ALANDICK AND COMPANY LTD., ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2012 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 439 (2011)

Income Tax Ordinance (XLIX of 2001)---

----Ss.113, 122-A, 153(1)(b) & 170(4)---Complaint against non-issuance of refund---Complainant had contended that tax deducted on contract receipts constituted minimum tax liability under Ss.153(1)(b) read with S.113 of the Income Tax Ordinance, 2001---Taxation Officer passed a back-dated order under S.170(4) of Income Tax Ordinance, 2001 rejecting the claim of refund on the ground that proof of tax deduction/ payment was not furnished---On complaint, Federal Tax Ombudsman, recommended that Federal Board of Revenue should ensure that refund/compensation due, as per law, was issued within 21 days after vacating/rectifying the order passed under S.170(4) of Income Tax Ordinance, 2001, but no compliance was made by the authorities and refund was not issued in spite of directions of Federal Tax Ombudsman---Complainant's claim of refund was not disputed by the department---Verification of tax deduction had already been made---No element of presumptive income was involved---No issue was pending in appeal---Case had not been selected for audit---Recommendation of Federal Tax Ombudsman given in complaint had not been implemented, which attracted action under S.16 of Establishment of Federal Tax Ombudsman Ordinance, 2001---Whole range of acts of omission and commission by the department tantamount to maladministration in the light of S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2001---Federal Board of Revenue was recommended to direct the Chief Commissioner to issue refund/compensation due as per law, within 21 days, failing which, proceedings under S.16 of the Establishment of Tax Ombudsman Ordinance, 2001, would be initiated against all concerned and report compliance within 7 days thereafter.

Istataat Ali, Advisor Dealing Officer.

Muhammad Zaheer, FCA Authorized Representative.

Muhammad Kashif Ahmad, OIR Departmental Respondent.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---This complaint is against non-issuance of refund of Rs.17,702,023 for tax years 2005 and 2006.

2.The complainant contended that tax deducted on contract receipts constituted minimum tax liability under section 153(1)(b) read with section 113 of the Income Tax Ordinance, 2001 (the Ordinance). On Complaint No.772 of 2010 filed before the Hon'ble Federal Tax Ombudsman on the same issue, it was recommended, vide order dated 17-8-2010, that the F.B.R. should ensure that refund/compensation due, as per law, was issued within 21 days after vacating/rectifying the order passed under section 170(4) of the Ordinance. As no compliance was made, the complainant vide letter dated 5-10-2011 requested that the instant representation be treated as a fresh complaint.

3.According to the complainant, during the pendency of complaint No.772 of 2010, the Taxation Officer passed a back-dated order under section170(4)rejectingtheclaimofrefundonthegroundthatproof of tax deduction/payment was not furnished. While a specific recommendationwasgivenbytheHon'bleFTOthatorderundersection 170(4) be vacated/rectified by the Commissioner by invoking the provisions of section 122A, the needful was not done. Also, on appeal filed before the Commissioner (Appeals), it was held that refund along with compensation be issued to the taxpayer. However, the refund due wasnotissued,despitefourreminders sent on 18-2-2011, 6-7-2011,1-8-2011 and 12-9-2011, and several visits of AR to the offices of ACIR and CIR. A period of almost five years elapsed, but no refund was issued.

4.The complaint was sent to F.B.R. on 17-10-2011 for comments, which were filed during the hearing of complaint on 21-12-2011. Advance copy of these comments was provided to the complainant who filed a rejoinder. The Department contended that desk audit of the case was required to be made before the issuance of refund. The audited accounts of the company were required to be examined with a view to find out the profitability of the PE. In the rejoinder, the complainant also contended that refund was not issued in spite of directions of the Hon'ble FTO. Unnecessary objections were being raised causing delay in issuance of refund.

5.During the hearing, the AR stated that complete verification of tax deduction had already been made. The case of the complainant had not been selected for audit. Refund was rejected vide order undersection 170(4). This order was vacated in appeal. No further appeal was pending in this case. The company was a service provider. Tax deductions in its case were adjustable. No supplies were made. No presumptive income was earned. Option under Clause (41B) of Part-IV of the Second Schedule was filed for assessment under normal regime. All the legal requirements were complete on record. The Department was using delaying tactics and the refund had been withheld without any lawful justification.

6.The DR stated that in the prescribed column of return relating to nature of business "supply/installation of telecom equipment" had been shown. The Department wanted to conduct desk audit to find out as to whether any presumptive income was involved or not. He contended that in consequence to desk audit, amendment of assessment would be made, if warranted. Otherwise, refund due would be issued promptly.

7.Arguments of both the parties have been considered in the light of relevant record. The complainant's claim of refund is not disputed by the Department. Verification of tax deduction has already been made. No element of presumptive income is involved. No issue is pending in appeal. The case has not been selected for audit. The Recommendations of the Hon'ble FTO given in Complaint No.772 of 2010 have not been implemented, which attracts action under section 16 of the FTO Ordinance.

Findings:

8.The whole range of acts of omission and commission by the Department tantamount to maladministration in the light of section 2(3) of the FTO Ordinance, 2000.

Recommendations:

9.F.B.R. to direct the Chief Commissioner to--

(i)issue refund/compensation due, as per law, within 21 days, failing which proceedings under section 16 of the FTO Ordinance shall be initiated against all concerned; and

(ii)report compliance within 7 days thereafter.

H.B.T./4/FTOOrder accordingly.