ISLAMABAD: The Federal Tax Ombudsman (FTO) has ruled that the delay in issuance of refund was tantamount to maladministration under Section 2(3)(ii) of the FTO Ordinance.
On his findings FTO in a refund claim case recommended the Federal Board of Revenue (FBR) to direct the Chief Commissioner to issue refund due, in accordance with law; and report compliance within 30 days.
According to the findings and recommendations of the FTO a complainant M/s Radian Glass (Pvt) Ltd Lahore versus the Secretary Revenue Division, Dealing Officer, Authorized representative and department representative.
The complainant claimed refund of Rs 2,146,222 for Tax Year 2012 as per application e-filed on 07.09.2013.
The refund arises, as a result of excess deduction of tax at source under sections 148, 153, 231A, 231B, 234, 235 and 236 on imports; supplies, cash withdrawals from Banks, registration of motor vehicle, payment of motor vehicle token tax, and in electricity and telephone / mobile phone bills.
As the refund claimed as per return filed / deemed assessment finalized u/s 120(1) of the Ordinance was not processed / disposed of within the mandatory 60 days time-frame stipulated in the statute, the complainant sought the intervention of the Federal Tax Ombudsman.
The department had served no notice on complainant to furnish explanation or documentation to clarify the refund claimed.
When confronted, the department filed a reply raising a preliminary objection that as the complainant had an option under the statute to file an appeal before the first appellate authority in case of non disposal of his refund claim, there was no cause for the FTO to assume jurisdiction in the matter Reference is made to President's decision in complaint No. 1176/2010 disposing of a dept'l representation against the FTO's recommendations.
Furthermore, the department also contends that it has been held by the President in his decision disposing of complaint No.1359-K/2001 that the FTO was not an appellate forum and was not competent to dilate on matters involving the interpretation of statutes.
Therefore, he could also not dilate on the merits or otherwise of statutory provisions governing issuance of refunds.
On merits the complainant contends that the delay in disposal of the refund claim was due to unforeseen delays in verification of the tax payment claims from the deducting authorities.
These delays were statedly due to deficient documentation filed by the complainant and also due to discrepancies that have not been satisfactorily explained by him.
The department has referred to decision of the Wafaqi Mohtasib in complaint No.11/289/88118 (Gojra Textile Mills Ltd) in which it has been held that the complainant is to blame equally for delays in verification of tax payment claims from the deducting authority.
The FTO heard both sides and available record examined.
As held by the Appellate Tribunal Inland Revenue (ATIR) in reported judgment cited as 2010 PTD (Trib.)5193 the Commissioner Inland Revenue is under a mandatory obligation to, suo moto, dispose of any refund claim arising as per return of Income filed that has been deemed to have been assessed under section 120(1) of the Ordinance within 60 days of the date of deemed assessment and order under section 170(4) of the Ordinance must then also be passed within the 60 days timeframe.
If this is not done, a delay in the disposal of the refund claim is evident and compensation for the delay is payable under section 171 of the Ordinance, The deemed assessment under section 120(1) of the Ordinance is an assessment order applicable "for all purposes of this Ordinance" (emphasis supplied) as stated in the statute itself.
The deemed assessment order is therefore relevant for refund purposes as well This judgment of the Tribunal is binding on all departmental functionaries.
In case the refund claimant falls to respond to a short document notice issued by the department requisitioning tax payment information relevant to a refund claim, an order under section 170(4) of the Ordinance must still be passed within the mandatory 60 days time frame.
Credit for tax payment claimed will not be allowed to the taxpayer to the extent that the relevant supporting documentation, such as tax payment challan /Cash Payment Receipt (CPR) or Rule-42 certificate, is not submitted, in this context it is pointed out that it has been held by the Supreme Court of Pakistan in reported judgment cited as PTCL 2002. CL. 1
(Assistant Collector Customs Pakistan versus Khyber Electric Lamps MFG Company Ltd Peshawar) that:
"It is well settled of proposition of law that a thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all."
The department has failed to adhere to the mandatory 60 days time frame prescribed for the disposal of the refund claim and this lapse on its part is an action 'contrary to law' and therefore tantamount to `maladministration' under section 2(3) of the FTO Ordinance.
The Honorable Chief Justice of the Lahore High Court in judgment disposing of Writ Petition No.11545 of 2012 (Muhammad Saleem versus FTO and others) held that the Federal Tax Ombudsman exercises jurisdiction without any restraint in all cases involving maladministration by FBR functionaries.
The judgments cited supra are central to the issues involved in the present complaint and were not referred to before the President when he heard the dept'l representation in complaint No.1176/2010 that has been cited in the preliminary objections raised by the department. Appeal before the Commissioner (Appeals) is not the only option available to a taxpayer/refund claimant when the department fails to dispose of a refund claim.
As per the Supreme Court judgment cited as PTCL.2002.CL.1 the dept'l lapse is clearly 'contrary to law' as the mandatory statutory requirement of passing an order u/s 170(4) of the Ordinance within the 60 days framework given in the statute to dispose of the pending refund claim has not been met.
As explained above, such a lapse is tantamount to 'maladministration as defined in section 2(3) of the FTO Ordinance and when aggrieved by such grievance the taxpayer can place the same before the Federal Tax Ombudsman as clarified in the LHC judgment in WP No.11545 of 2012, Once the matter is so placed before the FTO, no Court or other Authority can take it up for adjudication as stipulated in section 18 of the Federal Ombudsmen Institutional Reform's Act 2013 (FOIRA).
The law governing the office of the FTO has clearly changed substantially since the President announced his decision in complaint No. 1176/2010, the most recent change being the enactment of FOIRA in March 2013.
It is to be noted that the FTO has not made any attempt to interpret the statute when disposing of this complaint.
He has relied instead on interpretation of law by the competent appellate forum including the Supreme Court of Pakistan, the High Court and the Appellate Tribunal.
As for the department's contention that the complainant also has a responsibility to ensure that tax payment documentation is verified in time by the deducting authority, it is pointed out that the complainant can be expected to play his role only after the department has served formal notice on him in time confronting him with the precise verification problems faced by the department in specific cases.
Issuance of any such notice was not brought to the attention of the FTO in the present case.
The elaborate arguments made by the department to justify wholly unwarranted delay in disposing of pending refund claims is itself tantamount to maladministration as it shows dept'l reluctance to refund amounts due to taxpayers in brazen violation of the Supreme Court of Pakistan judgment in the Pfizer Ltd Vs FOP case (77 TAX 172). Under the given facts and circumstances of the case, as explained supra, the exercise of jurisdiction by the FTO in the complainant's case is in order as the department has not passed any order under section 170(4) of the Ordinance within the mandatory 60 days time frame prescribed under the statute and the concerned departmental officials are responsible for the delay in disposal of complainant's refund claim.
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