FINDINGS/RECOMMENDA TIONS MUSHT AQ AHMAD SUKHERA, (FEDER AL TAX OMBUDSMAN).--- The complaint was filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against unlawful recovery of tax demand from the bank account of the Complainant outstanding against a Private Ltd Company , and undue delay in refunding the same. He had also sought for award of costs and compensation under section 22 of the FTO Ordinance, along with additional payment for delayed refund.
2. Precisely , the Complainant an individual assessed to tax at RTO-III, Karachi vide NTN 2515005-7. According to the AR, the Inland Audit Officer (IAO) E&C Unit No-2 Haripur E&C Unit-02 Zone-01, RTO, Abbottabad, without considering the fact that the Complainant was assessed to tax at, RTO-III, Karachi, against whom no tax demand was outstanding and without serving on him any prior notice, illegally attached his following bank accounts and recovered amounts shown against each, under Section 140 of the Income Tax Ordinance, 2001 (the Ordinance) read with Rule 69 of the Income Rules, 2002 (the Rules): Sr. No. Name of the Bank Amount recovered in (m) DD No. and date
1. Standard Chartered Bank, M.A Housing Society KarachiRs.1.707 No.4164691 08.06.2017
2. Bank Alfalah PECHS Karachi Rs.0.007 08.06.2017
3. As this illegal recovery came to this notice of Complainant, he visited the IAO E&C Unit No-2 Haripur , where he came to know that in fact sales tax/FED liability was outstanding against M/s East End Tobacco Company (Pvt) Ltd, an existing taxpayer of Abbottabad. List of all the five Directors of the defaulting company was also available in the record of IAO. Following were the directors:
(i) Mr. Khaleel ur Reman son of Habib ur Rehman, (ii) Mrs. Rifat Anjum daughter of Mr. Khaleel ur Rehman, (iii) Mr. Aslam Hussian son of Mr. Amjad Hussain, (iv) Miss Faryal Khan daughter of Mr. Khaleel ur Rehman and (v) Miss Naveen Khan daughter of Mr . Khaleel ur Rehman
4. The IAO thus, despite having complete information in respect of the directors of defaulting company , negligently and inefficiently got attached bank accounts of the Complainant and illegally recovered the liability of defaulting company . According to the Complainant in his first meeting during June 2017, the IAO admitted his fault and advised him to apply for correction of Com puterized Payment Receipt (CPR). He was also informed that the refund would be issued by the RTO-III, Karachi after correction of the CPR. As a result of strenuous efforts, the Federal Treasury Officer, issued CPR dated 20.11.2017. On the advice of IAO, when the Complainant approached RTO-III, Karachi on 01.01.2018, for refund, his CPR was reversed by the Director General (DG) Computer Wing-IR, Islamabad, as well as the Treasury Office. The Complainant thereafter repeatedl y visited the IAO Haripur , along with his AR but failed to get the refund of the illegally recovered amount on one or the other pretext. Due to Dept'l apathy and non-seriousness, the Complainant was left with no option except to file the instant complaint.
5. Apart from refund of the recovered amount, the Complainant had also prayed for award of costs and compensation amounting to Rs.1.879 million allegedly incurred on account of expenses as well as mental torture under section 22 of the FTO Ordinance, including additional payment for delayed refund under Section 171 of the Ordinance.
6. The complaint was forwarded for comments to the Secretary , Revenue Division in terms of 10(4) of the FTO Ordinance, 2000 read with section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013. In response thereto, the Chief Commissioner-IR (CCIR), RTO, Abbottabad submitted comments vide letter dated 13.03.2018. It was contended that sales tax/FED deman d amounting to Rs.81.273 million was outstanding against M/s East End Tobacco Co. (Pvt.) Ltd. As the company failed to make payment of the outstanding liability , recovery proceedings were initiated against directors of the company under Section 140 of the Ordinance. However , on account of similarity of names, bank accounts of the Complainant were inadvertently got attached and an amount of Rs.1.707 million was recovered. It was averred that as soon as mistake was brought to the notice of the Deptt, corrective measures were initiated. As regards claim of compensation and additional payment for delayed refund, it was contended that as the CPR had been changed in the name of the Complainant, further action regarding refund would be taken by the R TO-II, Karachi having jurisdiction of the Complainant.
7. Later on, the CCIR, RTO, Abbottabad vide letter dated 13.06.2018 intimated that the RTO-III, Karachi has issued cheque of refund dated 19.04.2018, amounting to Rs.1.707 million to the Complainant. It was averred that the allegation regarding recovery of Rs.0.007 million from the Alflah Bank, is misconceived as no such amount was ever recovered from the above account.
8. Arguments of both the parties heard and record perused.
9. It is evident that a huge amount of Rs.1.707 million was illegally , negligently , without due process of law and in derogation of the procedure, was recovered by the IAO, from the bank accounts of the complainant. The 140 had blatantly overlooked evidence available on record, which clearly revealed that the Complainant, who is resident of Karachi, is registered with RTO-III, Karachi and that as per list of Directors the Complainant had no connection with defaulting company assessed to tax at Abbottabad. One of its directors is a female namely "Miss Faryal Khan" and not Mr. Faryal Khan. The IAO negligently entangled the Complainant in this case. Evidently , after coming into knowledge of the CCIR, RTO, Abbottaba d and officers down the line that the director of defaulting company was "Miss Faryal Khan daughter of Mr. Khaleel ur Rehman" and not the Complainant, no serious and adequate measures were adopted to alleviate sufferings of the wronged Complainant. The Complainant's matter was taken in a cavalier and perfunctory manner . It was after filing of the instant complaint; the Deptt finally got up from deep slumber and issued the refund of unlawfully recovered amount on 19.04.2018 and regrettably , the Complainant whose nightmare started the day his account was attached and amount seized on 08.06.2017, was not even regretted by the Deptt in writing.
10. Illegal attachment of the Complainant's bank account and unlawful show-cause notices (SCN) dated 15.05.2018 and 08.01.2019 regarding withdrawal of Rs.1.707 million, in the absence of any tax liability and thereafter deliberately and negligently delaying the issuance of refund amount, till filing of the instant complaint, following officers were required to expla in as to why costs and compensation of Rs.1.879 million, in terms of Section 22 of the FT O Ordinance, may not be adjudged against them;
(i) Dr. Amir Talpur , CCIR, RTO, Abbottabad, (ii) Mr. Muhammad Asghar Khan Niazi, Commissioner Zone-I, Abbottabad, (iii) Mr. Hayat Muhammad, Additional Commissioner -IR, RTO, Abbottabad and (iv) Hafiz Muhammad Rafaqat, IAO, E&C Unit No. 02 Haripur , Zone-01, R TO, Abbottabad
11. All the officers named above, responded to the notices vide letters dated 25.05.2019, 24.05.2019 and 15.01.2019.
(a) In response to SCN, Dr. Amir Talpur , the CCIR, Abbottabad stated that due to similarity of names, bank account of the Complainant was attached and an amount of Rs.1.707 million, was recovered. He averred that there was no mala fide in attaching the Complainant's bank account. The delay in issuing the refund was caused due to procedural difficulty which was not intentional. He averred that the Unit Officers are supervised by the Additional Commissioner-IR and the Zonal Commissioner-IR. The Chief Commissioner-IR has overall administrative supervision over RTO. According to him,' during September , 2017, the Complainant approached him and verbally narrated his grievance. For the unwarranted action of the Deptt, the Complainant was apologized and matter was taken up for issuance of refund. He contended that the Zonal CIR and IA0 Unit-2 were asked to explain their positions. After examining their replies, it was established that mistake had occurred on part of the Deptt. He further averred that suitable instructions were issued to all the CIR's to be vigilant so that such instances do not recur in future.
(b) Mr. Muhammad Asghar Khan Niazi, the Zonal CIR contended that he had delegated powers to attach bank accounts of the tax defaulters in terms of Section 140 of the Ordinance, to the Unit Officers vide Notification No.8751/A TD/ 2017 dated 03.05.2017.These powers were further clarified through letter dated 12.05.2017. Thus, the IAO E&C Unit-2 initiated recovery proceedings under the powers delegated to him, as per law. However , on account of mistaken identity , bank account of the Complainant was attached, in which he had no role.
(c) Mr. Hayat Muhammad, the Additional Commissioner-IR Zone-01 contended that powers under Section 140 of the Ordinance, are vested to the CIR, who had delegated the same to the IA0 Unit. The recovery proceedings in this case were initiated by the IA0 in his official capacity under the Ordinance, wherein he had no role. He averred that grievance of the Complainant regarding issuance of refund had already been redressed. He concluded that the attachment of bank account of the Complainant was on account of error of judgment, having no malfeasance or any ill motive on his part.
(d) Hafiz Muhammad Rafaqat, the IA0 of Unit concerned, in his reply to SCN, contended that recovery from the Complainant's bank account was inadvertently made due to rush of work, during month of June and similarity of names of the Complainant and the relevant director . He added that information in respect of the Complainant was provided by the CIR and on his directions, bank account of the Complainant maintained in SCB M.A Housing Society , Karachi was attached under Section 140 of the Ordinance. He further contended that when error came to the notice of the Deptt, immediate remedial measures were taken and the amount so recovered, was refunded to the Complainant.
12. Arguments heard and record perused.
13. As per facts narrated in the preceding paras, it has been proved to the hilt that illegally negligently , and without following due process of law, bank accounts of the Complainant were attached and Rs.1.707 million were recovered against liability of Miss. Faryal Khan, one of the Directors of Messrs East End Tobacco Company (Pvt.)
Ltd. The said recovered amount has now been refunded to the Complainant upon the intervention of this office. To that extent, grievance of the Complainant had since been redressed.
14. The Complainant had also sought for grant of costs and compensation, on account of the maladministration committed by the tax employee(s) under section 22 of the FTO Ordinance. The chain of hierarchy of the RTO, Abbottabad had already been detailed vide para-10 supra.
15. Perusal of the case record shows that recovery matter in the matter of East End Tobaco Co., had been lingering on for quite some time in the past. The present effort in connection with arrears, in this case was taken up with the initiation of a proposal by the IA0 to the Commissioner-IR, Zone-I, RTO Abbottabad through the Additional Commissioner-IR, Zone-I, RTO Abbottabad for write off of the arrears on 24.04.2017. It is interesting to observe that as per Annexure-B to this letter , the name of one of the Directors is appearing as "Mrs. Faryal Khalil". It is also clear that in the recovery notice dated 02.02.2017 issued by the Deputy Commissioner-IR, Unit-I, Zone-I, RTO Abbottabad name of the Director had also been mentioned as "Mrs. Faryal Khan". However , the proposal was declined and further proceedings were initiated where "Miss. Faryal Khan" was converted to "Faryal Khan".
16. The CCIR appears to have no role in illegal recovery from account of the Complainant for a very solid reason that he was appointed at RTO, Abbottabad on 20.07.2017, whereas the recovery was effected in the month of May, 2017. However , in his reply dated 25.05.2018 to show-cause notice issued by this office as required under section 22 of the FTO Ordinance, he disclosed that while seeking information from NADRA the Zonal CIR due to rush of work in May/June, 2017, the name of Miss Faryal Khan (as on Form 29) was inadvertently written as Faryal Khan and accordingly NADRA provided the details. This means as per contention of the CCIR the misery of the Complainant started from the Zonal CIR, namely Mr . Muhammad Asghar Khan Niazi.
17. The record reflects that Hafiz Muhammad Rafaqat, IAO submitted propos al to the CIR to write off the outstanding amount of Messrs East End Tobacco Co., which was declined. The CIR vide letter No. 8784 dated 04.05.2017, obtained information about details of bank accounts of the Directors from NADRA. It is this point of time when the name of Messrs Faryal Khan was written as "Faryal Khan", in the letter dated 04.05.2017 referred to above. In these circumstances, Mr. Muhammad Asghar Khan Niazi, the Zonal CIR cannot absolve himself from the incident of wrong mentioning of the name of the Complainant in the letter dated 04.05.2017, which is a sheer negligence, inattention and inef ficiency on this part.
18. The role of Mr. Hayat Muhammad, Additional CIR, does not lead to any maladm inistration on his part, therefore, no liability can be fixed on his shoulder .
19. It is evident that the tax profile of Messrs East End Tobacco Co., which contained the list of Directors was available with Hafiz Muhammad Rafaqat, the IAO of Unit concerned. He is the person who initially moved the CIR 24.04.2017 through proper channel for write off arrears in the case of Messrs East End Tobacco Co. As per Annexure-B, in the letter dated 24.04.2017, the name of one of the Directors is appearing as Miss. Faryal Khan. It is also clear that in the recovery notice dated 02.02.2017 issued by the Deputy Collector , IR, Unit-I, Zone-I, RTO, Abbottabad name of the said Director had been mentioned as Miss. Faryal Khan. This means in the proposal of writ off of the arrears names of all the Directors of the company were correctly recorded. This mistake was initiated by the CIR.
20. On receipt of information from NADRA regarding bank account of the Complainant, the same was passed to IAO by the CIR. He without consulting actual record issued notice under section 140 of the Ordinance, wherein name of Complainant with his CNIC were mentioned. Had the IAO consulted the record, this lapse would have never happened. His negligence, inefficiency , inattention and ineptitude, therefore, too is crystal clear . In these circumstances, he cannot absolve himself from the highest degree of maladministration committed by him.
21. The refund was issued after a long delay , on the intervention of this forum, only after the Complainant resorted to file the complaint. On both the counts i.e. unlawful recovery of tax from the Complainant, against whom no tax liability was outstanding and thereafter holding the refund inexplicably from the date the same was recovered i.e. 08.06.2017, to date of issuance of refund i.e. 19.04.2018, the explanations filed by the above employee appear to be untenable. As a result incompetence, inefficiency , negligence and administrative excesses for improper motives in the discharge of duties, appears to have been established against Hafiz Muhammad Rafaqat, IAO and Mr. Muhammad Asghar Khan Niazi, Zonal CIR.
Award of costs and Compensation under Section 22 of the FT O Ordinance .
22. The onus probandi to establish the quantum of costs incurred and quantum of compensation was on the Complainant. In order to sustain his contention, he produced following documents:-- Sr. No. Evidence of expenses Amount in (m)
1. Certificate dated 03.12.2018 (issued by the AR). Rs.0.500 million
2. Photo copies of invoices of air travelling by the Complainant. Rs.0.050 (Rs.50146/-)
23. In para-7 of the complaint, the Comp lainant has mentioned the details of expenses incurred by him, to attend this issue, with both the RTOs, Abbottabad and Karachi. No documentary evidence regarding transportation expenses or payment of fee to the AR on every visit to RTO, Abbottabad had been produced except the evidence mentioned in para-22 supra. In the absence of relevant evidence, the entire claim cannot be considered.
24. As regards the evidence adduced, the Complainant claims that he paid Rs. 0.500 million to Mr. Umar Khan Verdag, AR. It is not out of place to mention that it is not necessary to engage an AR before this forum, as it is a well known dictum that the "Ombudsman is an advocate of the aggrieved". The Complainant claims to have engaged AR against fee of Rs. 0.500 million, which is equivalent to 29.3% of the principal amount recovered from his account. The payment of such a huge amount of fee to recover such an average amount does not attend to the reason. It was his choice to engage an AR and pay such a huge amount and not the legal requirement. The Complainant has failed to produce any document indicating the mode of payment to the. AR. Obviously , he had not carried cash from Karachi. He must have issued a cheque of the fee. He could have mentioned this fact in the complaint but he even did not mention the factum of issuance of cheque. He has only tendered a certificate of AR on a plain paper which is an admission of the AR, regarding receipt of fee of Rs.0.500 million, which is neither a receipt nor can prove the mode of payme nt. However , he must have paid some amount to the AR as a fee and as per routine standard, the same is hereby fixed as Rs.0.100 million.
25. The Complainant is also entitled for lump sum amount of travelling expenses as per evidence produced by him.
According to the copies of vouchers mentioned in para-22 supra, he incurred Rs.0.050 million, on travelling and he is entitled for the same.
26. There is no second view that the Complainant suffered a lot for no fault, therefore, he is also entitled for compensation which is tentatively fixed as Rs.0.300 million. The amounts under all the three heads i.e. legal expenses (Rs.0.100 million), travelling expenses (Rs.0.050 million) and compensation (Rs.0.300 million) make a total of Rs.0.450 million The said amount is accordingly granted to the Complainant, in terms of Section 22 of the FTO Ordinance, to be paid by Hafiz Muhammad Rafaqat, IAO, Unit RTO, Abbottabad and Mr. Muhammad Asghar Khan Niazi, Zonal CIR, RTO, Abbottabad, in equal shares. The circumstances indicate that the complaint is also entitled for additional payment for delay refund.
FINDINGS:
27. Administrative excesses for improper motives, neglect, inattention, delay , incompetence, ineptitude and inefficiency in the discharge of duties and responsibly and as a consequence unlawful recovery of tax liability outstanding against a private limited concern from the bank account of the Complainant tantamount to maladministration in terms of section 2(3) (i)(d)(ii) of the FT O Ordinance.
RECOMMENDA TIONS:
28. FBR to: i) recover Rs.0.450 million from Mr. Muhammad Asghar Khan Niazi, Zonal CIR, RTO, Abbottabad and Hafiz Muhammad Rafaqat, IAO, Unit RTO, Abbottabad (costs and compensation) in equal shares and arrange to pay the same to the Complainant; ii) fix responsibility regarding administrative excesses neglect, inattention, delay , incompetence, ineptitude and inefficiency in the administration or discharge of duties and responsibly and initiate appropriate disciplinary proceedings against the of ficial (s) found accountable, as per law; iii) direct the Commissioner-IR concerned to issue additional payment for delayed refund to the Complainant, in terms of Section 171 of the Ordinance; and iv) report compliance within 45 days.