MUHAMMAD ZAFAR IQBAL VS The SECRETARY REVENUE DIVISION, ISLAMABAD, 2017 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1405 (2017)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 161, 205 & 153---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9, 2(3) & 10---Federal Tax Ombudsman, jurisdiction of---Maladministration---Disposal of complaints---Scope---Complaint against initiation of proceedings under Ss.161 & 205 of the Income Tax Ordinance, 2001 for default in deduction of withholding tax at source---Contention of complainant was that proceedings initiated in respect of the default in deduction of withholding tax already stood annulled by the Commissioner (Appeals) and there was no justification for initiation of said proceedings again---Validity---Federal Tax Ombudsman observed that the matter had gone though two rounds of appeal and was also subject of a complaint made to the Federal Tax Ombudsman, and thereafter fresh proceedings were initiated against complainant---Federal Tax Ombudsman disposed of the complaint on assurance of the Department to consider the complainant's reply to the notice on merits and with the direction to resolve the matter early as per law on receipt of reply and documents from the complainant.

1994 SCMR 2232 and PLD 1990 SC 666 ref.

Abdur Rehman Dogar, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Muhammad Masood, DCIR Departmental Representative.

FINDINGS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN---This complaint has been filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against the issuance of notice No.WHT/LY/ 2016-17/119 dated 18.10.2016.

2.Brief facts of the case are that the Deptt. initiated proceedings under Sections 161/205 against the Complainant for default of non-deduction of tax under Section 153(1)(a) of the Income Tax Ordinance, 2001 (the Ordinance) on payments made to suppliers for the period July 2012 to June 2013 (tax year 2013). The Inland Revenue Officer, Withholding Unit-09, Layyah treated the Complainant as assessee in default vide order dated 25.11.2014. Aggrieved, the Complainant filed appeal before the Commissioner IR (Appeals) who vide order dated 05.03.2015 annulled the assessment. The Deptt. did not file appeal to the ATIR and therefore, it attained finality. Another order was passed on 28.10.2015. The Complainant again filed appeal before the Commissioner IR (Appeals) who vide Order-in-Appeal No/1014 dated 23.08.2016 again annulled the order on the ground that no one should be condemned unheard as Superior Courts have laid great emphasis on it in the cases cited as 1994 SCMR 2232 and PLD 1990 SC 666. Later, a team of Audit and Revenue Receipts, Lahore pointed out that the Complainant had failed to deduct and deposit withholding tax and by doing so caused loss of Rs.9.401 million to the national exchequer. Based on this observation, the IRO, Withholding Unit, Layyah again initiated proceedings for the same period vide notice No.119 dated 18.10.2016. The Complainant brought the issue before this forum on the ground that assessment has already been annulled by the Commissioner IR (Appeals) and there was no justification for re-initiation of the proceedings. Moreover, no bar code appeared on the said notice which was contrary to instructions of the FBR in C.No.1(177)S(IDT-FATE)/2015 dated 30.06.2015.

3.The complaint was sent for comments to the Secretary, Revenue Division, Islamabad in terms of Section 10(4) of the FTO Ordinance. In response, the Chief Commissioner IR, RTO, Multan vide letter No.CCIR /RTO-MN/7033 dated 24.11.2016 forwarded comments of the Commissioner IR, Withholding Taxes Zone, Multan bearing No.493 dated 24.11.2016. According to the Deptt., notice dated 18.10.2013 was lawful. As regards printing of bar code, it was stated that statutory notice under sections 161/205 of the Ordinance has not been issued as yet. The default of withholding tax reported by Audit and Revenue Receipts has been communicated through an informal letter dated 18.10.2016 just to know the actual state of affairs and to provide opportunity of hearing to the Complainant to explain his position. Statutory notice, if so required, would be issued with bar code, to conclude the proceedings under sections 161/205 of the Ordinance. The case has gone through two rounds of appeal before the Commissioner IR (Appeals) and apart from that, after passing second assessment order, the Complainant had filed a complaint before this forum (Complaint No.33/MLN/IT/(13)/1343/ 2015) which was disposed of on 17.03.2016 with direction to revisit the assessment order. Aggrieved, the Deptt. filed representation before the Hon'ble President of Islamic Republic of Pakistan which was accepted. Thereafter, fresh proceedings were initiated on the basis of observation of Directorate of Revenue Receipt Audit that the Complainant being a prescribed person was required to withhold tax @ 3.5% under section 153(1)(a) of the Ordinance on payments made to the supplier companies. According to the Deptt., only controversy at present is whether applicable withholding tax rate on payments made to pharmaceuticals suppliers was 1% or 3.5%.

4.During the processing of complaint on 21.12.2016, the DR assured to consider Complainant's reply to the notice on merits and as per law. The AR agreed to submit reply and assist the Deptt.

5.Considering the above, investigation is closed with direction to the Deptt. to resolve the matter early as per law on receipt of reply/ documents from the Complainant.

KMZ/44/FTO Order accordingly.