2007 PLP 1266 (PTD)

Rs. 1,175 Total: Rs.2,815 Thus a sum of Rs.1,438 would still be refundable after adjusting due WWF. The Taxation Officer however, passed an ex parte order under section 63 of the Repealed Ordinance on 24-4-2003; hence the complaint.

3. In parawise comments, the respondents have taken preliminary objections to the FTO's jurisdiction on the ground that the case of complainant was excluded from the purview of SAS due to non-payment of Workers' Welfare Fund and because the matter involves the interpretation of the "term" tax as defined in section 2(43) of the Income Tax Ordinance, 1979. The complainant was duly confronted with the facts to explain his position. As far the tax credit it is given by an order passed under section 156 of the repealed Ordinance, 1979 on filing of documentary evidence/verification. The case was rightly processed under normal law on account of short-payment of tax under section 54 of repealed Ordinance. Since the complainant did not furnish proof of payment of tax the case was finalized under section

63. Self-Assessment Scheme 2002-2003 provides that the return where tax had been paid fully under section 54 of the repealed Ordinance and proof of such payment is attached with the return will qualify under SAS. There is no provision in SAS regarding adjustment of pending refunds for previous years. The case of the complainant did not qualify for SAS. The allegations of Taxation Officer calling the complainant's relative and offering him to pay the expenses, the tax demand and tendering an apology are concocted.

4. During the hearing the AR reiterated the points advanced in the written complaint. The DR also reiterated the arguments advanced by them in the parawise comments emphasizing that the matter involved interpretation of law whether the WWF was included or excluded from the definition of tax and, therefore, the case fell outside the jurisdiction of the Federal Tax Ombudsman.

5. In order to determine the nature of the matter involved in the complaint it is pertinent to peruse the law relating to "tax" and "WWF". Subsection (43) of section 2 of the Repealed Ordinance defines "tax" as under: "tax" means income tax, super tax, surcharge and additional tax chargeable or payable under this Ordinance, and includes penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance; Section 2(ff) of Workers Welfare Fund, Ordinance, 1971 (Ordinance XXXV of 1971). . Section 2(ff) of Workers' Welfare Fund, Ordinance, 1971 (Ordinance XXXVI of 1971. (ff) "Ordinance" means the Income Tax Ordinance, 1979 (XXXI of 1979) (i) "total income" has the same meaning as in the Ordinance. Section 4 of Ordinance XXXVI of 1971 (4) Mode of payment by, and recovery from industrial establish ments.

(1) Every industrial establishment, the total income of which in any year of account commencing on or after the date specified by the Federal Government in official Gazette in this behalf is not less than one lakh of rupees shall pay to the fund in respect of that year a sum equal to two per cent. of so much of its total income as is assessable under Ordinance or would have been so assessable but for the exemption made by section 48 thereof. (2) Every industrial establishment which is liable under subsection (1) shall pay the amount due from it to the Income Tax Officer having jurisdiction over the industrial establishment for purposes of the Ordinance. (3) The industrial establishment shall, on or before the date on which it is required to furnish a return of income under section 55 of the Ordinance, pay the amount due from it under subsection (1) calculated with reference to the total income reported in the said return. (4) At the time of making an assessment under the Ordinance or as soon thereafter as may be, the Income Tax Officer shall, by order in writing, determine the amount due from industrial establishment under subsection (1), if any, on the basis of the income so assessed after taking into account the amount paid by the industrial establishment under subsection (3) in respect of the year and the industrial establishment shall pay the amount so determined on or before the date specified in the order. (5) Any change by way of enhancement or reduction in the assessed income subsequent to the assessment made under the Ordinance shall be given effect to by adjustment of the amount due under subsection (1). (6) Any amount paid by an industrial establishment under sub-section (3) which is found, on the basis of an order in appeal or revision under the Ordinance, to have been paid in excess shall be refunded to it by the Income Tax Officer. (7) The payment made by an industrial establishment to the Fund under subsection (1) shall be treated as an expenditure for purposes of assessment of income tax. (8) Where any industrial establishment fails to pay the amount due from it as required under this section, it shall, without prejudice to any other liability to which it may be subject under this Ordinance or any other law, be liable to pay an additional amount equal to eight per cent per annum of the amount due from it from the date on which it was originally payable to the date on which it is paid. (9) The provisions of the Ordinance relating to the mode and time of recovery of the income tax liable under the Act shall, so far as may be, apply to the recovery of the amount due subsection (1). The provisions of law supra are unambiguous and involve no exercise of interpretation of law. While WWF is payable under section 4 of WWF Ordinance to the Income Tax Officer having jurisdiction over the industrial establishment concerned on or before the date on which a return under section 55 of the Ordinance is due, the Income Tax Officer is required under the WWF Ordinance to determine liability of WWF at the time of assessment with reference to assessed total income and any unpaid liability will be recoverable as recovery of tax demand under the Repealed Ordinance. It is not a tax or "any penalty, fee or other charge or any sum or amount leviable or chargeable under Income Tax Ordinance". The C.B.R. had clarified as far back as in 1995 that mere non-payment of WWF would not render a case ineligible under the SAS. The act of the Taxation Officer in initiating assessment proceedings under section 61 on account of non-payment of WWF as tax payable under section 54 of the Repealed Ordinance was an act and process contrary to the law and without any valid reason against which no appeal is provided. The reason offered by the respondent for the impugned process adopted and the action taken is not valid as considered supra. Further, the investigations reveal that the Taxation Officer has referred in 'the ex parte assessment order to the explanation offered by the complainant but he has not given it his due consideration. It is evident from the fact that he has not mentioned a word as to what was the explanation and why was it not found satisfactory. It renders the decision/assessment order arbitrary and perverse as well. The allegations of maladministrations as defined under sub-clauses (a) and (b) of clause (i) of subsection (3) of section 2 of Ordinance XXXV of 2000 are proved. It is recommended that: (i) That the Commissioner of Income Tax keeping in view the foregoing findings invokes his jurisdiction under section 122A and makes such revision to the assessment order passed by the Taxation Officer as the Commissioner deems fit. Compliance be reported within 30 days. C.M.A./222/FTO Order accordingly.