SHAHSONS PAKISTAN (PVT.) LTD., MULTAN Versus The SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.64/MLN/IT(42)530 of 2016, decided on 10th June, 2016.

Result: Order accordingly.

Summary

This is a complaint before the Federal Tax Ombudsman regarding the non-issuance of an income tax refund amounting to Rs.8,349,326 under section 170 of the Income Tax Ordinance, 2001 for the tax year 2015, along with a claim for additional payment under section 171 for the delay. The core legal question was whether the Department's failure to process and issue the refund within the statutory period of 60 days constitutes maladministration. The Federal Tax Ombudsman held that the failure to settle the refund claim within the prescribed time amounts to maladministration under section 2(3)(ii) of the Federal Tax Ombudsman Ordinance, 2000. The complaint was disposed of with recommendations that the FBR direct the Commissioner to complete the verification process and issue the due amount of refund within 30 days, and report compliance within 7 days thereafter. The key principle laid down is that failure by the tax department to settle a complete refund claim within the statutory timeframe constitutes maladministration under the Federal Tax Ombudsman Ordinance, 2000.

Questions settled in this judgment

Does the failure of the tax department to settle an income tax refund claim within the prescribed statutory period constitute maladministration?
Is a taxpayer entitled to additional payment for delay in the payment of a tax refund under section 171 of the Income Tax Ordinance, 2001?
What is the prescribed statutory period for settling an income tax refund claim under section 170 of the Income Tax Ordinance, 2001?

Laws & provisions referred

income tax refundmaladministrationfederal tax ombudsmanstatutory periodverification processadditional payment for delay

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.-- This complaint is regarding non-issuance of income tax refund amounting to Rs.8,349,326 under section 170 of the Income Tax Ordinance, 2001 (the Ordinance) for the tax year 2015. Statutory period prescribed by law for the purpose has since lapsed. The Complainant also claims additional payment under section 171 of the Ordinance for delay in payment of tax refund.

2.The complaint was sent for comments to Secretary Revenue Division, in terms of Section 10(4) of the Federal Tax Ombudsman Ordinance, 2000 (the FTO Ordinance). In response, the FBR submitted its comments vide letter dated 13.05.2016.

3.The AR claims that the Complainant is a limited company and derives income from manufacture and supply of agricultural tractor parts to Millat Tractors Limited and Al-Ghazi Tractor Limited etc. Return for the tax year 2015 was filed on 16.12.2015 on FBR web portal i.e. IRIS claiming refund on account of excess of tax deductions made under sections 147 (Advance Tax), 148 (Import of Goods), 153 (Payment for Goods, Services and Contract), 231A (Cash Withdrawal from Banks), 235 (Electricity Bills) and 236 (Telephone and Mobile Bills). Application for issuance of refund was filed on 07.01.2016 with original electricity and telephone bills etc. The AR contended that refund claim was complete in all respects but it has not been settled within the prescribed period of 60 days under section 170(4) of the Ordinance. Personal visits to RTO office have gone unheeded and nothing has been done in this regard so far. He also claimed additional payment under section 171(2) of the Ordinance for the delay in payment of refund by the Deptt.

4.The DR claimed that necessary verification was being made. It is claimed by the Deptt that to ascertain accuracy of refund claim required verification. He claimed that the refund voucher would be issued as and when the process of verification was completed. The DR deposed that there is no maladministration on the part of the Deptt.

5.Both the parties have been heard and the record perused. The AR delivered a copy of PRAL's letter dated 07.03.2016 claiming that the matter had been fully verified by PRAL and there was no justification to withhold the refund any further. However, the DR submitted that verification from some banks was still needed, but he failed to point out any justifiable deficiency.

Findings:

6.Department's failure to settle the refund claim within time as prescribed under section 170 of the Ordinance is tantamount to maladministration under section 2(3)(ii) of the Federal Tax Ombudsman Ordinance, 2000.

Recommendations:

7.FBR to--

(i)direct the Commissioner to complete the verification process and issue the due amount of refund within 30 days; and

(ii)report compliance within 7 days thereafter.

HBT/59/FTO Order accordingly.

Judges on this bench

Abdur Rauf Chaudhary78 judgments
Federal Tax Ombudsman30 judgments