FINDINGS/RECOMMENDATIONS The complaint was filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against failure to give appeal effect to the Appellate Tribunal Inland Revenue (ATIR)'s order dated 12.01.2024 and as a consequence thereof, delay in issuance of refund for Tax Year 2017.
2. Facts of the case in brief are that the Complainant is an individual, deriving income from trading agriculture products, e-filed return for Tax Year 2017 under Section 114(1) of the Income Tax Ordinance, 2001 (the Ordinance). Subsequently, the Addl Commissioner Inland Revenue (Addl. CIR) initiated proceedings under Section 122(5A) of the Ordinance and created demand vide order dated 03.03.2023 at Rs.0.981 million. Being aggrieved, the Complainant went in appeal whereby the CIR (Appeals) Multan confirmed the alleged demand. The Deptt issued recovery notice under Section 140 of the Ordinance dated 13.10.2023 and recovered tax demand without providing / serving notice to the Complainant which is mandatory in terms of Rule 210C(2) of the Income Tax Rules, 2006. The Deptt withdrawn the amount from the bank accounts and deposited in the national exchequer through CPRs. The Complainant filed 2nd appeal before the ATIR who vide Order No. ITA No.724/MB/2023 for Tax Year 2017 dated 12.01.2024 annulled the impugned order.
3. Thereafter the Complainant approached the Deptt for appeal effect under Section 124 of the Ordinance vide letter dated 26.02.2021. When failed to elicit any response, filed the instant complaint.
4. The complaint was referred to the Secretary Revenue Division, for comments, in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013 (FOIR Act, 2013). In response thereto, the Chief Commissioner-IR, RTO, Multan forwarded Para-wise comments of the Commissioner-IR, Multan Zone dated 21.06.2024 vide letter dated 22.06.2024, stating therein that ATIR's order has not been received officially as yet and the Deptt intends to file reference to the High Court after receipt of order. On e-filing of refund application, the Complainant's refund application will be processed as per law.
5. The AR in his rejoinder dated 02.07.2024 contended that the Deptt in its parawise comments has written that notice under Section 140 of the Ordinance was duly served to the Complainant via Pak Post. However, the Deptt has not mentioned Pak Post tracking number or receipt which establishes maladministration on the part of the Deptt.
6. During hearing, the DR explained that appeal effect has been given on 11.07.2024 in contradiction to the stance taken in parawise comments.
7. Both the parties have been heard and record perused.
8. The grievance of the Complainant revolves around recovery of tax demand through coercive means in terms of Section 140 of the Ordinance. The AR pointed out that prescribed procedure was not followed while making recovery under this section by observing essential legal prerequisites.
The DR could not rebut these allegations. Fact of the matter is that vide amended order for Tax Year 2017 dated 03.03.2023 tax demand of Rs.0.981 million was raised. This order was confirmed by CIR(Appeals) vide order dated 01.06.2023. The Deptt issued recovery notice under Section 1490 of the Ordinance vide notice dated 13.10.2023 and recovered the said amount. The ATIR vide order dated 12.01.2024 annulled the demand by accepting the appeal of the taxpayer. The Complainant has come up to this forum on two counts:
(i) Appeal effect be given to the order of ATIR; and
(ii) The tax recovered in terms of Section 140 of the Ordinance be refunded.
9. During investigations the Addl. CIR explained that the appeal effect in terms of Section 124/132 of the Ordinance has been given. The Complainant may now file an application in terms of Section 170(4) of the Ordinance by lodging his refund claim as per law. However, the highhandedness during the course of recovery proceedings in terms of Section 140 appears justified.
10. It appears that the guidelines provided in the Board's letter C. No.7(20)/S(IR-Operation)/2020 dated 12.10.2021 were not followed during the course of recovery process which is tantamount to maladministration in terms of Section 2(3)(i)(a) of the FTO Ordinance.
FINDINGS:
11. The course of action adopted in recovery under Section 140 of the Ordinance is not in conformity with guidelines provided by FBR and hence is tantamount to maladministration in terms of Section 2(3)(i)(a) of FTO Ordinance, 2000.
RECOMMENDATIONS:
12. FBR to -
(i) direct the Chief Commissioner-IR, RTO, Multan to issue directions to its Field Formations to ensure observance of legal / procedural requirements while enforcing recovery of tax through coercive measures under guidelines given by the Board in C. No.7(20)/S(IR-Operation)/2020 dated 12.10.2021 because such measures entail serious consequences to the taxpayers and tarnish the image of the FBR; and
(ii) report compliance within 30 days. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.