Tax experts have raised legal questions about the reasons for rejection of compensation claims for delay in issuance of income tax refund by declaring such claims as time-barred by tax officers. Tax experts told Business Recorder here on Monday that some of the filed officers of Regional Tax Office (RTO) Lahore have rejected claims of compensation for delay in issuance of income tax refund by declaring such claims as time-barred under the law.
They said that Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle had directed the Federal Board of Revenue to write to all field units that deliberate delay in settling genuine refund claims shall not be tolerated and concerned tax officials shall be held personally responsible for any such act of gross maladministration.
Experts raised question that the compensation is sort of penalty due to delay in payment of lawful refund, how it can be rejected on the basis of time-limitation, how and under which provision of law application for seeking compensation from department is required? How it can be rejected on imaginary basis by invoking provisions of section 170(4) of the Income Tax Ordinance, 2001?, they raised further queries.
To seek justice from the FBR's functionaries, in case of pending implementation in C.No 1620-L/2008, a specific request was forwarded to the Commissioner Inland Revenue (CIR), Zone VIII, RTO-II, Lahore, wherein following specific queries were communicated:
i) A sum of Rs 883,007/- has been withheld out of lawful refund as claimed in C.No 1620-L/2008 without any lawful excuse/intimation?
ii) Additional compensation for delay in payment of lawful refunds has not been issued despite repeated requests since the filing of complaint C.No 1620-L/2008.
iii) The order passed by FTO in C.No 1620-L/2008 and in Review dated 31/12/2009 has not been implemented in letter and sprit? Even more than 1/4th of the lawful refund has been withheld without any logical basis?
After a lapse of 2.5 months a show cause notice vide letter No 671/08 dated March 22, 2012 has been issued by the concerned Assistant Commissioner Inland Revenue (ACIR), with the remarks that, "As the compensation is part of refund and for the purpose of issuance of the same it is obligatory to file application within two years as per section 170(2) (c) of the Income Tax Ordinance 2001. Since no such claim was made along with original application for refund hence it can not be entertained at this stage being barred by time and the undersigned intends to reject your claim u/s 170(4) of the Income tax, 2001. If you have any objection the same be furnished by given time frame. In case of non-compliance or unsatisfactory reply order u/s 170(4) shall be made as per facts and legal position of the case, show cause notice added. Experts said that the FTO has categorically recommended the FBR to issue a directive to all staff to reply to taxpayers letters within 10 days at the earliest. For the purposes of implementation, specific instructions were issued by the FBR vide letter .No 6(23)/Coord/2011-29707-R dated March 03, 2011 but all relevant issues remained unanswered since December 2011. They opined that it appears while issuing show cause notice by RTO Lahore, record of the taxpayer has not been consulted, the claim of the taxpayer is solely based on the relief allowed by the higher appellate authorities or refund determined on IT-30 Forms issued by the competent taxation authorities, while the matter of issuance of refund is pending since long without any legal/logical justification, therefore, the department should clarify the following issues communicated by ACIR of RTO Lahore:
Firstly, how and under which provision of law application for seeking compensation from department is required? Secondly, the compensation is sort of penalty due to delay in payment of lawful refund, how it can be rejected on the basis of time-limitation?Thirdly, as stated by the ACIR "no claim was made", when no application was made to department, how it is being rejected on imaginary basis by invoking provisions of section 170(4) of the Income Tax Ordinance, 2001?
Fourthly, how and under which provision of law 1/4th lawful refund has been withheld/adjusted, while for the last 6 years revenue department is contesting the matter that claims of Refund by taxpayer was not legal being based on unverified payments?
Fifthly, for the sake of arguments if there is any lawful demand of tax exist against the taxpayer in the departmental record, then how the same has been adjusted against the invalid claim of refund by the taxpayer? Sixthly, how a taxation authority can adjust the lawful demand of tax against the illegal (as claimed by department) refund? Who is responsible for this loss of revenue to the national exchequer?