BURHAN PRODUCTS (PVT.) LTD., LAHORE VS The SECRETARY, REVENUE DIVISION, ISLAMABAD, 2016 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2054 (2016)

Income Tax Ordinance (XLIX of 2001)---

----Ss.229, 230 & 120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9, 2(3) & 10---Complaint against non-issuance of income tax refund---Jurisdiction of the Federal Tax Ombudsman in relation to cases of tax refund ---Scope--- Contention of complainant was income tax refund due to him for various tax years was not being issued due to inaction on part of Department to process said refund claims---Contention of Department was that complainant had not provided proof of tax deductions and that the Federal Tax Ombudsman did not have jurisdiction to take up tax refund claims for investigation---Validity---Held, no doubt supporting documentation for refund claims was expected to be submitted with the return but where the said return was electronically filed and deemed an assessment made under S.120 of the Income Tax Ordinance, 2001 that resulted in determination of refund payable to taxpayer, then the Department must issue and serve upon the taxpayer a notice to submit the required supporting documentation if the same was not available readily on the assessment record---Adverse inference against the taxpayer could not be drawn without giving such taxpayer the opportunity to explain his position---Federal Tax Ombudsman's objective was not to decide the refund claim, and rather the Federal Tax Ombudsman endeavored to see whether a refund at all arose in the case and if it did, then whether or not the Department had failed to process and dispose of the said claim within the prescribed time in accordance with law---Actual determination of amount of refund due to the taxpayer was the prerogative of the Department---In the present case, complainant's deemed assessments had been made for various years to which the claims for refund pertained, and resulted in a determination of refund because of excess deduction of tax at source, and the Department was bound to take cognizance of the same particularly after filing of refund applications by the complainant and the Department had to take practical steps to evaluate the refund claim---Protracted Departmental inaction was evident in the present case, and maladministration in terms of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 thus stood established and a taxpayer could not be stopped from filing a complaint against the same before the Federal Tax Ombudsman---Federal Tax Ombudsman recommended the Department to direct the concerned Commissioner to examine the tax deduction payment evidence available with the complainant in accordance with the legal procedure and to issue refund/compensation due strictly in accordance with law within a period of 21 days---Complaint was disposed of, accordingly.

Colenco Power v. FBR C.No.654/LHR/IT/(550)1153/2010 and TR-48 of 2011 Chicago Metal Works distinguished.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Ahmad Nawaz for authorized Representative.

Khurram Fakhar, ACIR, Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.--This is a complaint filed under section 10(1) of the Establishment of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against non-issuance of income tax refund for tax years 2005 to 2014.

2.The Complainant claims income tax refund on account of excess deduction of income tax at source under various provisions of the Income Tax Ordinance, 2001 (the Ordinance) for tax years 2005 to 2014. The Complainant contends that there has been complete inaction on the part of Deptt regarding the refund claim and no efforts whatsoever have been made to evaluate the refund that emerges as a result of assessment made under section 120(1) of the Ordinance. Such inaction is statedly tantamount to maladministration as defined under section 2(3) of the FTO Ordinance. The Compliant further deposed that e-filed CPRs available with him conclusively established that tax had been deducted at source in accordance with law and duly deposited in treasury and that the same could not be ignored/brushed aside by the Dept on flimsy grounds.

3.When confronted the Deptt filed a reply to state that proof of tax deductions and subsequent deposit of deducted tax in treasury was not provided by Complainant and the claims could not therefore be processed/disposed of. It was contended that proof of tax deductions was mandatory under Rule 71(3) of the Income Tax Rules, 2002 read with para-d of Part-VI of the 1st Schedule to the Income Tax Rules. Furthermore. it was provided in section 164(2) of the Ordinance that at the time of filing of return the taxpayer must attach copies of the tax deduction/deposit proof along with the return. Reference was also made to President's decision in a Dept'l representation bearing No.231/2010 Law (FTO) dated 16.11.2012 in C.No.654/LHR/IT/(550)1153/2010 (Messrs Colenco Power v. FBR) to argue that the FTO did not have jurisdiction to take up tax refund claims for investigation and that in case of delay in decision on claim by the Dept. the taxpayer ought to place the matter before the Commissioner (Appeals). Finally, the Deptt referred to Lahore High Court decision cited as TR-48 of 2011 (Chicago Metal Works) to say that Dept'l inaction may be contested before the CIR(Appeals) instead of the FTO.

4.Both sides heard and available record examined. No doubt supporting documentation for refund claim is expected to be submitted with return but where return is e-filed and deemed assessment made under section 120(1) of the Ordinance that results in a determination of refund payable to taxpayer the Dept must issue and get served a notice on the taxpayer to submit the required supporting documentation if the same is not readily available on the assessment record. An adverse inference against the taxpayer cannot be drawn without giving him an opportunity to explain his position in this regard. As for the Dept'l reference to the Presidents decision in the Colenco case the same is misconceived. The President's decision referred to by the Deptt acknowledges that delay in disposal of refund claims does amount to maladministration. However, it goes on to say that notwithstanding the fact that delay in disposal of refund claims does amount to maladministration, the FTO does not have jurisdiction to decide a refund claim. It is evident that the President's objection is to a decision on the refund claim per se determining amount of refund payable etc. In the present case it is not the objective of the FTO to decide the refund claim in the manner pointed out above. Rather. the FTO simply endeavors to see whether a refund at all arises in the case before him and if it does then whether or not the Deptt has failed to process and dispose of the said claim within prescribed time in accordance with law. Actual determination of the amount of refund due to a taxpayer is the prerogative of the Dept'l officer concerned in the matter. As for the LHC Judgment in TR-48 of 2011 suffice it to say that in another LHC Judgment in WP No.11545 of 2012 (M. Saleem v. FTO) it has been held categorically that in all issues involving maladministration the FTO exercises concurrent jurisdiction without restraint. Similarly in PTR No.328 of 2009 (CIR v. Muhammad Ali). dated 14.09.2015, a division bench of LHC has held that the (deemed) assessment order under section 120(1) of the Ordinance was a final document for all purposes under the Ordinance and that includes refund of excess tax deducted at source. As in the case of the present Complainant, deemed assessments have been made in all years to which the refund claims pertain and result in a determination of refund due to excess deduction of tax at source the Dept was bound to take cognizance of the same particularly after filing refund applications and take practical steps to evaluate the refund claim. Protracted Dept'l inaction being evident in the present case Deptl'l maladministration as defined in section 2(3) of the FTO Ordinance is established and the taxpayer cannot be stopped from filing a complaint before the FTO to contest the same.

Findings:

5.Dept'l maladministration, as defined in section 2(3) (i) and (ii) of the FTO Ordinance, is evident in this case as explained supra and compensation stipulated in section 171 of the Ordinance is payable to the taxpayer.

Recommendations:

6.FBR to--

(i)direct the Commissioner to examine the tax deduction/payment evidence available with the Complainant in accordance with the legal procedure:

ii)issue refund/compensation due strictly in accordance with. law within 21 days: and

(iii)report compliance within 07 days thereafter.

KMZ/36/FTOOrder accordingly.