Ch. SHAHID MEHMOOD VS SECRETARY REVENUE DIVISION, ISLAMABAD, 2015 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2443 (2015)

Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 10---Income Tax Ordinance, 2001, S. 114(6)---Filing of revised income tax returns---Obtaining written permission of Commissioner for filing revised income tax returns---Income tax refund---Complaint of maladministration on part of Income Tax Authorities for non-issuance of income tax refund---Complainant / taxpayer had filed revised returns for the tax years, 2011 to 2013 claiming enhanced refund and contended that the Department was not issuing the same-Contention of Department was inter alia that complainant had filed revised returns without obtaining prior written permission of the Commissioner in terms of S. 114(6) of the Income Tax Ordinance, 2001 ; hence the revised returns were invalid---Held, that examination of available record did not establish that prior approval of Commissioner Inland Revenue had been obtained and there was no confirmation by the Commissioner in such regard---Approval envisaged by law could not be deemed to have been obtained simply because the complainant/ taxpayer was able to file revised online returns for the tax year 2011 to 2103 and the law required that Commissioner's prior approval be obtained before- revised returns were filed---Commissioner, if he states that the prior approval had not been obtained and the complainant was unable to controvert the said statement with any documentary evidence that established that approval envisaged in law was in fact obtained, then the statutory requirement was not satisfied, as in the present case---Contention of complainant that the requirement of obtaining written permission was introduced vide an amendment in the Income Tax Ordinance, 2001 through the Finance Act, 2013 and was hence applicable with effect from tax year 2014 and was therefore not applicable to the revised returns of the complainant; was misconceived as said revised returns were filed in October, 2014 and at that time the statutory requirement of Commissioner's prior approval was in force as the Finance Act, 2013 became effective from 1st July, 2013 and any return revised after said time became subject to approval of the Commissioner---No case= for maladministration was made out and complaint was dismissed, in circumstances. [pp. 2445, 2446] A & B

Noon Sugar Mills Ltd. v. CIT 1990 PTD 768 and CIT v. Pakistan Tobacco Co. Ltd. 1988 PTD 66 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Shafiq Ahmad Chawala, Authorized Representative.

Manan Younas, DCIR Departmental Representative.

FINDINGS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.---This is a complaint filed under section 10(1) of the Establishment of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), against non-issuance of income tax refund.

2. The complainant original claimed refund of Rs.497,894 in Tax Year, 2011 and Rs.92,876 in Tax Year, 2012. He then revised the returns for Tax Years, 2011, 2012 and 2013 and filed fresh, enhanced refund claims as under:--

The refund claim arises on account of excess deduction of tax at source under sections 235 and 148 of the Income Tax Ordinance, 2001 (the Ordinance), in electricity bills and on import of goods, respectively. The complainant contends that despite fulfilling all statutory requirements, the Deptt. failed to process and dispose of his pending refund claim. He says that personal efforts to realize refund have been in vain and he was thus left with no alternative but to approach the Federal Tax Ombudsman.

3. When confronted in terms of the provisions of section 10(4) of the. FTO Ordinance, the Deptt. filed a reply to intimate that the complainant had revised his returns and filed revised returns of income for Tax Years, 2011, 2012 and 2013 without obtaining the prior written permission of the Commissioner IR as envisaged in section 114(6) of the Ordinance and the revision was thus not acceptable to the Deptt. and the revised returns were being treated as invalid returns under the law. Furthermore, the Deptt. also stated that proof of tax deductions at source had not been filed and credit could therefore not be accorded for any tax payments claimed to have been made by complainant. Under the given facts and circumstances of the case the Deptt. claimed that the refund claims could not be processed till such time that the statutory obligations were fulfilled by the taxpayer.

4. Scrutiny of the complaint revealed that there was a time lapse between the date that the refund claims arose and the date that the matter was placed before the FTO. As per provisions of section 10(3) of the FTO Ordinance, a complaint must be filed before FTO within six months of the date of grievance. If the revised returns are treated as not valid as approval of the Commissioner IR had not been obtained, then clearly the bar laid down in section 10(3) of the FTO Ordinance would be attracted. The complainant was asked to clarify his position, both with regard to commissioner's approval for the revised returns and also with regard to the provisions of section 10(3) of the FTO Ordinance.

5. In written reply dated 11th June 2015 the complainant stated that commissioner's prior approval was not required as the amendment in this regard was placed on the statute through Finance Act, 2013 that was statedly applicable from tax year, 2014. Simultaneously, the complainant also contended that he had actually obtained the commissioner's approval for the revised returns. He supported his contention by pointing out that he filed revised returns for tax years, 2011, 2012 and 2013 electronically and these could only have been filed if the revised return button was "enabled." Photocopies of e-filed returns were submitted to substantiate the stance. That being so, it was stated that the statutory requirement of commissioner's prior approval should be deemed to have been obtained.

6. As regards the bar laid down in section 10(3) of the FTO Ordinance, the complainant contended that after revision of returns, he filed refund applications in November 2014, followed by complaint before the FTO in March 2015 which was within the six month statutory deadline.

7. Both sides heard, available record examined and written averments considered.

8. Examination of the available record does not establish that prior approval of the Commissioner IR has been obtained. There is no confirmation by the Commissioner IR in this regard. The approval as envisaged in law cannot be deemed to have been obtained simply because the complainant was able to file revised online returns for tag years, 2011 to 2013. The law requires that the commissioner's prior approval be obtained before revised returns are filed. If the Commissioner says that his prior approval has not been obtained and the complainant is unable to controvert the commissioner's statement with any documentary evidence that establishes unequivocally that the approval envisaged in law was in fact obtained, then the statutory requirement is not satisfied, as in the case of the complainant.

9. As regards complainant's contention that the amendment in the law with regard to prior approval of the commissioner was placed on the statute through Finance Act, 2013 and was hence applicable with effect from tax year, 2014, such a view is quite misconceived. The revised returns were filed in October 2014 and at that time the statutory requirement for commissioner's prior approval was very much in force as the Finance Act became effective from 1st July, 2013 and any return revised after that date became subject to the commissioner's prior approval requirement. As succinctly explained by the Hon'ble Supreme Court of Pakistan (1990) PTD 768 Noon Sugar Mills Ltd. v. CIT):

"12. It is by now a well settled principle that the liability to pay tax is created by the Income-tax Act but the payability and the quantification of tax depend on the passing and application of Annual Finance Act."

10. This has been further clarified by the Karachi High Court in judgment cited as (1988 PTD 66 CIT v. Pakistan Tobacco Co. Ltd.) in the following terms:--

"(ii) Maneklal Vailabhdas Parikh and Sons v. Commissioner of Income-tax, Gujrat II, reported in 1969, Volume 2 Income-tax Reports, page 637. In the above case a Division Bench of the Gujrat High Court in an Income-tax reference held that though the subject of charge is the income of the previous year, the law to be applied is that in force in the assessment year unless otherwise stated or implied and that any amendment which is in force at the beginning of the assessment year must govern the case, though the amendment is made after the income under assessment is earned.

There cannot be any cavil to the legal proposition propounded in the above two cited cases. The legal position is very obvious, namely that accounting year is different from assessment year. The law applicable to a particular assessment year will be the law which is in force in that year and not the law which was in force during the accounting year unless otherwise stated or implied."

11. Thus under the Income Tax Ordinance, 2001 accounts closing on 30th June 2013 will come up for assessment in tax year, 2013 and previous year and Tax Year both refer to 2013. In the earlier repealed Ordinance, the distinction between previous years, 2012-2013 relevant to assessment years, 2013-2014 is new done away with.

12. In view of the position explained supra the requirement for obtaining the commissioner's prior approval before filing a revised return of income placed on the statute through Finance Act, 2013 became effective from 1st July 2013 (i.e. income as per accounts closing on 30th June, 2013). In this view of the matter, the law stood amended in October 2014 when the revised returns for, tax years, 2011, 2012 and 2013 were filed by the complainant. As the commissioner's prior approval had not been obtained, these returns cannot be considered for investigation purposes by the FTO as he is bound to follow the law laid 'down in the statute. Thus while the revised returns cannot be considered by FTO, the original returns, filed earlier, also cannot be considered due to the bar laid down in section 10(3) of the FTO Ordinance. However, should the complainant apply for revision of returns to the Commissioner for approval with valid grounds, he may qualify to claim refund as per law.

13. As maladministration could not be made out, the investigation is closed and case file consigned to record.

KMZ/85/FTOOrder accordingly.