SHAH SONS PAKISTAN (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2017 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1447 (2017)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 120---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9(2)(b), 2(3) & 10---Complaint against non-issuance of income tax refund---Jurisdiction of the Federal Tax Ombudsman in relation to cases of tax refund---Maladministration---Scope----Contention of the Department was that per S.9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000; the Federal Tax Ombudsman had no jurisdiction to investigate matters related to assessment of income or wealth and liability of tax in which statutory remedy of filing appeal was available---Validity---Federal Tax Ombudsman was a forum for looking into arbitrary acts of negligence and inattention, which tantamount to maladministration and not for determination of income or tax liability or interpretation of law---Failure of Commissioner to pass an order under S.170(4) of the Income Tax Ordinance, 2001 did not absolve him of the responsibility to pass such order within the time prescribed by law and failure to deal with such statutory obligation within time prescribed amounted to "maladministration"---Department could examine genuineness and accuracy of claims for refund but same had to be sorted out within the time prescribed under the law which had not been done in the present case---No condition existed in law that before filing of a complaint before the Federal Tax Ombudsman, complainant had to make representation(s) to Departmental authorities---Federal Tax Ombudsman observed that neglect and inattention in issuance of refund was tantamount to maladministration under S. 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 and recommended that the Department direct the Commissioner to dispose of the refund/ compensation claim early---Complaint was disposed of, accordingly.

Order No.55 of 2007-Law (FTO) dated 31.07.2008 and Orders Nos. 26/FTO/2016 dated 16.08.2016 and No.78/FTO/2016, dated 16.08.2016 rel.

Abdur Rehman Dogar, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Nadeem Ahmad, DCIR RTO Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.--This complaint has been filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 against non-issuance of refund amounting to Rs.1.271 million with compensation for tax year 2016.

2.Brief facts of the case are that the Complainant, a Private Limited Company deriving income from manufacturing and supply of tractor parts, e-filed income tax return on 17.12.2016.As the return assumed the status of deemed assessment under section 120(1)(b) of the Income Tax Ordinance, 2001 (the Ordinance), refund application was filed on 19.12.2016 claiming refund of excess amount deducted under Sections 231A, 234, 235 and 236 of the Ordinance. The documents were also submitted on 21.12.2016, followed by visits of the Deptt. time and again, but the claim was not settled.

3.The complaint was sent for comments to the Secretary, Revenue Division, Islamabad in terms of Section 10(4) of the FTO Ordinance, 2000. In response, the Chief Commissioner IR, RTO, MuIan vide letter No.CCIR/RTO-MN/13431 dated 22.03.2017 forwarded comments of the Commissioner IR, Corporate Zone, Multan bearing No.4020 dated 22.03.2017. The Deptt. raised preliminary objection that this forum had no jurisdiction to investigate in terms of the provisions of section 9(2)(b) of the FTO Ordinance, 2000 where the matter relates to the assessment of income or wealth and liability of tax in respect of which remedy of filing appeal is available under the relevant legislation. Failure of the Commissioner IR to pass order within the time specified in law was also appealable under section 170(5)(b) of the Ordinance. Further, under Rule 3 of the Federal Tax Ombudsman Investigation and Disposal of Complaints Regulation, 2001, the Complainant was under obligation to approach the Deptt's higher authorities before filing of this complaint. The matter also pertains to the interpretation of law and so beyond the jurisdiction of this fora as held by the Hon'ble President of Pakistan in a number of representation. On merits, the return was found incomplete as audited accounts were not annexed with it. The Complainant was, therefore, asked to provide accounts by 03.04.2017 vide notice under section 120(3) of the Ordinance but the same are still awaited. The claim would, however, be processed after receiving the supportive documents.

4.On the contrary, the AR stated that audited accounts were attached with the return, but the same have not been checked from the system. The return could not be feeded in the system without details/ attachments and the supportive documents.

5.The DR reiterated the written comments. According to him, no maladministration was involved in the case. However, he could not justify as to why the deficiency, if any, was not communicated to the Complainant immediately after receiving refund application.

6.Both parties heard and record perused. This fora is looking into the arbitrary acts of negligence and inattention which tantamount to maladministration and not the determination of income or tax liability or interpretation of law. Moreover, failure of the Commissioner to pass order under subsection (4) of section 170 of the Ordinance does not absolve him of his responsibility to pass order within the time prescribed in law. The Hon'ble President of Pakistan vide order No.55/2007-Law(FTO) dated 31.07.2008, has endorsed the view that failure to deal with a statutory obligation within the time prescribed under the statute amounts to maladministration. In numerous recent decisions also, the Hon'ble President rejected Deptt's representation on identical issues. In orders No.26/FTO/2016 dated 16.08.2016 and No.78/FTO/2016 dated 16.08.2016, the Hon'ble President rejected FBR's representation on the contention that non-issuance of refund was appealable under Section 170(5)(b) of the Ordinance, with the observation that "Agency has unnecessarily filed representation simply to delay the matter". The Deptt. can, however, examine the genuineness and accuracy of claims, but the same is to be sorted out within the time prescribed in law. This has not been done.

7.Further, as per Rule 3(2)(ii) of the Federal Tax Ombudsman Investigation and Disposal of Complaints Regulation, 2001, complaint can be made if a representation to the Senior Officer of the Revenue Division, Deptt or Agency in respect of the allegations contained in the complaint was made, but either no reply thereto was given within a reasonable time or representation had unjustly been turned down. However, there is no condition in law that before filing complaint with this fora representation shall be filed to Deptt'l authorities.

Findings:

8.The neglect and inattention in issuance of refund was tantamount to maladministration under Section 2(3)(ii) of the FTO Ordinance.

Recommendations:

9.The FBR-

(i)to direct the Commissioner IR to dispose of refund/compensation due early; and

(ii)report compliance within 45 days.

KMZ/45/FTO Order accordingly.