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President upholds FTO ruling against FBR: denial of refund due to missing record

The President has confirmed the ruling of the Federal Tax Ombudsman (FTO) that non-maintenance of old assessment record by the tax department could not form basis of denying income tax refund payments to the taxpayers.

Sources told Business Recorder here on Tuesday that the President has rejected a representation of the Federal Board of Revenue (FBR), filed with the President under section 32 of the FTO Ordinance in complaint No 1620-L/2008.

In a latest decision by the President, the order of FTO on a complaint filed by Lahore based tax lawyer, has been confirmed while rejecting FBR's representation filed u/s 32 of the Federal Tax Ombudsman Ordinance, 2000. The President's order has clearly said that representation of the FBR has not been able to improve its case and explain why the relevant record was not traceable in case of issuance of refund. The President has endorsed the viewpoint of the FTO office in this case. The FTO had earlier given its findings on the basis of income tax circulars and reported cases governing income tax refunds.

According to the order of the President, communicated through the Law and Justice Division, the matter relates to refund of income tax. The ratification orders were passed under Section 221 of the Income Tax Ordinance 2001 on May 8, 2006 for refund relating to the assessment years 1994-95 to 2002-2003, which were partially processed under the repealed law ie Income Tax Ordinance 1979 and partially under the Income Ordinance 2001.

The refund application of the complainant was received by the FBR on June 30, 2006 along with the demand note/order/IT.30 Form. The case of the FBR was that the verification having partially taken place, he was issued refund on September 29, 2008, whereas he was directed to provide further proof for the residual demand.

President's order further said that the complainant had arranged all relevant material, on the basis of which IT.30 Forms were issued. But he was unable to provide further material as the company ceased to exist and that therefore, the determined refund on the basis of demand note/IT.30 Forms is to be issued to him. The complainant produced the cheque of the partial refund amount which could not be encashed because no advice for its encashment was conveyed to the relevant bank. The FTO thought that this factum established mala fide on the part of the Agency.

After investigation, the FTO recorded his findings, saying: "From documents produced by the complainant, it transpires that the Taxation Officers had determined refund for the tax year 1994-95 on the basis of relevant documents. The case being old, the complainant can not be held responsible for non-production of original relevant documents, which were allegedly submitted to the Taxation Officer.

The respondents have not given any explanation for absence of the relevant record on the basis of which IT.30 Forms were issued. They have also not mentioned if any effort was made to search the relevant papers from the file of the Department. It has been observed that assessment records are not being properly maintained and invariably in case of refund their absence is pleaded to deny the relief". Where-after the FTO made the following recommendations: "The respondents should issue, as per law, the refund claim of the complainant for the tax years in respect of each IT.30 form or order determining refund of the complainant."

Against the findings of the FTO, the FBR filed a review petition, which was duly considered by the President, and the following observations were made:"Recommendations in the instant complaint were made after due consideration and with conscious mind while dealing with all the objections and pleas raised by the Respondents and there was no error or omission apparent on the fact of record. The negligence, inattention and arbitrariness in the discharge of duties and responsibilities on the part of the Respondent stood established. In view of the above finding, the Review Application, being devoid of merits, is rejected."

President's order ruled that through this representation the FBR has not been able to improve its case or explain why the relevant record on the basis of which the IT.30 Forms were issued was not traceable. Under the circumstances the findings of the FTO are fair and proper and do not call for any interference. Accordingly, the President has been pleased to reject FBR's representation, Presidential order added.

Copyright Business Recorder, 2011