DECISION /FINDINGS The complainant, an individual, is owner of Al-Murtaza Hotel, 19-Abbott Road, Lahore. He is no existing assessee of Circle-14, Zone-A on NTN: 05-14-0146652, He has alleged that the Special Officer, Circle-14, Zone-A, Lahore has unlawfully withheld refund of Rs.1,15,292 for the assessm ent year 1995-96 on the instructions of Commissioner of Income-tax Zone-A.
2. The facts of the case are briefly discussed as under:--- The assessm ent for the. Year 1995-96 was made under sections 62/66A at a net income of Rs.21,40,500 against declared income of Rs.52,800 after making additions of Rs.400,000 and Rs.1,15,80,500 under sections 13(1)(aa) and 13(1)(d) of the Income-tax Ordinance, 1979 respectively which resulted in demand of Rs.770,193. Appeal was filed before the CIT (Appeals) after depositing an amount of Rs.1,15,292 equal to 15% of the total demand as provided by subsection (2) of section 129 of the Income Tax Ordinance, 1979. The CIT (Appeals) deleted the additions made under sections 13(1)(aa) and 13(1)(d) mentioned above.
3. The consequential effect of the CIT's appellate order was that the amount of Rs.1,15,292 became refundable with effect from 9-8-2001 as is evident from the 11-30. The Department preferred second appeal before the ITAT against the order of the CIT (Appeals).
4. In respondent's reply submitted vide Letter No.RCIT-J/85/FTO/SO-1/3779, dated 18-1-2002 it has been stated that the appeal pending before the ITAT "will hopefully be decided in favour of the Department".
5. It has also been stated in the said reply that "the refund in question has been withheld under section 103 of the Income Tax Ordinance, 1979 with the prior approval of the competent authority".
6. The Departmental Representative produced a photostat copy of Letter No.1576/J, dated 2-11-2001 issued by the Special Assistant to Commissioner of Income Tax Zone-A, Lahore whereby he has conveyed the permission of the Commissioner to withhold refund of Rs.1,15,292 for the assessment year 1995-96 under section 103 of the Income Tax Ordinance, 1979.
7. The DCIT representing the Department has conceded that no order under section 103 was passed by the Assessing Officer and the only document in this behalf is the aforesaid letter issued by the Special Assistant to Commissioner of Income Tax, Zone-A. The perusal of this document shows that it was in fact not an order under section 103 but the approval letter authorizing the Special Officer, Circle-14, to withhold the refund of Rs.1,15,292. It is, therefore, established that no order under section 103 of the Income Tax Ordinance, 1979 was passed by the Assessing Officer as incorrectly reported in the parawise comments.
8. It is pertinent to mention here that the approval letter issued by the office of the Commissioner referred above also suffers from legal infirmity. No order under section 103 can be passed for indefinite period. It is imperative on the part of the Commissioner of Income Tax to stipulate the period for which the refund is to be withheld while according approval to the Assessing Officer under section 103 of the Income Tax Ordinance. The approval granted by CIT is, therefore, not in accordance with law.
9. It has also been noted that neither the Assessing Officer nor the Commissioner of Income Tax followed the direction of the C.B.R. While invoking the provisions of section 103 of the Income Tax Ordinance. The Board vide Circular No.4 of 1979, dated August 23, issued clear directions to the officers of the Department to exercise the power provided by section 103 of the Income Tax Ordinance very discretely. The relevant extract of the said circular is reproduced hereunder:--- "The provision is intended to preclude loss of revenue in cases where it is feared that the assessee after obtaining refund might disappear to divest himself? Of all assets thus making recovery impossible if the Department's appeal against the order giving rise to refund ultimately succeeds."
10. It will also be pertinent to recall Lahore High Court decision in re: Unique Enterprises 1995 PTD 749 wherein it was held that the "Income Tax Officer could only withhold refund, if he was of the confirmed opinion that the assessee, after obtaining refund, might disappear and the Department would suffer loss of revenue".
11. The complainant, owns valuable property in the shape of hotel building and no apprehension has been expressed by the respondent that he will run away after obtaining the refund and the recovery of taxes would be impossible.
12. The respondent has raised objection regarding jurisdiction of the present complaint in terms of section 9(2)(a) of the F.T.O. Ordinance, 2000, as second appeal has been filed before the Income Tax Appellate Tribunal. The Department has however, not obtained any stay order from the Income Tax Appellate Tribunal to withhold the refund of the complainant which has already been determined. The refund is stated to have been withheld under section 103 of the Income Tax Ordinance. The provision of the said section has not been invoked properly as discussed above.
The issue here is the refusal to refund which is not the subject-matter of appeal. The issue involved in this complaint is completely independent of the matter in appeal before the Tribunal. The objection to jurisdiction is not tenable and is rejected.
13. In the light of the above discussion, it is abundantly clear that there was no justification for the Department to withhold the refund of Rs. 1,15,292. This unjustified and unlawful withholding of refund amounts to maladministration. It is, therefore, recommended that:
(i) The refund due for the assessm ent year 1995-96 be issued within 30 days of the receipt of this order if no stay order is obtained from the Income Tax Appellate Tribunal till then.
(ii) The compliance be reported within a week thereafter. .