DECISION /FINDINGS ' The complainant, a private limited company, running a cotton factory, alleges maladministration on the part of respondent for deliberately avoiding to give complete credit claimed on account of tax deducted from their proceeds, in order to delay refund of amount deducted in excess of their assessed liability. It is further alleged that as an eye-wash refunds of Rs,841,360 and Rs,1,209,684 only were issued on 8-9-2001 and 31-10-2001 out of total claim amounting to Rs,6,161,889.
2. The respondent has submitted in response to notice under section 10(4) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 that the balance claim is unverified and requires verification from various DPCS and DPUS/Treasuries. It is submitted that as soon as the process of verification is completed the refund will be issued to the complainant.
3. The case came up for hearing on 7-12-2001. The respondent's representative submitted that it has to be ensured that the amount of tax deducted has been duly deposited in treasury for which the DCIT was directed to make verification by 15-1-2002. The only progress reported by 26-2-2002 was that the DCIT had addressed letters to the parties for verification. The DCIT attended on 18-3- 2002 and produced Voucher Book to show that a. Refund of Rs,355,145 had been prepared and was to. Be put up before the CIT for, his administrative approval.
4. Sh. Ghulam Asghar, Advocate counsel of the complainant pointed out that the Department was not addressing the problem seriously because allegedly, the intention was to drag on so as to delay the refund as long as possible. He produced the original letter of ACIT, Circle 33, Multan addressed to one Hakim-ud-Din Karachi but wrongly delivered by the Postal Authorities at complainant's address. The fact that complete address of Mr: Hakimud-Din was not noted on the letter clearly betrays the unfair motive. It was pointed out that even the withholding agents whose offices were at a walking distance from the Income Tax Office, Multan were not approached and the Treasury Challans of Rs,110,657, Rs,112,582, Rs,52,781 and Rs,178,345 relating to Arain Mills Limited, Salman Spinning Mills Limited Arain Textile Mills and Arain Fiber Mills Limited, Multan were obtained by the complainant through his own efforts without any assistance from the department.
5. It transpires that the functionaries deal with the tax withholding agents very casually and, quite obviously, do not attach due importance to the fact that millions of rupees deducted on behalf of the State by the textile mills, and several others are unlawfully retained by them for indefinite periods to be employed in their own business at the cost of the public.
6. This amounts to embezzlement of Government funds by the withholding agents. In the case in hand the above mentioned four mills among them had deducted Rs,454,365 only from one complaint as far back as 1997-98 and paid these into Government treasury after almost four years, on 8-2-2002 and that too when the complainant persuaded them to give copies of the treasury challans. The complainant claims to have furnished a long list of other tax deducting agencies who deliberately did not deposit amounts into the exchequer. Sh. Ghulam Asghar, the learned counsel, furnished photocopy of letter dated 3-3-2002 written by him to the CIT, Multan pointing out this embezzlement.
7. In Complaint No,250 of 2002 where similar issues were involved, a detailed decision has been rendered with recommendations amongst which following are incorporated and made in this case as well. The only difference between the facts of instant complaint with the facts in Complaint No,250 of 2002 is that here refund was delayed by denying credit claimed on account of taxes withheld while in the other case not only demand was created by refusing to allow credit against such claims but such dubious demand was collected from the complainant under duress.
9. The maladministration is established.
10. It is, therefore, recommended that the RCIT concerned to ensure:--
(i) that the refund of the remaining amount due to the complainant be issued within 15 days of the date of this order;
(ii) that the additional tax be charged under section 86 of the Income Tax Ordinance on the delayed deposits discussed in paras. 4 and 6 (supra);
(iii) that notices are issued to all the four defaulters under section 116 for default under section 108 for non-filing of statements prescribed under the Rules framed in pursuance of section 51 of the Ordinance and initiate proceeding for imposing penalties chargeable under the law;
(iv) that RCIT to direct the CIT concerned to refer the matter of default committed by the four Mills to the Legal Advisors for prosecution proceedings to be filed against them;
(v) further recommended that Member, Income Tax, C.B.R.:
(a) to ensure implementation by PRAL of the recommendation made in the Special Report on Accounting System of Income Tax Collection;
(b) to give wide publicity to the provisions of law as well as the procedure prescribed under the rules regarding the duties and obligations of assessees in their capacity as the statutory tax withholding agents of the State;
(c) to create awareness of their privileges among those from whose proceeds the taxes are deducted or on whose transactions taxes are collected at source by various withholding agents under the provisions of section 50 of the Income Tax Ordinance, 1979;
(d) to issue directions to the Inspecting Officers to conduct thorough inspection of one circle each month covering all aspects of performance including monitoring of taxes to be withheld by concerned assessees in that circle and the obligations to be fulfilled by them and to submit report by the 7th day of the following month to the CIT of the Zone with a copy to the Director, Inspection and Audit; and
(e) To ensure that entries of all taxes paid by or deducted or collected from each assessee are duly reported to the. Circle or any other authority holding jurisdiction over the assessment records of such assessee and he is allowed due credit at the time of assessment.
11. Report on compliance of recommendations made in para.10(i), (ii), (iii) and (iv) is to be submitted within 45 days of this order.
12. Report on compliance of recommendations made in para.10(v) is required to be submitted by 15-9-2002.