2011 PLP 1225 (PTD)

4. The perusal of record and the facts narrated in the complaint reveal intriguing aspects of gross maladministration in this case, including: (i) the complainant had earlier lodged a Complaint No.244/KHI/ IT(107)/726/2009 dated 11-3-2010 wherein it was alleged that the Department had blocked refunds amounting to Rs.712 million for assessment years 1995-96 to tax year 2005 despite clear orders of the appellate authorities and the Chairman of Central Board of Revenue that Port Qasim Authority being a 'local authority' was exempt from levy of income tax. In his Recommendations dated 11-3-2010 in Complaint No.244/KH/ IT(107)/726/2009 dated 11-3-2010, the FTO had also recommended to issue refund/compensation due to the complainant within 21 days, and to initiate action against officials responsible for inordinate delay in rectification of assessment orders. (ii) apparently with a view to thwart the issuance of refund, the Income Tax Department 'amended' order for tax year 2008 and created huge demand of Rs. 1,221,775,699 under section 122(5A) by passing ex parte order; (iii) the 'amended' order was made on the pretext that as per amendment made in section 49(4), PQA's income was taxable as a 'regulatory authority' whereas PQA being a 'local authority' was exempt under section 49(2) upto tax year 2008. The amendment under section 49(2) was made through Finance Act 2008, and therefore, the income of PQA remained exempt prior to tax year 2009. Due to this reason the CIT(A) annulled' the illegal order for tax year 2008; (iv) the amount of Rs.762,160,472 was added in the income of the complainant under the head "provision for reinsurers" which was never claimed in the account. Likewise depreciation amounting to Rs.380,339,854 was disallowed without justification apparently just to inflate the income. Another" amount of Rs.4,183,237,593 was added on account of Federal Government loan/liability, just to create tax liability of over Rs.1.27 billion to cover up the amount of refund payable to the complainant, in violation of directions of FTO in the decision referred to earlier. (v) minimum tax liabilities were also created under section 113 of the Income Tax Ordinance, 2001 despite the fact that PQA being " a 'local authority' enjoyed exemption from such tax; (vi) the punitive actions against the taxpayer were apparently to teach him a lesson for claiming refund and compensation for the preceding years, and so the huge demand was created ex parte without allowing him opportunity to submit explanation regarding the illegal points relied upon by the Department.

5. The above acts of omission and commission by the departmental officials clearly indicate their arbitrariness and unlawful behaviour, which is amply proved by the decision of the CIT(A). Such conduct of the departmental officers also shows their tendency to involve the taxpayers in protracted and unwarranted litigation. It is observed that the departmental functionaries in a bid to thwart issuance of large refunds, often resort to raising issues not supported by law. This appears to be a systemic issue which needs urgent attention of the F.B.R. for adopting transparent and lawful measures while dealing with refund cases. Findings:

6. The arbitrary, oppressive, and perverse conduct of the officials of the Department has been clearly established in the instant case, which tantamounts to maladministration under section 2(3)(i) of the FTO Ordinance, 2000. Recommendations:

7. F.B.R. to-- (i) report compliance of FTO's earlier recommendations in Complaint No.244/KHl/IT(107)/726/2009 within 7 days; (ii) adopt transparent measures to eliminate mala fide practices in blocking issuance of large refunds, in particular; (iii) conduct enquiry and initiate appropriate disciplinary action against officials responsible for mala fide, biased, and arbitrary conduct in the instant case; (iv) compliance report be sent on Recommendations No.(i) within 10 days and (ii) and (iii) within 45 days. H.B.T./99/FTO Order accordingly.