Federal Tax Ombudsman (FTO) has directed Federal Board of Revenue (FBR) to allow additional payment (compensation) for delayed refund to an educational board of the government of Khyber Pakhtunkhwa for late returning money recovered through bank account attachment. Sources told Business Recorder that the FTO has issued recommendations to FBR in a complaint against the chairman FBR and tax employees of RTO Abbottabad on the issue of long silence to return the money illegally recovered through attachment of bank account of Board of Intermediate and Secondary Education, Abbottabad.
According to the findings of the FTO, the inordinate delay in disposing of request for additional payment for delayed refund Tax Year 2013 in terms of Section 171of the Ordinance, tantamount to mal-administration in terms of Section 2(3)(ii) of the FTO Ordinance.
It is learnt that complaint was moved by educational Board of KPK through Waheed Shahzad Butt Advocate, wherein they sought intervention of the FTO for returning their money from the FBR functionaries of RTO Abbottabad and some illegal proceedings. Earlier, Peshawar High Court has also issued notices to then SA to Prime Minister on Revenue, Chairman FBR and CIR Niazi in a petition moved by educational Board of KPK.
The FTO order has stated that the complaint has been filed in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance), alleging delay in payment of additional payment for delayed refund for Tax Year 2013 and against notice issued under Section 161 read with Section 205 of the Income Tax Ordinance, 2001 (the Ordinance) for Tax Year 2017.
Precisely, the complainant is an autonomous body owned by provincial government of Khyber Pakhtunkhwa (KPK). According to the AR, the department initiated proceedings for Tax Year 2013, treating the Complainant as assessee in default in terms of Section 161 read with Section 205 of the Ordinance. Although on the similar issue a complaint No 90/ISD/IT(61)1140/2014 was filed against the orders passed under Section 161 read with Section 205 of the Ordinance. The DR contended during investigation of the above complaint that had the Complainant approached the department, its grievance could have been resolved much earlier.
Thus on the undertaking given by the department to re-consider the impugned orders to resolve the issue, the investigation was closed. However, notwithstanding above, on the same issue, the department passed order under Section read with Section161 read with Section 205 of the Ordinance dated 18.08.2014, for Tax Year 2013 and created against the Complainant demand amounting to Rs 5.876 million, which the department subsequently recovered. The Complainant filed appeal against the above order.
The Commissioner-IR (CIR) (Appeals) Peshawar confirmed the treatment, vide order dated 20.01.2015. However, the Appellate Tribunal Inland Revenue (ATIR) vacated orders of both the authorities referred to above vide Judgment dated 24.05.2016. Against the order of ATIR, the FBR vide letter dated 29.08.2016 directed the department to file reference before the High Court which was however, filed almost after 2 years.
The department also dragged the matter for 2 long years in allowing appeal effect and only after the Complainant filed Constitutional Petition (CP) before of Peshawar High Court, Abbottabad Bench, refunded principal amount of Rs 5.876 million vide voucher dated 11.04.2018.While filing request for refund vide letters dated 12.08.2016 followed by reminders dated 10.11.2016. 01.03.2017. 30.06.2017, 28.08.2017 the Complainant also requested for additional payment of delayed refund for Tax Year 2013 in terms of Section 171 of the Ordinance.
However, despite repeated efforts of the Complainant, the department failed to settle his request of additional payment for delayed refund, however, the department without considering facts of the case issued the impugned notice dated 20.03.2018 under Section 161(1A) of the Ordinance requiring the Complainant to deposit Rs 13,408 for alleged default of withholding tax, for Tax Year 2017.
The issuance of notice for alleged default of non-deduction of withholding tax for Tax Year 2017 fell within ambit of Section 2(3) of FTO Ordinance. The AR prayed for taking action against the department officers/officials concerned for issuing unlawful notices and also award cost with compensation for monetary loss to the Complainant incurred on account of un-necessary litigation.
The complaint was forwarded for comments to secretary Revenue Division in terms of Section 10(4) of the FTO Ordinance, 2000 read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013 in response thereto, Chief Commissioner-IR. RTO Abbottabad, submitted para-wise comments dated 10.05.2018. At the outset preliminary objection regarding bar of jurisdiction was raised in terms of Section 9(2)(a) & (b) of FTO Ordinance, 2000 on the ground that only legal notice was issued in accordance with law.
On merits, it was contended that Complainant was treated as assessee in default under Section 161/205 of the Ordinance for the Tax Year 2013 vide impugned order dated 18.08.2014. The order for Tax Year 2013 was passed before the decision in complaint No 90/ISD/IT(61)1140/2014. The Complainant did not approach the department for revision of the impugned order under Section 122A of the Ordinance, instead chose legal remedy of appellate forum. The CIR (Appeals) confirmed the treatment vide order dated 20.01.2015.
However, the ATIR allowed relief to the Complainant vide Order dated 24.05.2016 vacating action of the department. Accordingly after given appeal effect under Section 124A of the Ordinance, the amount Rs 5 876 million was refunded to the Complainant vide voucher No 485 dated 11.04.2018.
However, against the order of ATIR the department tiled reference TR No 04-A/2018 before the Peshawar High Court Peshawar, Abbottabad Bench. The High Court admitted the reference and issued notices vide order dated 16.5.2018. It was contended that impugned notice was issued for Tax Year 2017 after the case was selected for withholding audit in the light of FBR's instructions contained in letter CN 1(79)C(WHT-IR)2015-16/57143 dated 05.05.2017.
The selection was made earlier in February 2018 much before filing of the instant complaint, therefore, malafide could not be attributed to it. It was averred that only a notice was issued for Tax Year 2017, in accordance with provisions of law and replies filed by the Complainant before the officer having competent legal jurisdiction were under consideration. Thus mere issuance of a legal notice under the law did not tantamount to maladministration.
Arguments of the parties have been given due consideration and available record perused by the FTO. Evidently, after passing of the order dated 18.08.2014, the Complainant chose to file appeal under Section 127 of the Ordinance. The CIR confirmed treatment of the department which the ATIR vacated Vide order dated 24.05.2016. Against, the ATIR's order, the department filed reference which is now pending before the Peshawar High Court.
The department has already allowed appeal effect under Section 124A of the Ordinance and issued refund for Tax Year 2013. However, request of the Complainant for additional payment for delayed refund is still not disposed of and no explanation for undue delay has been offered by the department. Under these circumstances, as the reference against the order of ATIR has been admitted for hearing and as the same is still sub-judice before the Peshawar High Court, no adverse inference can be drawn against offices/officials of the department.
Similarly, request for awarding cost and compensation in terms of Section 22 of the FTO Ordinance is still premature in this case. As regards impugned notice dated 20.03.2018, it is observed that the same was issued after case of the Complainant for Tax Year 2017 was selected for withholding audit, in terms of FBR's instructions discussed supra.
This notice was issued by way of providing opportunity of hearing to the Complainant to explain its position. There is a plethora of case law where superior appellate fora and this office as well, have held that mere issuance of notice does not constitute maladministration.
As the Complainant has already furnished the required reply to the impugned notice, the department is directed to process and decide the issue after affording adequate opportunity of hearing in transparent manner and in the light of understanding given by the department in already decided complaint No.90/15D/I T(61)1140/2014, in accordance with law.
The undue delay in disposal of request of the Complainant for additional payment on account of delayed refund for Tax Year 2013. In terms of Section 171 of the Ordinance is however evident, the FTO order said.
According to the findings of the FTO, the inordinate delay in disposing of request for additional payment for delayed refund Tax Year 2013 in terms of Section 171of the Ordinance, is tantamount to mal-administration in terms of Section 2(3)(ii) of the FTO Ordinance.
The FTO has recommended the FBR to direct the Commissioner-IR concerned to dispose of request of the Complainant for additional payment for delayed refund for Tax Year 2013, after providing opportunity of hearing as per law and report compliance within 45 days.
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