Rejecting Federal Board of Revenue (FBR) claim to block a genuine refund, the Federal Tax Ombudsman (FTO) has strictly directed the FBR to issue income tax refund as well as compensation to a genuine refund claimant ie taxpayer. According to the FTO order (Complaint No 291/LHR/IT(211)/881/2015) issued here on Saturday in a case of refund claim, FTO has categorically conveyed to the FBR that an adverse inference against the taxpayer cannot be drawn without giving him an opportunity to explain his position in this regard.
FTO order said 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 department regarding the refund claim and no efforts whatsoever has been made to evaluate the refund that emerges as a result of assessment made u/s 120(1) of the Ordinance. Such inaction is statedly tantamount to maladministration as defined u/s 2(3) of the FTO Ordinance. The complainant 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 department on flimsy grounds.
When confronted the department filed a reply to state that the 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 the proof of tax deductions was mandatory under Rule 71(3) of the Income Tax Rules 2002 read with para-d of Par-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 Departmental representation bearing No 231/2010 Law (FTO) dated 16 11.2012 in C.No 654/LHR/IT/(550)/1153/2010 (M/s Colenco Power Vs 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 department, the taxpayer ought to place the matter before the Commissioner (Appeals). Finally, the department referred to a Lahore High Court decision cited as TR-48 of 2011 (Chicago Metal Works) to say that departmental inaction may be contested before the CIR(Appeals) instead of the FTO.
FTO said that both sides heard and examined available record. No doubt, supporting documentation for refund claim is expected to be submitted with return but where return is e-filed and deemed assessment made u/s 120(1) of the Ordinance that results in a determination of refund payable to taxpayer the department 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.
The President's decision referred to by the department acknowledges that the 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 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 endeavours to see whether a refund at all arises in the case before him and if it does then whether or not the department 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 departmental officer concerned in the matter. As for the LHC Judgement in TR-48 of 2011 suffice is to say that in another LHC Judgement in WP No 11545 of 2012 (M. Saleem Vs 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 Vs Muhammad Ali) dated 14.09.2015, a division bench of LHC has held that the (deemed) assessment order u/s 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 results in a determination of refund due to excess deduction of tax at source, the department was bound to take cognizance of the same particularly after filing refund applications and take practical steps to evaluate the refund claim. A protracted departmental inaction being evident in the present case is established and the taxpayer cannot be stopped from filing a complaint before the FTO to contest the same, the FTO said.
The findings of the FTO said the departmental 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. It is recommended that the FBR should direct the Commissioner to examine the tax deduction /payment evidence available with the complainant in accordance with the legal procedure; issue refund/compensation due strictly in accordance with the law within 21 days and report compliance within 07 days thereafter.
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