DECISION /FINDINGS Facts of the complaint are that the complainant had filed Wealth Tax Return for the assessment year 1995-96 declaring wealth amounting to Rs.36,00,000 which was assessed by the Wealth Tax Officer at Rs.14,378,091 vide Assessm ent order, dated 16-5-1996 which, however, was reduced to Rs.36,00,000 by the Appellate Tribunal vide its order, dated 17-9-2002. Following assessment by the Taxation Officer the complainant deposited wealth tax of Rs.328,986. He filed an application for refund of tax on 16-10-2002 which was not considered. Subsequently, the complainant filed more applications/reminders for payment of refunds but to no effect.
2. In reply the respondents have submitted that the complainant claimed total payment of wealth tax at Rs.328,986 for Assessm ent year 1995-96. Wealth tax liability of the complainant after ITAT's order amounted to Rs.40,000. Another amount of Rs.5,000, deposited on 21-11-1997 related to supper tax and not wealth tax and was, therefore, not refundable. The payment of Rs.30,000 made on 18-4-1998 could not be verified from the record of Data Processing Centre (DPC) available with the MTU. This payment would require further verification from State Bank of Pakistan. If the aforesaid three amounts were excluded the .Refundable balance would work out, tentatively, to Rs.253,986. The reply to the reminders could not be given because the wealth tax record was under transfer from Zone-B to MTU. Income tax and additional tax demands amounting to Rs.313,566 are outstanding against the complainant for Assessment year 1995-96 to 1997-98, which are more than the refund being claimed. The complaint may be dismissed being devoid of merit.
3. During the hearing, the AR reiterated the arguments advanced in the written complaint and stated that even if an amount of Rs.40,000 is deducted from the overall amount of refund claimed i.e. From Rs.328,986 it still would leave a refund of an amount of Rs.288,986. The complainant applied for 'appeal-effect' to Tribunal's order, dated 17-9-2002 and though the order was received by the department it did not give the appeal-effect. The AR pleaded that the department may be directed to give the requisite appeal-effect.
4. The DR, however, submitted that apart from Rs.40,000 which was payable, there were two more amounts namely Rs.5,000, which was not refundable as it was deposited as super tax, and an amount of Rs.30,000 which was paid on 13-4-1998 required verification. Asked as to why the appeal-effect was not given when the ITAT's order was received in September, 2002 he admitted that the appeal-effect should have been given but could not be due to work overload and due to transfer of record to the MTU. At this stage the two sides agreed to reconcile the amount of Rs.5,000 to ascertain whether it was deposited as wealth tax or super tax, reduce an amount of Rs.40,000 i.e. The tax payable from the overall claim of refund. The DR also undertook to verify payment of an amount of Rs.30,000 from the State Bank of Pakistan. He, however, stated that even then an amount of Rs.313,566 was outstanding against the complainant for Assessment years 1995-96 to 1997-98, which would be adjustable against possible refund of wealth tax. He further added that the assessm ents for income tax for Assessment years 1995-96, 1996-97 and 1998-99 were finalized on 18-5-1999. Refund of wealth tax became due only after issuance of ITAT's order on 17-9-2002, therefore, the outstanding amounts of income tax and additional tax were adjustable against refund of wealth tax. Asked to produce copies of formal demands for payment of additional tax the DR admitted that those had not yet been finalized/determined nor have the payment been demanded or a notice served. The AR submitted that if there was any outstanding liability they should have been informed at the appropriate time. The complainant had been making request after request for payment of refund but the department did not react. He further added that in so far as income tax assessm ent for Assessment year 1995-96 is concerned the complainant had written to the department on 8-11-1999 for rectification of the order under section 156 of the repealed Ordinance on account of claim of credit of 1/5th for repair of the property but no reply was received. Similarly applications for rectification were made in respect of assessments for the years 1996-97 and 1997-98 which also failed to elicit any response from the department. The income tax demands were, therefore, not final. Now they were time-barred and the department should accept complainant's contention. The DR submitted that applications for rectification of assessm ents for 1996-97 and 1997-98 were received, which were disposed of vide Income Tax Officer's, letter dated 13-8-1999 as not falling within the ambit of section 156 of the repealed Ordinance. He, however, could not produce any reply with regard to the other application, dated 8- 11-1999 relating to Assessm ent year 1995-96. The AR, however, submitted that the complainant had filed the returns for assessm ent years 1995-96, 1996-97 and 1997-98 for lease income and not property income and, therefore, even respondents' reply, dated 13-8-1999 was not relevant to the application, dated 22-6-1999. The DR showed his willingness to look into the application for rectification and decide it on merit so as to determine the correct picture. The complainant, however, submitted that the time for rectifications as applied for had expired. He, however, submitted that his client would be prepared to discharge any tax liability which is legally determined as payable and outstanding against it.
5. The arguments of the parties and the record of the case have been considered and examined. It is observed that despite Appellate Tribunal's clear order, dated 17-9-2002 the department failed to give the appeal-effect. Department's argument that some payment (Rs.30,000) required verification is also not tenable because had the appeal-effect been given and the refund created the task of verification could have been completed much earlier. They cannot, therefore, hold back this amount. The complainant is, however, ready to reconcile the amount of Rs.5,000 (super tax?) to ascertain whether this amount was deposited as payment of wealth tax or super tax. The DR could not produce copies of formal demands of additional tax said to be recoverable along with B demands for income tax which means that admittedly the demands for additional tax are still undetermined. As for complainant's applications for rectification of assessment orders for the subject years, it is observed that while the department disposed of complainant's application, dated 22-6-1999 for rectification under section 156 of the repealed Ordinance vide their letter, dated 13-8-1999 it appears that it did not process complainant's application for rectification for assessm ent year 1995-96. The Appellate Tribunal passed its order on 17-9-2002. Had the appeal- c effect been given and had the refund been created at the appropriate time the department could have adjusted the refund against the then settled income tax liability and allowed the balance refund, if any. The respondents' failure to (i) give appeal-effect to the Tribunal's order, (ii) create refund, and (i.e) pay proper attention to the complainant's refund claim has unduly complicated the matters to the detriment of the D complainant which amount to maladministration within the meaning of section 2(3) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.
6. The maladministration aspects of delay caused in allowing credit for taxes paid by, deducted and collected from assessee due to flawed system of accounting of such collection being persistently followed by the Income Tax Department has been the subject of a number of decisions e.g. C. No. 1429-L/2003, dated 10-1-2004 and the Special Report on Accounting of Income Tax Collection latest being the decision/recommendation in C. No.331-L of 2004, dated 4-8-2004.
Similarly the CBR has yet to take effective measures against officers who neglect and at times deliberately .Delay in allowing effect to the appellate orders such as the one in the instant case.
7. The issue of jurisdiction, specially the misreading of law with reference to the rider, "unless it is bona fide and for valid reasons" appearing in sub-clause (a) of clause (i) of subsection (3) of section 2 of FTO Ordinance with reference to allegations of maladministration on account of "departure from established practice or procedure" has also been considered in several decisions, the latest being the decisions in C.No. 530-L of 2003, dated 17-7-2004 and C. No. 1472-L of 2003, dated 17-7-2004. It is reiterated here that except the departure from established practice and procedure, no other trait of maladministration specifically laid down under subsection (3) of section 2 ibid or any other aspect of maladministration covered by the dictionary meanings of the word "maladministration" there is any valid reason with the Revenue Division or any tax employee working under the Revenue Division to justify the decision, process, recommendation, act of omission and commission falling under the ambit of maladministration; there is no onus on the complainant either to allege or prove malice/mala fide against the respondent.
8. It is now commended:--
(i) That the Member Income Tax, C.B.R. Directly or through the Regional Commissioners issues instructions to all concerned officers that they shall not provide any cause to assessee for alleging maladministration on account of inattention or delay in allowing effect to the orders in appeal; that all backlog shall be cleared by December, 31, 2004 and that any officer found responsible for maladministration on the aforesaid account after the aforesaid date shall render oneself liable to major punishment "Removal from Service (Special Powers) Ordinance, 2000."
(ii) That the Member Income Tax, C.B.R. Ensures, by 31st December, 2004, implementation of the recommendations of Special Report of the Federal Tax Ombudsman on Accounting of Income Tax Collection or any better devised system to enable G allowing full credit, at the time an assessment is made, deemed or through any method provided under the law, rules or regulations, of tax genuinely claimed with return to have been paid by or deducted or collected from the assessee, if full particulars of such payment by or deduction or collection from such assessee are enclosed with the return in the form of a statement or photocopies of challans, certificates or bills in respect thereof. (The C.B.R. May prescribe a pro forma statement in this behalf).
(i.e) The Member Income Tax, C.B.R. Issues instructions to all those concerned to implement/evolve and implement the system recommended at serial number (ii) supra that the backlog is cleared by December 31, 2004 and that any tax employee found responsible for any lapse in this regard shall render oneself liable to major punishment under the Rules ibid.
(iv) Allow appeal-effect to the Appellate Tribunal's order, dated 17-9-2002 and create refund immediately reducing the amount of refund by Rs.40,000 said to be tax payable in consequence of Tribunal's order.
(v) Reconcile with the complainant the disputed amount of Rs.5,000 and verify whether or not it represented payment of wealth tax or super tax and decide its status. If it is demonstrably determined that the amount in question represented wealth tax and not super tax, refund of this amount would be admissible, otherwise not.
(vi) Adjust towards recovery of income tax the tax liability finally settled and outstanding for assessm ent years 1996-97 and 1997-98 as complainant's applications for rectification for the aforesaid years were decided but without adjusting undetermined additional tax and pay the balance refund, if any.
(vii) Pay refund for assessm ent year 1995-96 after adjusting the finally settled/outstanding income tax liability without adjusting any additional tax which admittedly has not been determined/ demanded.
(viii)The Commissioner in-charge undertakes written counselling of the Tax Employees responsible for the maladministration found in the instant case.
(ix) Compliance be reported within 30 days in respect of recommendations (iv) to (viii) and monthly progress reports are submitted; beginning from September, 15, 2004 up to January 15, 2005 with regard to recommendations (i) to (i.e) supra. .