2008 PLP 548 (PTD)

(a) the party who deducted the tax had deposited it late in the Government account not adhering to the legal requirements to deposit within 7 days of deduction, and (b) Challan in respect of the other indicates payment under section 52A and not section 50(4) of the repealed Ordinance. With this the Complainant is aggrieved.

3. The Respondents have forwarded parawise comments by R-CIT, Eastern Region, Lahore which admit that refund aggregating Rs.383,329 relating to assessment years 1999-2000 to 2001-2002 have been withheld because the Challans as provided by the withholding agent, contain a date of deposit which falls in the tax year 2003. Again, the Challan on the basis of which refund is claimed for 2001-2002, has on its face mention of Section 52A thereby giving the impression that the payment represents deposit by Tele World Marketing (Pvt.) Ltd. and not for the Complainant.

4. The learned Counsel, Khawaja Riaz Hussain, submitted that since the lodging of complaints two more refunds have been issued as under:

(i) Rs.1,231,476 vide Voucher dated 16-8-2003 (ii) Rs,2,080,875 vide Voucher dated 6-11-2003 with the result that refunds withheld are for following reasons:

Assessment Year Amount of. Refund Remarks 1999-2000 Rs. 47,047 Deposited late by the withholding agent. 2000-2001 25,761 -do- 2001-2002 310,521 Withholding agent wrongly mentioned Section 52A instead of section 50(4) Total Rs. 383,329 It was pleaded by the AR that the mistakes, as pointed out, were committed by the `withholding agent' for which it is unjust to punish the Complainant. If late payment was made by the `withholding agent cognizance should have been taken under Section 52 by initiating action against them but the Complainant is being penalized by way of refusal to give credit for deduction made out of the payments due to him. Similarly, the mistake of mentioning a wrong Section by the `withholding agent' has been made an excuse to withhold refund ignoring that the Challan clearly mentions (in the detail on the reverse) that out of consolidated deposit of Rs.743,I56, a sum of Rs.310,521 represented amounts recovered from the Complainant. The AR concluded by submitting that the Department's inefficiency in disciplining the 'withholding agent' is causing harassment to the Complainant and depriving him of the credit of tax deducted out of the payment due to him. It was insisted that in addition to refund due, instructions be issued for payment of Additional Payment for delayed refund under Section 171 from the date on which refund became due.

5. Mr. Muzammil Hussain (D-CIT) appearing for the Revenue, on his turn, submitted that unless fool-proof verification was furnished it would not be possible to issue refund of huge amounts and it was necessary to ensure that moneys were deposited in the Government account as per requirements of law and Rules. He supported the arguments conveyed by the R-C1T in favour of refusal to withhold issuance of refunds.

6. Scrutiny of record after discussion with two representatives reveal :

(i) Challan for Rs.743,156 represents payments of withholding tax in respect of three parties of which Rs.310,521 pertained to the Complainant. This is clearly visible from the details of payment' on Challan dated 27-3-2001. It is true that in a column (meant for the status of the depositor), the word "52-A" has been written which is being made an excuse to insist that payment was under Section 52A and not under section 50(4). Surprisingly, there is no column on the prescribed Challan form for the Section in which payment is made. It is, therefore, illogical to presume that the payments are by the Tele World Marketing (Pvt.) Ltd., on their own account and not for the parties whose names were clearly mentioned in the column meant for "details of payment". This could be verified from the with-holding agent i.e. Tele World Marketing (Pvt.) Ltd. (ii) Section 52A of the repealed Ordinance relates to recoveries from the person from whom tax was deducted (or collected) and has no relevance in the present context because neither the Complainant nor the withholding agent were required to make payment under section 52A. (iii) As respects the delay in depositing the withheld amount of tax by the withholding agent, the responsibility falls on the latter and not on the former and should have been taken cognizance of under section 86 of the repealed Ordinance. (iv) It may be relevant to recall that C.B.R. Circular No.5/2003 dated 30-6-2003 [reported as (2003) 88 TAX 129 (Statutes)] unequivocally lays down that refund vouchers should preferably be issued along with the refund order and where verification is required within three months from the date the refund order is made" and the refund voucher be delivered to the taxpayer by registered post or courier service. In the Complainant's case it is not in dispute that the refund, as claimed, has already been shown due on IT-30 of each year under-consideration. On the basis of above data, which is available on record, it emerges that the Department is responsible for deliberate withholding (or non-payment) of refund thus committing "maladministration" as per sub-clause (v) of clause (3) and for delaying refund on irrelevant ground as per sub-clauses (i)(c) of Clause (3) of Section of the FTO Ordinance. It is, therefore, recommended that

(i) Refund of the aggregating, Rs.383,329 for the assessment years 1.999-2000 to 2001-2002 be issued under section 170 of the Income Tax Ordinance, 2001. (ii) Additional Payment under section 171 of the Ordinance for the period from which the refund originally became due to the date of payment, be also issued, as per law.

7. Compliance report be submitted within 30 days of receipt of this Order. C. M.A./364/FTO Order accordingly.