FINDINGS/DECISION JUSTICE (RETD.) SALEEM AKHTAR, FEDERAL TAX OMBUDSMAN - The complainant is an individual earning his income from manufacture of adhesives and cementing solutions. Income Tax Returns filed by the complainant for the assessment year 2000-2001 declaring income at Rs. 1,80,000/- was accepted under Section 59(1) of the repealed Ordinance. However full credit for the tax paid deducted was not given in I.T. 30 and demand notice. The complainant moved an application for rectification and order under Section 156 of the repealed Ordinance was' made by the Taxation Officer on 23.7.2001 determining the refund of the complainant at Rs. 5,21,924/-. It is alleged that this refund has not been issued to the complainant since23.7.2001 by Taxation Authorities on one pretext or other. The complainant made an application to the RCIT for issuance of refund on 11.8.2000 but instead of issuance of refund proceedings under Section 66A of the repealed Ordinance were initiated against the complainant on frivolous grounds and order under Section 66A of the repealed Ordinance was. Passed by the IAC on 12.10.2001 cancelling the order under Section 59(1) of the repealed Ordinance. The complainant filed an appeal before the Income Tax Appellate Tribunal against the above order. The ITAT vide I.T.A. No. 5005/LB of 2001 and I.T.A. No. 5051/LB of 2001, dated 28.10.2003 cancelled the order under Section 66A by the IAC Range-ll Zone-A, Lahore. The complainant made an application for refund to the Taxation Officer vide his letter dated 15.11.2003 for issuance of refund but so far refund has not been issued. This has caused grievance to the complainant and constitutes maladministration.
2. In reply the RCIT Eastern Region, Lahore has raised preliminary objection that this complaint relates to assessm ent proceedings and does not fall in the jurisdiction of the Federal Tax Ombudsman.
3. On merits it has been submitted, that action under Section 66A in this case, was taken on the valid ground and order under Section 59(1) was cancelled hence no refund was due to the complainant, It is further submitted by the RCIT that order under Section 66A dated 12.10.2001 by the IAC Range-Ill was cancelled by the ITAT vide order dated 28.10.2003 with the observations that there was no formal assessm ent order in writing under Section 59(1) of the repealed Ordinance hence action under Section' 66A could not be taken against the complainant but the CIT Zone-A, Lahore has moved a Miscellaneous Application vide No. 3670, dated 27.1.20Q4 for recall of the above order of the ITAT. The RCIT has denied and maladministration and' has submitted that the refund could not be issued to the complainant for valid reasons because of cancellation of order under Section 59(1) by the IAC and subsequent filing of miscellaneous application- before the ITAT.
The RCIT has also submitted that in the original assessment order under Section 59(1) full credit for tax paid/deducted could not be given to the complainant, as the complainant did not produce legible copies of the challans for deduction of tax.
4. Mr. Muhammad Ejaz Ali Bhatti, Advocate attended for the complainant. He has explained that order under Section 156 was passed by the Taxation Officer on 23.7.2001 determining the refund of Rs. 5,21,924/-. As provided under Section 100 of the repealed Ordinance no application was required to be fifed by the complainant for issuance of refund, It was incumbent upon Taxation Officer to issue the refund immediately irrespective of the fact whether any application for refund was made by the complainant or not. The C.B.R, time and again has issued instructions that refund wherever due should be issued promptly but the Taxation Authorities violated these instructions especially the instruction issued vide C.B.R. Circular 2 of 2000 and determined refund was not issued in spite of the above provisions of law and the fact that the complainant made application for refund vide his letter dated 11.8.2001 to the Regional Commissioner of Income Tax, Lahore but instead of issuance of refund action under Section 66A of the repealed Ordinance was initiated against the complainant. Mr. Ghulam Rasul, DCIT attended for the Revenue and reiterated the sub-sections made by the RCIT in his report.
5. The complaint and respondent's reply have been examined and rival arguments have been considered. The RCIT has raised a preliminary objection that this complaint relates to assessment proceedings hence it does not fall in the jurisdiction of the Federal Tax Ombudsman. This objection has been raised in routine and is not correct because this complaint is about non-issuance of refund hence the preliminary objection raised by the RCIT is overruled.
6. From the above facts it is quite evident that refund in this case has been withheld any justification. The order under Section 156 was made on 23.7.2001 and order under Section 59(1) was cancelled on 12.10.2001, refund could be issued to the complainant within this period. However after cancellation of the order under Section 66A by the ITAT vide their order dated 28.10.2003 there was absolutely no justification for non-issuance of refund. The complainant has made repeated applications for issuance of refund, especially application dated 15.11.2003. The plea of the RCIT that refund has not been issued to the complainant after cancellation of the order under Section 66A because the CIT(A) has moved miscellaneous application for recall of the order of the Income Tax Ordinance, 200I dated28.10.2003 is not tenable. The refund already determined cannot be withheld because of expected liability. This issue has already been examined in detail in C. No. 1358-L/2002 wherein the President of Islamic Republic of Pakistan on representation by the Income Tax Department was pleased to hold:-- "The; Federal Tax Ombudsman findings that refund of tax cannot be withheld to cover the assessee's expected liability remains unexplained in the representation Law Divisions' recommendation that the Federal Tax Ombudsman recommendation is appropriate and is well- founded accordingly the President has been pleased to reject the representation of D.G., L.T.U.
Karachi.
"Non-issuance of refund to the complainant as above constitutes maladministration within the meaning of the provisions t>f Section 2(3)(v) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. The reasons advanced by the respondents for withholding complainant's refundable amounts are invalid, It has been emphasized in several findings that there is no law that requires the assessee to furnish his copy of paid challan to claim tax credit, It is the obligation of the Department to keep proper account of tax paid by or withheld or collected from the assessee in the respective circles where they are assessed. The fact that the tax credit claimed by the complainant has been allowed ultimately, proves that the claim was correct but the Department had not maintained proper account of collection in the relevant records, It further proves that a Special Report presented by this Forum to Honourable President of Pakistan and which he had graciously approved for implementation has neither been implemented nor any better alternative has been adopted to address one of the most serious grievances of the taxpayers.
7. Further there is no provision empowering any tax employee to withhold the determined refundable amount at his sweet-will without passing a valid order in this behalf. The respondents have not referred to any order passed in this behalf either in their para wise written comments on the complaint or at the time of hearing. There is no provision of law for automatic stay either of due refunds or of due demand during pendency of litigation, It will be appreciated if officers of the level of RCIT take due note of such irresponsible comments of subordinates before subscribing their signatures to such reports.
8. The alleged maladministration is proved in failure to give prompt credit of tax collected from the complainant and for deliberately withholding the refundable amount determined on 23.7.2001 till 12.10.2001, when such order was cancelled under Section 66A, and again since 28.10.2003 when the order under Section 66A cancelling the refund order was vacated by the Tribunal. No fresh application for refund as provided under Section 170 of I.T. Ordinance, 2001 (The Ordinance) is required in the instant case because it is covered by the previsions of Section 239 of the Ordinance.
The respondent committed wilful error in determination of refund in the original order and then deliberately withheld the refundable amount ultimately determined by him. The respondent is again withholding the refundable amount after restoration of the refund order without any. Valid reasons.. The onus to prove that there was no maladministration in the instant case lay with the respondents, which has not been discharged.
9. It is therefore recommended.
(i) . That the refund already determined for the assessment year 200-01 should be issued immediately and compensation if any due to the complainant should also be paid.
(ii) Compliance report be submitted within 40 days of receipt of these recommendations by the Revenue Division.