed the finding on the ground that unless the complainant supplied the evidence and relevant papers regarding tax payments/deductions, the refund could not be issued as per law.

5. Mr. Waheed Shahzad Butt, Advocate defended the complainant. It was stated that the complainant Company had long discontinued its business and the evidence asked for by the respondents was missing from their records, however, during the processing of refund application, the available challans and certificate was provided to the respondents for their verification. Based on the information provided by the complainant, verification letters were issued by the Taxation Officer which were placed on file and were still available with the department.

6. The AR further emphasized that in all the years under consideration the assessment originally finalized were rectified. During the process of rectification, challans were produced for scrutiny by the taxation authorities. The. I.T. 30 were prepared after proper verification of payments, entries were made in Demand and Collection Register, and orders were signed and issued by the Taxation Officers. Therefore, no further evidence was to be asked for at this stage.

7. The FTO's Recommendation in this case was that refund as per law was to be issued for tax years in respect of which I.T.30 order determining the refund had been issued. If the Taxation Officer was not satisfied he should not have issued the I.T. 30. A bona fide I.T.30 which was an integral part of assessment/rectification order and an index of income assessed, tax leviable, tax deductions/payments and demand or refund determined, and so it could not be questioned while processing a refund case. Reference is also made to Circular letter No. ITB-3(21)/85 dated November, 24, 1985:

"Calculations of tax payable are made on I.T-30 form which is a part of the assessment order. While preparing I.T-30, credit for the payments made by the taxpayer is required to be given. Credit for tax paid once given legally becomes final. Thus subsequently, tax already paid/shown in the I.T-30 cannot be challenged by the department nor can the department, for the purposes of refund, also the tax-payer concerned to produce further evidence in support of the tax claimed and shown to have been paid The refund shown in I.T. 30 if any will have to be issued straightaway."

8. Similar emphasis was also laid down in Circular No.ITB-3(5)/ 86 dated July 3, 1994. The respondent's asking for original challans was also not relevant for the payments made during the years under consideration, as clarified by F.B.R. vide Circular No.3 of 1984. This was essential in respect of payments made prior to first July, 1984 in cases where verification from Treasuries was otherwise not possible. In the instant case, however, all the payments/deductions were made after first July, 1984. In fact the Department did not seem to have made any serious effort to verify payments from their own computerized records. Moreover, in view of amendment of section 100 of the repealed Income Tax Ordinance, '1979, where, as- a result of any order passed under sections 59, 59A, 62, 63 or in appeal, revision, reference or other proceedings under the Ordinance, refund of any amount became due, it would be issued irrespective of whether any claim in that behalf was made or not made.

9. The earlier judgment of the FTO also supports the contention of the complainant. Reference is made to the following Recommendations of FTO in a case reported as 2004 PTD 2915:--

"Department could not withhold refund already created.... Mala fide action of the department in withholding the refund is an established maladministration".

10. However with the introduction of Universal Self-Assessment Scheme through Income Tax Ordinance 2001, a return filed for the tax year 2003 onward assumed the status of an assessment order on the day it was filed, as such the system of computation of income and tax demand or refund on I.T. 30 was discontinued and instead C.B.R. laid down procedure for issue of refunds vide Circular No.5 of 2003 dated 30-6-2003. The refund cases for the year 2003 onward were to be processed accordingly.

11. FTO finding in the instant case in respect of I.T. 30 was obviously for the years in respect of which the system of I.T.30 was operative. The respondent department did not process the case on merit and delayed the disposal of refund claim; therefore the allegation of maladministration was established.

12. The perusal of record indicated that Recommendations were sent to the respondent Department videa letter dated 18-12-2008 but they did not inform the FTO Office about the action taken for implementing the recommendations on' or before the due date i.e. 19-1-2009, when a Show-Cause Notice under section 12(2) of FTO Ordinance was issued on 3-2-2009 for compliance by 18-2-2009. The respondent Department did not submit any reply to the Show-Cause Notice and instead filed Review Application on 14-3-2009 on. the grounds which had already been considered while processing the Complaint. The allegations of the complainant that the respondent's failure to implement FTO's Recommendations and defiance of Notice was a continuous maladministration, therefore, carries weight.

Finding:

13. Recommendations in the instant complaint were made after due consideration and with conscious mind while dealing with all the objections and pleas raised by the respondents and there was no error or omission apparent on the face of record. The negligence, inattention and arbitrariness in the discharge of duties and responsibilities on the part of the respondent stood established.

14. In view of the above findings, the Review Application being devoid of merits is rejected.

Recommendations:

(i) The officers responsible for defiance of show-cause notice be identified and directed to show cause within 21 days as to why proceedings of contempt may not be initiated against then under the provisions of section 16 of FTO Ordinance, 2000.

(ii) Compliance be reported within 21 days from the receipt of Recommendations by the Secretary Revenue Division.

H.B.T./15/FTO Order accordingly.