The Supreme Court on Tuesday granted leave to a case related to Federal Tax Ombudsman's jurisdiction to inquire matters related to assessment of income tax. A two-judge bench comprising Justice Umar Atta Bandial and Justice Munib Akhtar heard an appeal against the Lahore High Court verdict.
Muhammad Ashraf, proprietor of M/S Shahzadi Polypropylene Industries, on 18-07-2016 filed a complaint before FTO that his refund application submitted to FBR is not processed and his due fund of Rs 3,606,057 was not being paid to him.
The FTO issued notice to the Federal Board of Revenue (FBR) and thereafter heard both the parties. The FBR acknowledged the availability of evidence supporting the claim of the complaint and made commitment before the FTO that the claim of M/S Shahzadi Polypropylene Industries would be settled in three weeks. In view of this commitment, the FTO did not give any finding or recommendation and disposed of the matter. However, the agency set at naught its own commitment and represented to the President of Pakistan, which is Appellate Authority.
The President accepted the representation of the agency and set aside the observation of the FTO. The complainant then filed a writ petition before the Lahore High Court which was dismissed on 27-04-2017. The Intra-Court Appeal (ICA) was also dismissed on 30-04-2017.
The complainant, therefore, filed an appeal in the apex court under Article 185 of Constitution to set aside the LHC judgment.
He contended that denial of FTO role in checking the mal-administration by the tax functionaries in their dealings with the tax-payers would be tantamount to negating the very concept of FTO.
The delay of payment of refunds to tax payers is mal-administration falling within the purview of Section 2(3)(ii) of Ordinance. He argued that tax-payer cannot be denied the option of accessing the forum of FTO, at his choice, instead of approaching the agency which, according to him, is responsible for the mal-administration.
He stated that the President cannot act under Section 32 of FTO Ordinance in the absence of FTO recommendation. The agency is bound by its own commitment that it will pay the refunds within three weeks. The agency cannot refuse from its solemn commitment made before the FTO (in his quasi-judicial capacity) that it will pay the refund within three weeks, after which the FTO disposed of the matter in the light of the commitment.
That in the absence of any recommendation by the FTO, the President could not proceed to exercise his powers under the Section 32 of the Ordinance even when such powers had not been conferred on him. The President cannot decide a representation in total conflict with his earlier decisions on the same subject in similar circumstances. "The words related to assessment of income or wealth determination of liability of tax or duty, classification or valuation of goods, interpretation of laws, rules and regulations relating to such assessment, determination, classification or valuation in respect of which legal remedies of appeals, reviews are available under the relevant legislation, do not embrace mal-administration through delay in payment of refund to a tax payer."
The LHC has misconceived the law in holding that the petitioner could avail a remedy under the Section 32 of the FTO Ordinance when in fact no remedy was available to the petitioner. The case is adjourned for two weeks.
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