2012 PLP 1632 (PTD)

FINDINGS/RECOMMENDATIONS DR. MUHAMMAD SHOAIB SUDDLE, (FEDERAL TAX OMBUDSMAN).

This complaint is against non-issuance of refund.

2. The complainant claimed refund of Rs.157,884 in Tax Year 2007 vide application submitted on 8-4-2009. The refund arose on account of excess deduction of income tax at source on payments made for the manufacture and supply of advertisement media like sign boards, billboards and hoardings. Supporting documentation comprising tax deduction certificates and other record accompanied the application. On 6-3-2012 the Deptt. informed the complainant that the refund application was liable to be rejected as the electricity tariff (A2) was for domestic use and did not bear out the complainant's contention that he was a manufacturer/supplier of goods. The complainant submitted a reply to the Deptt. on 6-3-2012, explaining that the process of preparing signboards, billboards and hoardings involved cutting, welding and shaping iron angles and preparing flex skin sheets for which an industrial electricity connection was not required. However, expert workers were employed to cut, shape and frame the iron and flex sheets by hand. Where necessary, gas welding plant was used for which no electricity was required. After receipt of the complainant's reply, the Chief Commissioner RTO-I, Lahore, vide Letter No CCIR/RTO-LHR/SO-11/ 6136 dated 30-3-2012, addressed to the Chief Commissioner RTO-I, Lahore, held that jurisdiction over the case lay with RTO-II, Lahore, "as the complainant was a manufacturer and not an advertiser.

3. When confronted, the Deptt. filed a reply intimating that the refund claim was under process and would be settled as soon as the required documentation was obtained, scrutinized and verified.

4. The complainant submits that all the required documentation had already been filed and the Chief Commissioner RTO-I had also confirmed that he was a manufacturer/supplier.

5. Examination of the relevant record indicates that the complainant was a manufacturer/supplier and tax deducted at source was therefore required to be adjusted against tax liability due. Though the refund application was filed on 8-4-2009, it remained unattended till 28-2-2012 when the DCIR wrote a letter (delivered on 6-3-2012) to the complainant for the first time raising various queries. Earlier, the complainant had, on 16-12-2011, written to the Commissioner, DCIR and ACIR concerned in the matter, but to no avail. So far as jurisdiction over the case is concerned, the complainant had originally filed the Return along with the refund application in RTO Lahore. The records were then retained in the newly created RTO-I, Lahore, when two RTOs were set up at Lahore and finally transferred to RTO-II, Lahore, on 30-3-2012. The Chief Commissioner RTO-I reached a decision that the complainant was a manufacturer/ supplier of advertisement media. Had the Deptt. disposed of the refund claim in time it would have been settled by June 2009, before the creation of two RTOs at Lahore. The refund had thus been held up without any justification for more than three years. Findings:

6. The delay in issuance of refund is tantamount to maladministration under section 2(3)(ii) of the FTO Ordinance. The delay also creates the right to receive compensation under section 171 of the Income Tax Ordinance, 2001. Recommendations:

7. FBR to direct the Chief Commissioner to-- (i) issue refund/compensation due, as per law, within 15 days; and (ii) report compliance within 05 days thereafter. C.M.A./98/FTO Order accordingly.