2021 PLP 344 (PTD)

2. Precisely, the Complainant, a Private Ltd company, deriving income from manufacturing and supplies of "tractor parts", e-filed return of income for Tax Year 2019, under Section 114(1) of the Income Tax Ordinance, 2001 (the Ordinance), claiming refund amounting to Rs.0.693 million. The Complainant e-filed refund application for Tax Year 2019, on 08.06.2020. According to the AR, the Department (Deptt.) without providing statutory opportunity of hearing in terms of subsection (4) of Section 170 of the Ordinance, passed order dated 26.08.2020 to the extent of verified deductions of Rs.0.232 million.

3. The Complainant has also prayed for additional payment for delayed refund in terms of Section 171(1) of the Ordinance.

4. The complaint was referred to the Secretary Revenue Division, for comments in terms of Section 10(4) of the FTO Ordinance read with Section 9(1) of the Federal Ombudsmen Institutional Reforms Act, 2013. In response thereto, the Chief Commissioner-IR, RTO, Multan forwarded Para-wise comments of the Commissioner-IR, (CIR) Multan Zone dated 17.09.2020 vide letter dated 18.09.2020. At the outset, preliminary objection regarding bar of jurisdiction, in terms of section 9(2)(b) of the FTO Ordinance, was raised. Reliance was placed on the judgment of Hon'ble Lahore High Court in W.P. No.5999/2017 titled Messrs Shehzadi Polypropylene Industries through Proprietor v. Federation of Pakistan through President and others (2017 PTD 2019).

5. On merits, it was contended that the Complainant's refund application for Tax Year 2019, had been disposed of under Section 170(4) of the Ordinance, vide order dated 26.08.2020, determining refund to the extent of verification, amounting to Rs.0.232 million. Concluded that since impugned order being appealable under the relevant legislation, the complaint was barred in terms of Section 9(2)(b) of the FTO Ordinance.

6. During hearing, the AR reiterated that the Deptt was not justified to ignore tax deduction certificates issued under Rule 42 of Income Tax Rules, 2002 (the Rules) which were furnished by the Complainant and subsequently, got verified by the Deptt and then passed impugned order without providing the Complainant opportunity of hearing. The DR reiterated that the Complainant's refund application for Tax Year 2019, had already been disposed of and refund to the extent of verification stands issued.

7. Both the parties heard and record perused.

8. The preliminary objection raised under Section 9(2)(b) of the FTO Ordinance, is misconceived as the Complainant is aggrieved at the passing of order without providing opportunity of hearing which was in clear violation of subsection (4) of Section 170 of the Ordinance. The case law relied upon by the Deptt is thus, not relevant as the facts and circumstances of the said case are entirely different from the fact and circumstance of the instant complaint.

9. Evidently, the Complainant's refund application for Tax Year 2019 was disposed of, under Section 170(4) of the Ordinance, vide order dated 08.06.2020. Perusal of the impugned order, however, reflects that not a single correspondence was made with the Complainant and refund for Tax Year 2019, was unilaterally reduced to Rs.0.232 million. Thus, while passing the order for Tax Year 2019 failure to the provide opportunity of hearing in terms of subsection (4) of Section 170 of the Ordinance, is evident.

10. The Complainant's request for additional payment for delayed refund is, however, premature at this stage in terms of explanation to section 171(2) (c) of the Ordinance. FINDINGS:-

11. Passing of impugned order dated 08.06.2020 without providing an opportunity of hearing being contrary to law and procedure, is tantamount to maladministration, in terms of section 2(3)(i)(a) of the FTO Ordinance. RECOMMENDATIONS:-

12. FBR to- (i) direct the Commissioner-IR, Multan Zone to revisit the order for Tax Year 2019 dated 08.06.2020, while exercising powers conferred under Section 122A of the Ordinance and pass fresh order under Section 170(4) of the Ordinance, after providing an opportunity of hearing to the Complainant, as per law; and (ii) report compliance within 45 days. KMZ/180/FTO Order accordingly.