Federal Tax Ombudsman (FTO) has recommended to the Federal Board of Revenue (FBR) to initiate inquiry against the officer responsible for mal-administration. This verdict was given by Mumtaz Ahmad, adviser FTO, Karachi over the complaint filed by M/s J.M enterprises on June 04, 2009, which observed that the audit of the Directorate Revenue Receipt Audit (DRRA), in the matter of sales tax input adjustment based on photocopies of five bills of entry, was not well-founded.
It alleged that the sales tax department had selected the case on the basis of the order-in-original as the adjustment of input tax of Rs 216,547 in respect of imported goods was inadmissible (having been allowed on photocopies basis). It is stated that the complainant approached the assistant collector and showed original bills of entry, who assured the representative of the firm that the matter would be taken up with the DRRA for withdrawal of the observations para.
But the firm came to know about the order-in-original and the demand of the said amount raised by disallowing input tax claim when embargo was placed to recover the demand. The embargo was lifted after Rs 50,000 was paid against the demand due to coercive methods adopted by the department.
It is further stated in the complaint that the order passed by the department is contrary to law, arbitrary, based on irrelevant grounds, using coercive methods for tax recovery, therefore, falls within the ambits of mal-administration as defined under section 2(3) of the Federal Tax Ombudsman Ordinance, 2000.
The plaintiff therefore requested the FTO to set-aside the illegal order-in-original no.21 dated 02.01.2009. The complainant further asked to direct concerned collector for the refund of Rs 50,000, which was wrongly recovered by the department. Meanwhile, the representative of the department submitted the explanation document, which stated that the order-in-original was legally maintainable and it can be appealed before the collector (Appeals).
However, the FTO was of the view that it is a clear case of mal-administration as the observations of DRRA could have been settled in 2006, by verifying the payment from customs department but the delay has caused a lot of inconvenience to the taxpayer, and created an embarrassing situation for him.
Therefore, the FTO has recommended the revenue division to direct the collector to cancel the order-in-original passed by his subordinate and to undertake fresh proceedings so that refund of Rs 50,000 is paid to the complainant. The FTO further asked the FBR to write a letter to the complainant regretting the inconvenience besides issuing appropriate guidelines for the sales tax officers in the matter of handling DRRA-related observations.
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