WAHEED SHAHZAD BUTT Versus SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.627/LHR/IT(483)1310 of 2011, decided on 28th May, 2012.

Result: Order accordingly.

Summary

The complainant, an income tax lawyer, filed a public interest complaint before the Federal Tax Ombudsman highlighting tax computation defects in the electronic Income Tax Return (IT-1) on the F.B.R. web portal for service sector corporate taxpayers in Tax Year 2010, contending that the portal understated due tax liability and showed maladministration. The Federal Tax Ombudsman examined the contentions and the response of the Revenue Division, noting that a similar issue had been addressed in an earlier complaint. The court held that the defectively designed electronic Return for corporate taxpayers in the services sector demonstrated inefficiency and amounted to systemic maladministration under the relevant statutory provisions. The Federal Tax Ombudsman disposed of the complaint by ordering that the recommendations previously issued in Complaint No. 1346 of 2011 shall apply mutatis mutandis, requiring the Federal Board of Revenue to submit a compliance report within fifteen days. The key principle laid down is that the failure of tax authorities to design an error-free electronic tax return resulting in defective tax computation constitutes systemic maladministration under the law.

Questions settled in this judgment

Does a defectively designed electronic tax return on the F.B.R. web portal constitute systemic maladministration under the Establishment of the Office of Federal Tax Ombudsman Ordinance 2000?
Whether the Federal Tax Ombudsman can apply recommendations from a prior similar complaint to subsequent identical complaints concerning tax return defects?
Is the Federal Board of Revenue responsible for ensuring a fool-proof electronic tax return is placed on its official web portal for corporate taxpayers?

Laws & provisions referred

Federal Tax Ombudsmanelectronic Income Tax Returnmaladministrationservices sectorIncome Tax Ordinance

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.--- The complainant, a practicing income tax lawyer, filed the instant public interest complaint, highlighting tax computation defects in the electronic Income Tax Return (IT-1) placed on the F.B.R. web portal required to be e-filed by service sector corporate taxpayers, in Tax Year 2010.

2.The complainant contends that for corporate taxpayers deriving income by providing/rendering services chargeable under section 153(1) (b), read with section 153(6) of the Income Tax Ordinance, 2001 (the Ordinance), the electronic Income Tax Return (IT-1) for Tax Year 2010 placed on the FBR web portal gave misleading information to taxpayers and tax payable by them was not being correctly computed. Specifically, the electronic Income Tax Return understated a taxpayer's due income tax liability for Tax Year 2010 and was not designed to take into account receipts/income liable to tax under Normal Tax Regime, besides the income taxable under the Minimum Tax Regime. The matter was brought to the notice of the FBR by the complainant but the Department did not give him a satisfactory response, compelling him to refer the issue to the Hon'ble Federal Tax Ombudsman as it involved FBR's maladministration in failing to design an error-free Return.

3.The complaint was sent to the Secretary, Revenue Division, for comments which were filed on 19-1-2012 and on 16-4-2012.

4, In response, Mr. Basit Salim Shah, Secretary, IR (General), FBR, submitted that 9887 taxpayers had filed their Returns showing income from services sector (AOP: 1436, Business Individual: 3828, Company: 2707 and Salary Individual: 1916) for the Tax Year 2010. He further submitted that directions had been issued to field formations to carry out the desk audit in all cases for the purpose to point out any short payment in order to award against any possible loss of revenue.

5.It is pertinent to mention that earlier a similar nature Complaint No 158/ISD/IT(88)1346/2011 was decided by this Office with the Recommendations that

"FBR to -

(i)ensure that in future a fool-proof electronic Return is placed on the FBR's official web portal:

(ii)direct field formations to determine revenue loss that has occurred due to defective e-Return;

(iii)take steps to retrieve the loss, without charging any penalty or default surcharge to the concerned taxpayers; and

(iv)report compliance within 30 days."

Findings:--

6.The defectively designed electronic Return for corporate taxpayers (services sector) shows incompetence, inefficiency and inaptitude on the part of the dealing officials and is thus tantamount to systemic maladministration under section 2(3)(ii) of the FTO Ordinance, 2000.

Recommendations:--

7.Being an identical nature complaint, the Recommendations already issued in Complaint No.1346 of 2011 shall apply in this case. F.B.R. to submit a compliance report within 15 days.

M.W.A./111/FTO Order accordingly.

Judges on this bench

Dr. Muhammad Shoaib Suddle179 judgments
Federal Tax Ombudsman30 judgments