M. SHAH SONS PAKISTAN (PVT.) LTD. VS The SECRETARY, REVENUE DIVISION, ISLAMABAD, 2017 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1651 (2017)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 10, 2(3) & 9---Federal Tax Ombudsman, jurisdiction of---"Maladministration"---Disposal of complaints---Delay in issuance of refunds---Scope---Complaint against non-issuance of refund / compensation under S.170(4) of the Income Tax Ordinance, 2001---Contention of complainant was that order on its application for issuance of refund was not processed within the 60 days period provided for in S.170(4) of the Income Tax Ordinance, 2001---Department contended that jurisdiction of the Federal Tax Ombudsman was barred under S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Refund claim was not an issue pertaining to assessment of income or determination of tax liability and Commissioner had to determine excess refundable amount after verification of tax payment and in case there was any deficiency, then the Commissioner was required to requisition the same by issuing a letter under S.120(3) of the Income Tax Ordinance, 2001 and no such exercise was conducted in the present case---Failure to deal with a statutory obligation within the time prescribed under a statute amounted to "maladministration"---Federal Tax Ombudsman recommended to the Department to direct to the Commissioner to settle the complainant's refund claim in accordance with the provisions of law without further delay---Complaint was disposed of, accordingly.

Order No.55/2007-Law (FTO); Orders No.26/FTO of 2016, dated 16.08.2016; No.78/FTO of 2016 dated 16.08.2016; 2016 PTD 377 (2015 LHC 6191) rel.

Sardar Irshad Shaheen, Advisor and Abdur Rehman Dogar, Advisor Dealing Officers.

Riaz Ahmad Raja, ITP Authorized Representative.

Arslan Quddus Bukhari, DCIR RTO, Multan Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.---The complaint has been filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (the FTO Ordinance) against non issuance of refund/compensation under section 170(4) of the Income Tax Ordinance, 2001 (the Ordinance) for tax year 2016.

2.Brief facts of the case are that the Complainant, private limited company, deriving income from manufacturing agriculture tractor parts for Millat Tractors Ltd. and Al-Ghazi Tractors Ltd. etc. filed income tax return for tax year 2016 on 31.12.2016 declaring income of Rs.5.444 million and claiming refund of Rs.0.506 million due to excess deduction of withholdings tax under sections 231A and 235 of the Ordinance. Application for issuance of refund was moved on 27.01.2017. As refund order was not passed within 60 days as provided under section 170(4) of the Ordinance, which is construed by the Complainant as tantamounting to maladministration.

3.The complaint was sent for comments to Secretary Revenue Division, in terms of Section 10(4) of the FTO Ordinance. In response, the Deptt submitted its comments vide letter No.CCIR/RTO-MN/14638 dated 20.04.2017. The Deptt raised preliminary objection of jurisdiction of FTO and stated that jurisdiction is barred under section 9(2)(b) of the FTO Ordinance as matter pertains to assessment and determination of tax liability and interpretation of law. On facts it was stated that the complaint needs no comments being general in nature. It was further stated that verification process of refund was underway.

4.Both the parties heard and record perused. Preliminary objection raised by the Deptt. is just for the sake of objection and a pretext to delay the settlement of refund claim. After passing the deemed assessment order under section 120(1) of the Ordinance on the basis of return filed, the Commissioner is bound to settle refund claim within 60 days, after filing of refund application. A refund claim is not an issue pertaining to assessment of income or determination of tax liability. What the Commissioner has to do is to calculate/determine excess refundable amount after verification of tax payment. In case there was any deficiency or short documents, the Commissioner was required to requisition the same from the Complainant by issuing letter under section 120(3) of the Ordinance. In case any deduction certificate of a withholding agent was required, it could have been requisitioned from that agent. No such exercise has been carried out by the Deptt. Moreover, the Hon'ble Supreme Court of Pakistan in the case of Pfizer Laboratories Ltd. v. Federation of Pakistan held that withholding of a citizen's money by public functionaries on the plea of limitation or any other technical reason was deprecated. Whereas, the Hon'ble President 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 has rejected Deptt's representations on identical issues. In the recent Orders No.26/FTO/2016 dated 16.08.2016 and No.78/FTO/2016 dated 16.08.2016, the President rejected FBR's representation on the Dept'l 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". Further, Division Bench of the Honorable Lahore High Court had overruled the judgment referred to by the Deptt. in a later judgment cited as 2016 PTD 377 (2015 LHC 6191(sic)). Maladministration on the part of the Deptt is, therefore, established.

Findings:

5.Delay in settling the Complainant's refund claim within time as prescribed under section 170(4) of the Ordinance tantamounts to maladministration under section 2(3)(ii) of the FTO Ordinance.

Recommendations:--

6.FBR to?

(i)direct the Commissioner to settle the Complainant's refund claim in accordance with the provisions of law without further delay; and

(ii)report compliance within 45 days.

KMZ/48/FTO Order accordingly.