The instant appeal at the behest of the Revenue, pertaining to the tax year 2006 has been directed against the impugned order dated 30.11.2007, passed by the learned C.I.A. (A), Multan. Following grounds have been urged through memo, of appeal:
(i) That the learned C.I.T- (A) was not justified to hold that refund becomes due when deemed assessm ent is made under Section 120 of the Income Tax Ordinance, 2001.
(ii) That the learned C.I.T.(A) was not justified to ignore the provisions of Section 171(2)(c) of the Income Tax Ordinance, 2001 respecting the definition of phrase "become due".
(iii) That the learned C.I.T.(A) was not justified to ignore the decision of Honourable President of Pakistan in complaint No. 1096-L/2005, dated 26.5.2006 where Honourable F.T.O's decision was declared having been passed without jurisdiction.
2. Briefly stated the facts relevant for disposal of present appeal are that the taxpayer filed return of income pertaining to the tax year under appeal on 16^10.2006 'claiming refund. Return was supported with certificate of deduction of Income Tax. Subsequent thereto, refund application under Section 170 of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance) was filed on 22.11.2006 in accordance with the provisions of Section 170(2). In pursuance thereof the taxpayer sent another letter to the department which was received by the Revenue on 15.5.2007, reminding the department with regard to the original letter submitted by the taxpayer in respect of claim of refund, In the said letter, it was further requested that refund was to be issued within 90 days but since it Was issued on 3.3.2007 i.e. Beyond the prescribed period, request was made for the payment of compensation for the delayed period of 45 days. However, the department was not in an agreement with the claim of the taxpayer with regard to the payment of additional payment for delayed refund, It was the stance of the Revenue that additional payment for delayed refund started after lapse of 3 months of the date on which it became due. The department was of the view that as per Section 171 of the Ordinance, the refund is considered as having become due on the date the refund order, is made. |n this respect the department relied upon thd conditions laid down in Section 171{2)(c) of the Ordinance, It was maintained by the Revenue that since the order with regard to payment of refund was passed on 24.4.2007, refund vouchers were issued on the same date, it was delivered within 3 months of the passing of the order, hence the claim of compensation @ 6% under Section 171 was .Unlawful, therefore, the same was rejected.
3. Feeling aggrieved with the treatment accorded by the Revenue, an appeal was preferred before the learned first appellate authority who vide an order dated 30.4.2007, accepted the appeal of the taxpayer and, held that the taxpayer is entitled to compensation by way of additional compensation for delayed payment of refund.
4. The Revenue is in further appeal before the Tribunal to assail the impugned findings recorded by the learned first appellate authority.
5. Both the parties, have been heard and relevant orders perused, The learned D.R. While appearing on behalf of the Revenue reiterated almost all the arguments which and incorporated in the impugned order passed by the earned C.I.T.(A). It has been. Submitted that additional payment for delayed refund is only payable after the lapse of 3 months of the date on which it became due.
Further contended that Section 171(2) elaborates the phrase "becomes due", the learned D.R.
Emphasized that in the case of the taxpayer Section 171(c) is attracted because sub-sections (a) and (b) of Section. 171(2) are relatable to the cases where an order is made in consequence of an appeal by the appellate forums or in case of sub-section (b) where revised order has been made under Section 122(a) of the Ordinance. He stated that in all other cases the refund shall be treated as having become due, on the date of refund order is made by the concerned authority.
Continuing his arguments, he also tried to 'highlight the difficulties of the department wherein it needs time to determine the genuineness of the claim by the taxpayer. He stated that the time frame of 45 days and then 90 days provided under the law was given to facilitate the taxing authority to verify the claim of refund. The learned D.R. Summed up his arguments with the plea that the. Judgment rendered by the F.T.O. And relied upon by the learned first appellate authority stood reversed by the President of Pakistan, hence the findings given by the learned first appellate authority could not be given legal credence. He prayed for the reversal of the judgment passed by the learned first appellate authority.
6. Conversely, the learned A.R. Has opposed the arguments advanced by the learned D.R. With great vehemence. He averred at the bar that under the scheme of things given by the Income Tax Ordinance, 2001, the return filed under Section 120(1) shall be taken for all the purposes to be an assessm ent order issued to the taxpayer by the Commissioner of Income Tax on the date the return was furnished. The learned A.R. Further stated that the Return was furnished. The learned A.R.
Further stated that the Return filed under Section 120(1) will be considered to be a complete assessm ent, as provided for under the provisions of Section 114(2) of the Ordinance. He stated that the taxpayer submitted tax deduction certificate issued by the withholding agent at the Time, of filing of return, hence there was no deficiency whatsoever as per guidelines given by the law. He argued that the department has made wrong interpretation of Section 171 which deals with the additional payment for delayed refund. He explained that Section 171 cannot be read in isolation, In this respect he referred to Section 170 ibid which provides that a taxpayer may apply to the Commissioner for refund if the tax he has paid is in excess of the amount which the taxpayer is chargeable. He pointed out .That the word "may" does indicate that it is not obligatory for the taxpayer to apply to make a claim for refund. He contended that Section 120 of the Ordinance which relates to the framing of assessment provides that in case of furnishing of complete return of income, the return shall be treated to be an assessment order issued to the taxpayer by the Commissioner on the day the Return is furnished. Further contended that even in cases where taxpayer submits an application under Section 170(4) of the Ordinance in order to claim refund, the Commissioner is hot only bound to decide the issue within 45 days of the receipt of the refund application but an order in writing of the decision is to be served upon the taxpayer applying for the refund within the prescribed period. He further submitted that the period of 3 months as provided in Section 171 is to be calculated in the case of non-filing of application for claim of refund from the date of return of income is filed under Section 120 of the Ordinance or in case of filing of application from the expiry of 45 days of submission of application for claim of refund. |n this respect, he produced a copy of the application submitted to the department which clearly showed that the reminder was sent by the taxpayer mentioning therein that original application for claiming of refund was submitted on 18.10.2006, was received by the department on 15.5.2007.
Similarly, copy of letter dated 6.6.2007 whereby the claim Of compensation for delayed refund was refused by the department has also been placed on file, It was pointed out by the learned A.R. That it gives no reason whatsoever for passing an order on 3.3.2007 except reproducing Section 171(2) and stating that since the refund to becomes due on the date refund order is made, hence department was not liable to pay any compensation for delayed refund. As regards learned that appellate authority's reliance upon the judgment passed by the F.T.O., no argument was offered by the learned A.R.
7. We have heard the learned counsel for both the parties and have gone through the relevant orders along with the copies of application and reply submitted by the department. Before we embark upon/dilating the key issue involved in the instant case it would be in the fitness of things to reproduce the relevant provisions of law relatable to the current issue:- Section 120(1): Where a taxpayer has furnished a complete return of income (other than return under sub-section
(6) of Section,114) for a tax year ending on or after the 1st day of July, 2002,--
(a) The Commissioner shall be taken to have made an assessment of taxable income for that tax year, and the tax due thereon, equal to those respective amounts specified in the return, and
(b) The return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished.
Section 120(2): A return of income shall be taken to be complete if it is in accordance with the provisions of sub- section (2) of Section 114.
Section 170 Refunds: M). (2). (3) & (4): A taxpayer who has paid tax in excess of the amount which the taxpayer is properly chargeable under this