DECISION /FINDINGS ' Maladministration is alleged on the part of Taxation Officer, Circle-A-4, Companies-III, Karachi for causing inordinate delay in issuing refunds of Rs, 212,251 determined for the assessment year 2000- 2001 on 13th March, 2001 which is subject-matter of Complaint No,1110-K of 2003. Further maladministration is alleged on the part of the same officer for failing to allow credit claimed on account of tax withheld amounting to Rs,368,672 and Rs,176,388 in assessment year 2001-2002 and 2002-2003 which are subject-matter of Complaints No,1111-K/2003 and 1112-K/2003 respectively. All these three complaints are disposed off by this decision.
2. Briefly the facts are that the assessment for the assessment year 2000-2001 was made on 13th March; 2001 determining a refund of Rs,212,251 which was duly intimated to the complainant through assessm ent order Form IT-30 as well as the notice under section 85 of the Income Tax Ordinance 1979 (Repealed Ordinance). However, the determined refund was not issued despite requests made to the Officer concerned.
3. Assessm ents for the assessm ent years 2001-2002 and 2002-2003 were made on 30th March, 2002 and 25th February, 2003 respectively. Tax liabilities amounting to Rs,123,023 and Rs,70,399 were determined on the assessed income for the two respective years. However, credit claimed for the tax withheld at source was not allowed. The complainant filed application for rectification of orders by allowing credit for the balance amounts of taxes withheld. Such applications were filed on 31st March, 2003, 24th June, 2003 and 14th July, 2003 but no orders were passed.
4. Parawise comments were received from the respondents in response to notice under section 10(4) of Ordinance XXXV of 2000. The respondents admitted the facts alleged in the complaint relating to assessm ent year 2000-2001. However, it was submitted that the refund had not been issued in view of the liabilities of tax payable determined in two subsequent assessment years.
According to respondent the tax liabilities were determined in the assessment years 2001-2002 and 2002-2003 because the credit claimed in the returns for the tax withheld at source was not verifiable from record. It was further submitted that verification of tax credits claimed was under process and as soon as the credits were verified from Data Processing Centre the assessment orders would be rectified and refunds determined in each three respective orders would be issued.
5. Mr. Abdul Razak and Mr. Khalid M. Lodhi, Taxation Officer (B18) have been heard. The counsel of the complainant has submitted that meanwhile the complainant received a combined notice under section 220 of the Income Tax Ordinance 2001 requiring the complainant to show-cause as to why the assessm ent for the assessment years 1996-97 to 2000-2001 should not be rectified in order to disallow the expenses claimed in each the aforesaid assessment years on account of rent of business premises because the tax was not withheld under subsection (7B) of section 50 from the rent paid to the landlord. The counsel submitted that evidence of deduction of tax from the amount of rent paid in each year and proof of depositing the same in the treasury had been submitted to the Taxation Officer in the form of copies of tax paid challans as well as copies of prescribed statements duly filed.
6. The Taxation Officer explained that while he was in the process of verification of tax credits claimed by the complainant and was about to issue refund, audit observations were received from the office of Deputy Director, Audit alleging that mistakes had been committed in the assessment orders for assessm ent years 1996-97 to 2000-2001 by allowing expenses on account of rent which were inadmissible because such rent was paid without withholding the tax due thereon. The Taxation Officer, however, admitted that the evidence produced by the complainant proved that the observations made in the audit paras were factually incorrect. He produced a copy of his letter addressed to Commissioner of Income Tax, Companies-V, Karachi, dated 27th August, 2003 wherein he had reported that refunds amounting to Rs,31,053 for assessment year 1999-2000, Rs,212,251 for assessm ent year 2000-2001, Rs,218,563 assessment year 2001-2002 and Rs,57,391 for assessm ent year 2002-2003 had been determined after verifications'of deduction/payments of taxes which were found in excess of the determined tax liabilities in the respective years. He, therefore, had sought approval of the Commissioner to issue the determined refund. The Taxation Officer submitted that the refund would be issued by 5th September.
7. The counsel of the complainant acknowledged that the incumbent Taxation Officer had taken due interest in sorting out the matters but still credit for an amount of Rs,48,593 in assessment year 2002-2003 had not been allowed. The Taxation Officer submitted that the challans were under verification and as soon as the credits claimed were verified the assessment order would be further rectified to allow the credit and to issue the due refund.
8. Maladministration alleged on account of inordinate delay in issuing refund due in the assessm ent year 2000-2001 since 13th March, 2001 is proved. There was no valid reason for withholding the said refund. Maladministration is also proved for deliberate inaction to verify the tax credit claimed on account of withholding of tax in respect of two subsequent years since March, 2002 and February, 2003 respectively. It is also noted with concern that the need for verification of tax credits claimed on account of taxes withheld is lingering on despite the direction of the President of Pakistan to implement the recommendations made by the Federal Tax Ombudsman in the Special Report submitted to Honourable President by this office on "Accounting of Income Tax collection".
9. It is recommended that:
(a) The Commissioner, Companies-V, Karachi to ensure that determined refunds are issued forthwith.
(b) The Member Income Tax, C.B.R. To submit a report on implementation of recommendations made in the Special Report ibid "on Accounting of Income-tax collection".
(c) Compliance is reported within 30 days.