COMMISSIONER INLAND REVENUE, ZONE-IV VS PAKISTAN SERVICES LIMITED, 2013 PTD-KARACHI-HIGH-COURT-SINDH 368 (2012)

Income Tax Ordinance (XLIX of 2001)---

----S.171---Refund for adjustment against tax liability---Limitation---Refund would become due and stood determined on date of receipt of order passed by Appellate Authority including the Commissioner (Appeals) or Appellate Tribunal or High Court or the Supreme Court---Principles.

Jawaid Farooqi for Applicant.

Abid H. Shaban for Respondent.

Date of hearing: 15th November, 2012.

ORDER

AQEEL AHMED ABBASI, J.---Through instant reference application, following questions have been proposed by the applicant, which according to learned counsel for the applicant arise from the impugned order dated 25-10-2011 passed by the learned Appellate Tribunal Inland Revenue (Pakistan) in I.T.A. No.453/KB of 2011 under section 205(1B):--

(1)Whether on facts and in the circumstances of the case as well as on law, the learned Tribunal was justified in confirming the order of the Commissioner Inland Revenue (Appeals) who deleted the additional tax levied under section 205(1B) of the Income Tax Ordinance, 2001 without considering the ground taken by the department that the default surcharge was levied when the Taxpayer failed to file the estimate of income as required under section 147(4A) of the Income Tax Ordinance, 2001?

(2)Whether on facts and in the circumstances of the case as well as on law, the learned Tribunal was justified in confirming the order of the Commissioner Inland Revenue (Appeals) who deleted the additional tax levied under section 205(1B) of the Income Tax Ordinance, 2001 on the ground that refund was available to be adjusted against the 4th installment, without considering the provisions of section 170(3) of the Income Tax Ordinance, 2001 which relates to the adjustment of refunds against tax liability and stipulates that satisfaction of CIR regarding overpayment is necessary for adjustment of refund?

2.Learned counsel for the applicant has argued that both the appellate forums have erred in law and facts by setting aside the order passed by the Deputy Commissioner Inland Revenue, which was based on proper appreciation of facts and correct application of laws. Per learned counsel, since, the applicant did not file the estimate of income as required under the provisions of section 147(4A) of the Income Tax Ordinance, 2001, whereas, there was no order under section 170 of the Ordinance, 2001 whereby the adjustment of the amount of tax liabilities was determined, therefore, provisions of section 205(1B) of Income Tax Ordinance, 2001 were properly invoked under the facts and circumstances of the instant case.

3.Conversely, learned counsel for the respondent has submitted that no question of law arises from the order of the learned Appellate Tribunal Inland Revenue (Pakistan), as findings of facts have been recorded by both the appellate forums, hence no substantial question of law arises from the impugned order. Learned counsel for the respondent has referred to the relevant finding of the learned Commissioner (Appeals), which reads as follows:--

"In this case the appellant had a determined refund of Rs.19382565 available in Tax Year 2006 as a result of appeal order of CIT(Appeals) vide Order No. 208 dated 9-1-2009 which was also confirmed by learned ATIR. The Officer Inland Revenue had passed order under section 124 of Income Tax Ordinance, 2001 dated 21-3-2009 giving effect to appeal order and created refund of Rs.19382565. According to clear provisions of section 171 of Income Tax Ordinance, 2001, refund becomes due on the date of receipt of order of CIT (Appeals) which was 16-1-2009 as is clear from appeal memo. filed before ATIR. As per provisions of section 170(3) the appellant requested department to apply Rs.7368000 towards 4th installment advance tax payment under section 147 out of the available refund of Rs.19,38(M). The Officer Inland Revenue did not consider the above position and was of the view that for refund to be determined and thus available for adjustment against advance liability, there has to be refund order under section 170(4). He thus passed an order under section 205(1B) of Income Tax Ordinance, 2001 creating tax demand of Rs.724239 which is under appeal.

I find the action of the Officer Inland Revenue to be illegal and contrary to clear provision of law.

I find that the Officer Inlands Revenue has seriously erred that there has to be an order passed under section 170(4) of Income Tax Ordinance, 2001 before adjustment can be allowed. Such interpretation would frustrate section 171 of Income Tax Ordinance, 2001, section 170(3) of Income Tax Ordinance, 2001 and clear binding instructions of FBR contained in FBR Circular No. 5 of 2003 dated 20-6-2003, which clearly states that refund becomes due on date when Commissioner receives order passed by Commissioner (Appeals) and where there is no appeal, then on date order is passed under section 170 of Income Tax Ordinance, 2001, In this appellant's case the Commissioner (Appeals) passed an order dated 9-1-2009 which was received in office of Commissioner on 16-1-2009. Hence refund of Rs.19,382,565 stood determined on 16-1-2009. Further FBR Circular No.5 dated 30-6-2003 para. 3 permissible as per section 170(3) of Income Tax Ordinance, 2001 Hence the Officer Inland Revenue has seriously erred in not allowing adjustment of determined refund of Rs.19.38(M) againstadvancetaxundersection147ofIncomeTaxOrdinance,2001 of Rs.7368000 as fourth installment of advance tax in June, 2009."

4.After having read out the above findings recorded by Commissioner (Appeals), the learned counsel for the applicant has also referred to the order of Tribunal and argued that the finding of facts recorded by the Commissioner (Appeals) has duly been concurred by the Tribunal, which does not suffer from any error hence the same does not require any interference by this Court.

Learned counsel has also placed on record an acknowledgement receipt dated June 13, 2009 in respect of the estimate of tax payable for the relevant year under subsection (4A) of section 147 of the Income Tax Ordinance, 2001 and submitted that taxation officer has based his order on incorrect facts, which has rightly been set aside by both the appellate forums below.

5.We have heard both the learned counsel, perused the record and the orders passed by both the appellate forums. We have also examined the provisions of section 171(2)(a) of the Income Tax Ordinance, 2001, which reads as follows:--

"171. Additional payment for delayed refunds

(1)

(2)For the purposes of this section, a refund shall be treated as having become due:

(a)in the case of a refund required to be made in consequence of an order on an appeal to the Commissioner (Appeals), an appeal to the Appellate Tribunal, a reference to the High Court or an appeal to the Supreme Court, on the date of receipt of such order by the Commissioner."

6.From perusal of the above provisions, it has emerged that the refund becomes due on the date of receipt of the order passed by appellate authority, including the Commissioner (Appeals), Appellate Tribunal, or High Court or Supreme Court. In the instant case, it has come on record that order of Commissioner (Appeals) was received in the office of concernedCommissioneron 16-1-2009hencetherefundin the instant case stood determined on such date of receipt of the appellate order. It is further observed that such legal position has already been recognized by the FBR through Circular No. 5, of 30-6-2003, however, the taxation officer failed to take cognizance of such legal position.

7.Under the circumstances, we are of the opinion that no irregularity or error has been committed by the Commissioner (Appeals) or the Appellate Tribunal while recording their findings on facts, which otherwise depicts correct position of law. Learned counsel for the applicant has not been able to show any perversity or error in such finding recorded by the Tribunal in its impugned order, therefore, we answer both the questions in affirmative against the applicant.

Accordingly, instant reference application having no merits, is hereby dismissed in limine along with listed application.

SAK/C-9/KReference dismissed in limine.