RADIANT GLASS (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2014 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1480 (2014)

Income Tax Ordinance (XLIX of 2001)---

----Ss 170(4), 171 & 120---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Complaint against non-issuance of tax refund---Deduction of tax at source under provisions of the Income Tax Ordinance, 2001----Refund due to taxpayer---Additional payment for delayed refunds---Jurisdiction of Federal Tax Ombudsman---"Maladministration" & "contrary to law"---Scope---Complainant/taxpayer in return filed under S. 120(1) claimed refund on account of tax deducted at source under various provisions of the Income Tax Ordinance , 2001---Contention of complainant was that Department failed to process return / deemed assessment within mandatory period of sixty days under S. 190(4) of the Ordinance, and sought intervention of the Federal Tax Ombudsman---Validity---Commissioner, Inland Revenue was under a mandatory obligation to, suo motu, dispose of any refund claim arising out of return of income, that had been deemed to have been assessed under S. 120(1) of the Income Tax Ordinance, 2001 within 60 days of the date of deemed assessment and order under S. 170(4) of the Income Tax Ordinance, 2001 must be passed within 60 days; and if the same was not done, then delay in disposal of refund claim was evident and compensation for such delay was payable under S. 171 of the Ordinance---Department, in the present case had failed to adhere to mandatory sixty days time frame prescribed for disposal of refund claim, and such lapse was therefore, "contrary to law" and tantamount to "maladministration" under S. 2(3) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Commissioner to issue refund due to the taxpayer/complainant in accordance with law, and report compliance of the same within 30 days---Complaint was disposed of, accordingly.

Gojra Textile Mills Ltd.'s case Complaint No.11/289/88118 ref.

2010 PTD (Trib.) 519; Assistant Collector Customs Pakistan v. Khyber Electric Lamps MFG Company Ltd. Peshawar PTCL 2002 CL. 1; Muhammad Saleem v. FTO and others Writ Petition No.11545 of 2012; 2001 SCMR 838; Writ Petition No.11545 of 2012 and Pfizer Ltd. v. FOP PLD 1998 SC 64 rel.

Muhammad Munir Qureshi, Advisor for Dealing Officer.

Navid Farid, ITP for Authorized Representative.

Yasif Butt, DCIR for Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHRY FEDERAL TAX OMBUDSMAN.---This complaint is against non issuance of refund.

2.The complainant claimed refund of Rs.2,146,222 for Tax Year 2012 as per application e-filed on 7-9-2013. The refund arises as a result of excess deduction of tax at source under sections 148, 153, 231A, 231B, 234, 235 and 236 on imports, supplies, cash withdrawals from Banks, registration of motor vehicle, payment of motor vehicle token tax, and in electricity and telephone / mobile phone bills. As the refund claimed as per return filed / deemed assessment finalized under section 120(1) of the Ordinance was not processed / disposed of within the mandatory 60 days time frame stipulated in the statute, the complainant sought the intervention of the Federal Tax Ombudsman. The Deptt. had served no notice on complainant to furnish explanation or documentation to clarify the refund claimed.

3.When confronted, the Deptt. filed a reply raising a preliminary objection that as the complainant had an option under the statute to file an appeal before the first appellate authority in case of non disposal of his refund claim, there was no cause for the FTO to assume jurisdiction in the matter. Reference is made to President's decision in Complaint No.1176 of 2010 disposing of a Deptt. representation against the FTO's recommendations. Furthermore, the Deptt. also contends that it has been held by the President in his decision disposing of Complaint No.1359-K of 2001 that the FTO was not an appellate forum and was not competent to dilate on matters involving the interpretation of statutes. Therefore, he could also not dilate on the merits or otherwise of statutory provisions governing issuance of refunds. On merits the complainant contends that the delay in disposal of the refund claim was due to unforeseen delays in verification of the tax payment claims from the deducting authorities. These delays were statedly due to deficient documentation filed by the complainant and also due to discrepancies that have not been satisfactorily explained by him. The Deptt. has referred to decision of the Wafaqi Mohtasib in Complaint No.11/289/88118 (Gojra Textile Mills Ltd.) in which it has been held that the complainant is to blame equally for delays in verification of tax payment claims from the deducting authority.

4.Both sides heard and available record examined.

5.As held by the Appellate Tribunal Inland Revenue (ATIR) in reported judgment cited as 2010 PTD (Trib.) 519, the Commissioner Inland Revenue is under a mandatory obligation to, suo moto, dispose of any refund claim arising as per return of Income filed that has been deemed to have been assessed under section 120(1) of the Ordinance within 60 days of the date of deemed assessment and order under section 170(4) of the Ordinance must then also be passed within the 60 days timeframe. If this is not done, a delay in the disposal of the refund claim is evident and compensation for the delay is payable under section 171 of the Ordinance. The deemed assessment under section 120(1) of the Ordinance is an assessment order applicable "for all purposes of this Ordinance" (emphasis supplied) as stated in the statute itself. The deemed assessment order is therefore relevant for refund purposes as well. This judgment of the Tribunal is binding on all departmental functionaries. In case the refund claimant fails to respond to a short document notice issued by the Deptt. requisitioning tax payment information relevant to a refund claim, an order under section 170(4) of the Ordinance must still be passed within the mandatory 60 days time frame. Credit for tax payment claimed will not be allowed to the taxpayer to the extent that the relevant supporting documentation, such as tax payment challan/Cash Payment Receipt (CPR) or Rule-42 certificate, is not submitted. In this context it is pointed out that it has been held by the Supreme Court of Pakistan in reported judgment cited as PTCL 2002 CL. 1 (Assistant Collector Customs Pakistan versus Khyber Electric Lamps MFG Company Ltd Peshawar) that:--

"It is well settled of proposition of law that a thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all." (SIC)

The department has failed to adhere to the mandatory 60 days time frame prescribed for the disposal of the refund claim and this lapse on its part is an action 'contrary to law' and therefore tantamount to 'maladministration' under section 2(3) of the FTO Ordinance. The Honorable Chief Justice of the Lahore High Court in judgment disposing of Writ Petition No.11545 of 2012 (Muhammad Safeem v. FTO and others) held that the Federal Fax Ombudsman exercises jurisdiction without any restraint in all cases involving maladministration by FBR functionaries. The judgments cited supra are central to the issues involved in the present complaint and were not referred to before the President when he heard the Deptt. presentation in Complaint No.1176 of 2010 that has been cited in the preliminary objections raised by the Deptt. Appeal before the Commissioner (Appeals) is not the only option available to a taxpayer/refund claimant when the Deptt. fails to dispose of a refund claim. As per the Supreme Court judgment cited as 2001 SCMR 838 the Deptt. lapse is clearly 'contrary to law' as the mandatory statutory ( requirement of passing an order under section 170(4) of the Ordinance within the 60 days framework given in the statute to dispose of the pending refund claim has not been met. As explained above, such a lapse is tantamount to 'maladministration' as defined in section 2(3) of the FTC Ordinance and when aggrieved by such grievance the taxpayer can place the same before the Federal Tax Ombudsman as clarified in the LHC judgment in Writ Petition No.11545 of 2012. Once the matter is so placed before the FTO, no Court or other Authority can take it up for adjudication as stipulated in section 18 of the Federal Ombudsmen Institutional Reform's Act, 2013 (FOIRA). The law governing the office of the FTO has clearly changed substantially since the President announced his decision in Complaint No.1176 of 2010, the most recent change being the enactment of FOIRA in March 2013. It is to be noted that the FTO has not made any attempt to interpret the statute when disposing of this complaint. He has relied instead on interpretation of law by the competent appellate forum including the Supreme Court of Pakistan, the High Court and the Appellate Tribunal. As for the Deptt's. contention that the complainant also has a responsibility to ensure that tax payment documentation is verified in time by the deducting authority, it is pointed out that the complainant can be expected to play his role only after the Deptt. has served formal notice on him in time confronting him with the precise verification problems faced by the Deptt. in specific cases. Issuance of any such notice was not brought to the attention of the FTO in the present case. The elaborate arguments made by the Deptt. to justify wholly unwarranted delay in disposing of pending refund claims is itself tantamount to maladministration as it shows Deptt. reluctance to refund amounts due to taxpayers in brazen violation of the Supreme Court of Pakistan judgment in the Pfizer Ltd. v. FOP case PLD 1998 SC 64.Under the given facts and circumstances of the case, as explained supra, the exercise of jurisdiction by the FTO in the complainant's case is in order as the department has not passed any order under section 170(4) of the Ordinance within the mandatory 60 days time frame prescribed under the statute and the concerned departmental officials are responsible for the delay in disposal of complainant's refund claim.

Findings:

6.The delay in issuance of refund is tantamount to mal-administration under section 2(3)(ii) of the FTO Ordinance.

Recommendations:

7.FBR to direct the Chief Commissioner to:--

(i)issue refund due, in accordance with law; and

(ii)report compliance within 30 days.

KMZ/38/FTOOrder accordingly.