Refund

Authorities allowed compensation for the period starting from three months after receipt of appellate order and rejected the claim for period during which order under S. 120 of Income Tax Ordinance, 2001, was operative

In appeal, Commissioner (Appeals) allowed compensation for the year as well against which the authorities filed an appeal before Appellate Tribunal Inland Revenue

Validity

Authorities did not dispute that compensation was due on account of delayed refund

Only dispute was regarding one of the periods in question for which compensation was denied

Provision of S.171(1) of Income Tax Ordinance, 2001, was clear and unequivocal, which had obliged the Commissioner to pay to taxpayer a further amount by way of compensation where refund due to taxpayer was not paid within three months of the date on which it had become due

Two forums below were right in holding that for the purpose of S.171(1) of Income Tax Ordinance, 2001, refund became due on the date of assessment order made under S.120(1) of Income Tax Ordinance, 2001

High Court decided question of law in favour of respondents / taxpayers

Reference was dismissed, in circumstances.

Assessing authority while observing difference between the purchases declared in the income tax return and the sales tax returns turned down the refund request of taxpayer

Appeal filed by taxpayer before the Commissioner (Appeals) was accepted

Validity

Order was passed by the Assessing Authority on a day which was a public holiday

Addition under S.111(1)(d)(i), Income Tax Ordinance, 2001, could have been made if the taxpayer had concealed/furnished inaccurate income, suppressed any production, sales or any amount chargeable to tax

Assessing Authority had made addition under S.111(1)(d), Income Tax Ordinance, 2001, pertaining to the tax year 2007 whereas Cl.(d) was inserted through Finance Act, 2011

No specific notice under S.111(1)(d) of Income Tax Ordinance, 2001, was issued

Order passed by Assessing Authority was not sustainable in the eyes of law, which was rightly cancelled by the Commissioner (Appeals)

Appeal filed by department was dismissed.

Petitioner companies assailed order passed by National Tariff Commission (NTC) rejecting their request for refund of provisional anti-dumping duty imposed on the basis of preliminary determination

Validity

Provision of S.55 of Anti-Dumping Duties Act, 2015 addressed situation where at the end of adjudicatory process NTC would reach a conclusion while making its final determination that there was no injury or threat of injury described under S.55(4) of Anti-Dumping Duties Act, 2015 as negative final determination

National Tarrif Commission was under obligation to issue a refund of "any cash deposit made during the period of application of provisional measures within the period of forty-five days of such determination"

Issuance of refund was not the product of any adjudicatory process but was a mandatory requirement with a fixed timeline

National Tarrif Commission terminated investigation without imposition of any measures pursuant to S.40 of Anti-Dumping Duties Act, 2015, or issued a negative final determination

Effect of it was that NTC determined that matter before it did not involve any injury or threat of injury to domestic industry and any security deposit received by NTC as a provisional measures pursuant to the provisions of Ss. 43, 44 & 51 of Anti-Dumping Duties Act, 2015 had become refundable automatically pursuant to S.55(4) of Anti-Dumping Duties Act, 2015, which was to be refunded within a period of forty-five days of termination of investigation without imposition of any measures or issuance of a negative final determination as the case could be

High Court set aside order passed by NTC as the same was in breach of S.55(4) of Anti-Dumping Duties Act, 2015

High Court directed NTC to refund cash deposit received as provisional anti-dumping duty within a period of forty-five days

Constitutional petition was allowed accordingly.

Consignment was declared to contain "cold rolled Steel Sheets and Coils in Secondary Quality" under PCT heading 7209.1610 at unit value of US $ 400 PMT

Subject goods were assessed provisionally at US $ 494 PMT by securing differential amount of duty and taxes in shape of post dated cheque, pending clarification of value from the Directorate General of Customs Valuation

Directorate General of Customs Valuation directed that contracts/LCs opened on or after 1.3.2009 up to 31.5.2009 could be assessed at US $ 345 PMT

Declared value of the importer at US $ 400 PMT was higher than the value determined by the Directorate General of Customs Valuation

Importer approached Securities Section of the Collector for release/refund of their Security (cheque), but security cheque was got en-cashed by the department on 21-6-2012 as the provisional assessment was made on 22-5-2009, and the time period of provisional assessment had expired much before the encashment of the cheque in question

Subsequently, the Collectorate directed the importer to furnish the documents in support of his refund claim, proving thereby that incidence of duty and taxes had not been passed on to the end consumer in terms of S.19-A read with S.33 of Customs Act, 1969

Importer instead of furnishing the same, contested the matter that S.19-A of Customs Act, 1969 was not applicable to his case as the differential amount of duty and taxes were secured provisionally

Adjudicating Officer vide order-in-original held that charges against the importer was proved

Appellate authority set aside the order of Adjudicating Officer

Validity

Appellant department had complicated case by getting cheque encashed perhaps in a drive for "earning" revenue

Department, instead of finalizing the provisional determination within six months, as required under S.81(2) of the Customs Act, 1969, after three years got encashed the post-dated cheque

Department was bound to finalize assessment by 21.11.2009 as the provisional assessment was done on 22.5.2009

Said final determination could have been done much before expiry of mandatory period of six months; as the Directorate General, Customs Valuation had decided the matter vide letter dated 13.6.2001 by advising the appellant department to assess the goods at value US $ 345 PMT

Department's failure to comply with mandatory provision of law was a serious omission

Directorate General Customs Valuation, had directed the department that two amounts were to be refunded/ returned to the importer; (i) difference between US $ 400 PMT and US $ 494 PMT (Post dated cheque); and (ii) difference between US $ 354 PMT and US $ 400 PMT

Importer had deposited duty and taxes as per declared value US $ 400 PMT

Said process should have been completed within few days/weeks of receiving advice from the Directorate General, Customs Valuation on

Department had attended the case, not only in the extremely non-professional manner, but had deprived the importer of his legitimate money for long 8 years for no fault of him, which was quite disturbing and detestable

Collector of Customs was directed to immediately return both the amounts to the importer without any loss of time.

Nature of power of Commissioner to amend assessment order under S. 122(5A) of the Income Tax Ordinance, 2001, as distinct from power of adjudication of refund claims under S. 170 of the Income Tax Ordinance, 2001

Scope

Question before the High Court was whether Commissioner had jurisdiction to amend an assessment order when on basis of same assessment order, a refund had been made to the taxpayer under S. 170 of the Income Tax Ordinance, 2001

Held, under Income Tax Ordinance, 2001 power to amend assessment order was a different concept having its own parameters as provided under S. 122(5A) of the Income Tax Ordinance, 2001 whereas claim of refund was to be adjudicated under S. 170 of the Income Tax Ordinance, 2001 which had its own attributes

Power under S. 122 of the Income Tax Ordinance, 2001 was inherent in its nature and was not para meteria to power of review by an authority

Such power was only exercised when Commissioner was of the opinion that an assessment order was erroneous or prejudicial to interests of the revenue

Claim for refund under S. 170 of Income Tax Ordinance, 2001 had different parameters and limitations and thus, said section could not make power of Commissioner under S. 122(5A) of the Income Tax Ordinance, 2001 redundant

Reference was answered, accordingly.

Assessee, labour contractor, who had provided labour services to a company, having filed returns in terms of S. 115(4) of Income Tax Ordinance, 2001 regarding three consecutive tax years, claimed refund for the same, which were accepted by Additional Commissioner (Audit)

Said assessment was, however, subsequently, amended under S.122(5A) of the Ordinance on ground that the assessee had wrongly filed returns under S. 115(4) of the Ordinance, as the payment received on account of labour contract was final tax liability; the assessee was, therefore, assessed under Presumptive Tax Regime and tax deducted was treated as Final Tax liability

Assessing Officer rejected claim of the assesses; whereas, the same was accepted by Appellate Tribunal

Department contended that the services provided by the assessee were not professional services, hence, the same did not come within the purview of S. 153(1)(b) of Income Tax Ordinance, 2001, and instead, the same came within the ambit of S. 153(1)(c) of the Ordinance and tax deducted would, therefore, be final tax under S.153(6) of the Ordinance

Assessee pleaded that amendments introduced in S.153 of Income Tax Ordinance, 2001, vide Finance Act, 2005 being explanatory in nature and having retrospective effect, were applicable to the present case as the same had introduced the term 'providing of' which had covered the services rendered by the assessee

Validity

Initially, vide Finance Act, 2002, word 'professional' had been omitted form S. 153(1)(a) of Income Tax Ordinance, 2001; whereas, in order to achieve true intent of legislature, words 'providing of' were inserted therein, vide Finance Act, 2005

Amendments introduced vide Finance Act, 2002 intended to expand the term 'services', which intent of legislature however had not been appreciated in true sense

Legislature, in order to clarify its intent had inserted the words 'providing of'

High Court observed that as per FBR Circular No. 1 of 2005 (Income Tax), dated 5-5-2005 which provided that with omission of word 'professional' from the law in 2002, an erroneous impression was created that the meaning of term 'services' had been restricted, and in order to dispel that impression, a clarifactory amendments had been made whereby the words 'or providing of' had been inserted in S.153 of Income Tax Ordinance, 2001, which had made withholding tax on all types of services adjustable

Amendments, introduced in S.153 of Income Tax Ordinance, 2001, could surely be termed as declaratory and remedial legislation, as the sole intent of legislature was to clarify the confusion caused in the pre-existing provisions of S.153 of Income Tax Ordinance, 2001

High Court observed that a clarifactory amendment in fiscal statute operated retrospectively, because the same clarified ambiguity, and that courts had always treated clarifactory amendments as retrospective amendments, even in cases where the purpose behind such amendment was to nullify earlier judgments

Amendments introduced vide Finance Act, 2005, being remedial and declaratory in nature, had retrospective effect, and the same would apply to relevant tax years in question

Assessee was entitled to claim refund under S. 170 of Income Tax Ordinance, 2001, regarding the taxes already paid, as he would not come within the presumptive tax regime under S. 153 (6) of Income Tax Ordinance, 2001

Reference was answered in negative in circumstances.

Assessment order under S. 120 of Income Tax Ordinance, 2001 was an order for all purposes of Income Tax Ordinance, 2001 including issuance or rejection of refund under S. 170 of Income Tax Ordinance, 2001, therefore, Commissioner could not go behind such assessment order while exercising jurisdiction under S. 170 of Income Tax Ordinance, 2001

Only course available to Commissioner was to assume jurisdiction under S. 122 of Income Tax Ordinance, 2001 by issuing a show-cause notice, proposing amendment of such assessment order and Commissioner could proceed under both jurisdictions simultaneously

In case, assessment order was amended in accordance with law then Commissioner could refuse to process the application for refund because very basis of refund application was the assessment order which was not in field.

While exercising jurisdiction under S. 170 of Income Tax Ordinance, 2001, Commissioner was required to see first that whether requirements of S. 170(2) of Income Tax Ordinance, 2001 were met; and under S. 170(3) of Income Tax Ordinance, 2001 he had to satisfy himself through probing into supportive document that tax was overpaid

Commissioner could adjust the overpaid amount of tax against any other tax due from taxpayer

After being so satisfied, Commissioner had to refund the remaining portion of overpaid ta

After inquiring into correctness of overpaid tax, if Commissioner was not satisfied then he should pass a written order of reducing or refusing claimed refund after giving an opportunity of being heard to taxpayer

Order of refund or its refusal or reduction was to be passed within 45 days under S. 170(4) of Income Tax Ordinance, 2001.

Perusal of S. 170 of Income Tax Ordinance, 2001 in juxtaposition with S. 120 of Income Tax Ordinance, 2001 showed that S. 170(2)(b) of Income Tax Ordinance, 2001 while providing a condition of filing of an application for refund stated that such application should be made within two years of date on which Commissioner had issued assessment order

Refund could be claimed on basis of an assessment order and if an amount was paid in excess of chargeable tax, as determined in assessment then it could be claimed as refund under S. 170(1) of Income Tax Ordinance, 2001

Section 170 of Income Tax Ordinance, 2001 gave powers only to see whether claimed refund was supported by evidence or not.

Department, had to complete the verification process within time as prescribed under S.170(4) of Income Tax Ordinance, 2001

Verification process, was not an open ended exercise, and could not be allowed to continue indefinitely

Delay in settling refund claim within prescribed time would tantamount to maladministration under S.2(3)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000

Ombudsman directed that Federal Board of Revenue should direct the Commissioner to ensure that refund claim be settled within 3 weeks along with compensation due under S.171 of Income Tax Ordinance, 2001 for delayed payment of refund; and to give compliance report within next 7 days thereafter.

Petitioner taxpayer impugned adjustment memo. of Federal Board of Revenue, whereby Department sought to adjust the advance tax liability of the taxpayer against the principal amount of refund due to taxpayer under S. 170 of the Income Tax Ordinance, 2001 instead of adjusting the same first against the amount of compensation accrued as payable to the taxpayer for delayed payment of said refund

Held, that instead of making adjustment of compensation due to the petitioner, the Department proceeded to adjust liability against the principal amount and attempted to deprive the petitioner of the right to claim any further compensation for delay in payment of refund which meant that petitioner was no longer entitled to claim any further compensation for delay in payment of compensation amount already due for the said tax year

Sole purpose of S. 171 of the Income Tax Ordinance, 2001 was to induce the Department to pay/adjust the amount of refund expeditiously and promptly by making adjustments against the principal amount as refund, and the Department had made an effort in the present case to avoid its duty to promptly repay/adjust the amount of refund and at the same time indefinitely delayed payment of compensa-tion on which no further compensation was payable

Such modus operandi ex-facie was an attempt to play a fraud on the statute and to deprive the petitioner of an amount which was due to it

Section 171 of Income Tax Ordinance, 2001 provided for payment of compensation to the taxpayer and also cast a duty on the Department to either adjust the refund to reduce tax liability of the taxpayer or pay the refund quickly

Intention of Legislature behind S. 171 of the Income Tax Ordinance, 2001 was that the State could not be allowed to withhold indefinitely what it admitted to as due to the taxpayer by way of a refund

Impugned actions of the Department therefore constituted violation of Constitutional guarantees and amounted to taking away property without due process of the law

Sections 170 & 171 of the Income Tax Ordinance, 2001 had to be read in tandem as they provided a mechanism to ensure that taxpayers are protected against losses that they incur on account of excessive payment of tax and delays in refund of the same

Actions of the Department, in the present case, if allowed, would result in unjust enrichment of the department, since by applying principal amount of refund to reduce advance tax liability of the taxpayer / petitioner, the Department had attempted to absolve itself of its obligation towards making any further compensation for delayed payment of principal amount of refund

Delayed compensation payment already due, by use of such methodology, could be deferred indefinitely by the Department without having to pay any further amount of account of non-payment of delayed payment / adjustment of amount of compensation that had already accrued

Contention of the Department that nothing in S. 170 or 171 of Income Tax Ordinance, 2001 existed to suggest that the department was under an obligation to utilize the amount of compensation first and then adjust the balance against the amount of refund, had no force in view of the clear and obvious intent behind Ss. 170 & 171 of the Income Tax Ordinance, and there was no need to spell out the same by way of specific provisions in the Income Tax Ordinance, 2001

Both amounts were payable by the State to the taxpayer and one attracted obligation to pay compensation with interest, for the period of delay and the other did not; and thus if the State intentionally decided to adjust a taxpayers' liability against an amount for non-payment for which it was required to pay compensation, and did not make such adjustment against an amount for delayed payment on which it did not have to pay any compensation, it could delay payment/adjustment of such compensation indefinitely without any penal consequence, and intention behind such action could not be termed bona fide fair or just

High Court directed the Department to adjust the advance tax liability of the petitioner taxpayer first against the amount of delayed payment of compensation, and make the resultant adjustment in the total amount of refund as well as in the delayed payment compensation payable to the petitioner taxpayer, and further directed the Department to reduce the tax liability by applying the compensation amount till such time it was fully adjusted before utilizing the principal refund amount for adjustment or repayment of the same to the petitioner taxpayer

Constitutional petition was allowed, accordingly.

Customs Authorities assailed order passed by Customs, Excise and Sales Tax Appellate Tribunal, whereby appeal filed by importer was allowed

Validity

Provisions of S. 33 of Customs Act, 1969, were only applicable when duty and charges were paid through inadvertence, error or misconstruction

Importer claimed exemption from duty and taxes at the very outset at the time of filing of goods declaration and the same was denied by authorities, thus no inadvertence, error or misconstruction was involved

Owing to persistent efforts on the part of importer, certain refund claims were settled in its favour, which also included three time barred claims

Case of authorities was not governed by the provisions of S. 33 of Customs Act, 1969, as neither there was any inadvertence nor error or misconstruction on the part of importer in claiming refunds from authorities

Importer had claimed exemption under S.R.O. 462(I)/ 1995, dated 4-6-1995, from the day one and the same had been denied by authorities but subsequently it was granted by sanctioning 12 claims including 3 time barred claims vide letter dated 12-11-1998

Question of grant of exemption on merits of the case was never in dispute, once Central Board of Revenue had categorically decided issue in favour of importer

Reference was dismissed in circumstances.

Action of Sales Tax Department to recover the amount of tax refunded to the taxpayer due to subsequent black-listing of any of his suppliers did not find any support from any provision of Sales Tax Act, 1990 and Rules made thereunder

Demands raised through order-in-original were held to be void ab initio, illegal and without authority and was annulled by the Appellate Tribunal and order-in-appeal was vacated.

For the purpose of S.171(1) of Income Tax Ordinance, 2001, the refund would become due on the date of order treated to have been made under S.120(1) of Ordinance.

Taxpayer contended that Appellate Tribunal held that the duty of the Authority to refund was restricted to the extent of the cross check of the documents for calculation of amount of refund and to satisfy that no other tax was outstanding against him before issuance of refund; to check validity and legality of the various claims of the assessee in his return which practically was the deemed assessment order was not his responsibility; that he was not supposed to check the vires thereof; that process of issuance of refund was only a consequential action and the assessment and refund proceedings were two separate independent matters; that proceedings with an application filed by the assessee for refund, scrutiny of the return would amount entering into the purview of S.120 of the Income Tax Ordinance, 2001; that Refund Assessing Authority had entered into the jurisdiction which was available to the Assessing Authority and the rejection of refund application was without jurisdiction and liable to be annulled

Validity

No justification was available for rejecting the refund application

Order of First Appellate Authority was vacated and the order passed by the Taxation Officer was cancelled and Taxation Officer was directed to issue refund in accordance with law if no other liability was outstanding against the taxpayer.

Refund arose on account of excess deduction of income tax at source on payments made for the manufacture and supply of said advertisement media like sign boards etc.

Department contended that refund application was liable to be rejected as the electricity tariff(A2) was for domestic use and did not bear out that the taxpayer was a manufacturer/ supplier of goods

Taxpayer explained 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; and expert workers were employed to cut, shape and frame the iron and flex sheets by hand; and where necessary, gas welding plant was used for which no electricity was required

Validity

Record indicated that the taxpayer was a manufacturer/supplier and tax deducted at source was required to be adjusted against tax liability due

Chief Commissioner reached a decision that the taxpayer was a manufacturer/supplier of advertisement media

Refund had been held up without any justification for more than three years

Delay in issuance of refund was tantamount to maladministration

Delay also created the right to receive compensation

Federal Tax Ombudsman recommen-ded that Federal Board of Revenue to direct the Chief Commis-sioner to issue refund/compensation due, as per law, within 15 days.

Appellate Tribunal found that carriage contracts were in the nature of services rendered and were assessable under normal tax regime

Department initiated proceedings for amendment of assessment on the same ground relied upon earlier by the Taxation Officer and carriage receipts were assessed under Presumptive Tax Regime without bringing any fresh evidence on record

Validity

Assessment of income and determination of tax thereon fell within the jurisdiction of Audit Division and not within the competence of the Enforcement Division

Appellate Tribunal settled the issue that assessment of income of the complainant was to be done under normal tax regime

Amendment of assessment by the Audit Division on the same ground was unjustified

Refund had been issued during the processing of complaint

Although grievance of complainant to the extent of issuance of refund had been resolved after the intervention of the Office of the Federal Tax Ombudsman, the issue of compensation due was yet to be settled

Arbitrary and unreasonable treatment and the delay in disposal of refund claim within the time limit prescribed under S.170(4) of the Income Tax Ordinance, 2001 was tantamount to maladministration which also created right to compensation

Federal Tax Ombudsman recommended the Federal Board of Revenue to direct the Chief Commissioner to issue compensation due, as per law and to warn the officials to stop behaving unfairly and unreasonably, failing which they will be dealt with under S.22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, in addition to any other action deemed fit against them.

Departmental appeal was filed in the Appellate Tribunal on 7-7-2011, the complaint came to the Federal Tax Ombudsman office on 20-7-2011 i.e. two weeks after the matter had become sub judice

Complaint though appeared to be hit by S.9(2)(a) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, the facts were so obvious and peculiar that any further delay in issuance of refund as allowed by the First Appellate Authority would be an irrefutable act of maladministration

Overriding purpose of Federal Tax Ombudsman Ordinance, 2000 was to redress and rectify and injustice done to a taxpayer, the apparent jurisdictional bar placed in S.9(2)(a) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000, being of a technical nature, could not be allowed to defeat the very purpose of the law

Delay also created right to receive compensation under S.171 of the Income Tax Ordinance, 2001

Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to issue refund/compensation due, as per law and without prejudice to the decision of the Appellate Tribunal, within 21 days.

Taxation officer declined to grant refund to assessee on the ground that amendment brought in S. 153(1) of Income Tax Ordinance, 2001, had no retrospective effect

Plea raised by assessee was that it was clarificatory amendment and it operated retrospectively

Validity

Clarifcatory amendment in a fiscal statute operated retrospectively as the same was to clarify ambiguity

Courts had always treated clarificatory amendments as retrospective amendments even in cases where purpose behind such amendment was to nullify earlier judgments

Sole purpose behind such amendment was to change legal position after an inconvenient, improper or uncalled for interpretation was put on such provision

Unless it was a mere clarification and not a change in substance, retrospectivity of such amendment could not be questioned

Both the forums below had rightly found assessee entitled to the claim of refund and questions posed in the reference stood decided by them which required no further consideration by High Court

Reference was dismissed in circumstances.

Facility to obtain refund under S.169 or 170 of the Income Tax Ordinance, 2001 does not confer a right on the tax authorities to charge tax without any lawful justification

Refund arises where due to some inadvertence excess taxis charged or paid; it surely does not grant a licence to the tax authorities to charge taxes which the law prohibits or does not sanction

In the present case inspite of discharge of Final Tax under the Ordinance the taxpayers were being subjected to deduction of transitional advance tax under. S.235, which was not chargeable and therefore will invariably be refunded

Taxpayer cannot be deprived of his property just because he was entitled to refund at some later stage

Refund could not be a pretext to charge tax if the tax was not lawfully permissible.

Registered person was required under law to deposit the arrears despite the fact that refund due was payable in his favour

Adjustment or carry forward could be made after consulting a senior officer of the department i.e. Cost Accountant.

In case, any impropriety and illegality was observed in any order/decision, it should have been checked by the Federal Board of Revenue or by the Collector himself by exercising their revisional jurisdiction under S.45A of the Sales Tax Act, 1990

Provisions of S.45A of the Sales Tax Act, 1990 did not empower any other authority subordinate to Federal Board of Revenue or to the Collector of Sales Tax to reopen and review an order passed lawfully

Issuance of show cause notice under S.36 of the-Sales Tax Act, 1990 by re-opening a past and closed transaction by the Assistant Collector having no revisional jurisdiction was an act of assumption of wrong jurisdiction and as such the order passed by him was without jurisdiction

Where, a basic notice issued for assumption of jurisdiction was defective, the subsequent action/orders based upon the said notice were also patently void ab initio and without jurisdiction.

Procedure of refund, jurisdiction and limitations.

Taxation Officer, while proceeding under' S.170 of the Income Tax Ordinance, 1979 embarked on an inquiry into the commercial status of the tax payer; and rejected the claim of refund by determining the commercial status of the taxpayer as supplier instead of manufacturer on the ground that it was mandatory to verify the claimed status of being a manufacturer by the taxpayer

Validity

Taxation Officer or Commissioner had no jurisdiction to probe an issue which had attained the status of an assessment order by operation of law under S.120 or 115 read with S.169(3) of the Income Tax Ordinance, 2001

Commissioner could neither disturb an assessment taken to have been made under S.120 of the Income Tax Ordinance, 2001 nor could he withhold/reject the refund on the basis of his opinion that such assessment was defective or needed amendment under the relevant provision of Income Tax Ordinance, 2001

Order of Taxation Officer determining the commercial status of the taxpayer as supplier in place of manufacturer, being without lawful authority was void

Appeal filed by the Department was dismissed and order of First Appellate Authority was upheld by the Appellate Tribunal.

Limitation cannot run against a void order.

Inaction/default by the Commissioner under subsection (4) of S.170 of the Income Tax Ordinance, 2001 amounted to refusal of refund and the Commissioner (Appeals) should treat such inaction as refusal order passed by the Commissioner

After entertaining appeal on inaction within 45 days, the First Appellate Authority may proceed on to determine the refund, if any amount was found in excess of the amount chargeable to tax as per law and as provided under S.170 of the Income Tax Ordinance, 2001.

Ss. 170(5)(2) & 127-Refund-lithe contention that "since no order was passed under subsection (4) of S.170 of the Income Tax Ordinance, 2001, appeal would not lie under S.127 of the Income Tax Ordinance, 2001" was accepted, it would render Cl. (2) of sub-section (5) to S.170 of the Income Tax Ordinance, 2001 as redundant.

Rejection of refund application as illegal for being hit by limitation-Taxpayer contended that refusal of refund order was time barred for having been passed after 45 days as stipulated in S.170(4) of the Income Tax Ordinance, 2001

Appeal was accepted by the First Appellate Authority on the ground of limitation, holding the order for refusal of refund as time barred

Department contended that omission under subsection (4) to S.170 of the Income Tax Ordinance, 2001 was appealable under sub-S.(5)-Validity-Consequence of failure to pass order under sub-section (4) of S.170 of the Income Tax Ordinance, 2001 within the specified period of 45 days was provided in Cl. (b) of subsection (5) to S.170 of the Income Tax Ordinance, 2001, whereby a cause of action arises in favour of the taxpayer and the taxpayer being aggrieved of the inaction on the part of Commissioner could prefer an appeal under Part-III of Chapter X

Section 127 of the Income Tax Ordinance, 2001 provided first appeal before Commissioner of Income Tax (Appeals) to the taxpayer against any order passed by a Commissioner or a Taxation Officer under sections mentioned therein

Section 170, inter alia, was one of the sections provided in S.127 of the Income Tax Ordinance, 2001

Person aggrieved of an order or of omission to pass order under subsection (4) of 5:170 of the Income Tax Ordinance, 2001 could prefer an appeal before Commissioner (Appeals) under S.127 of the Income Tax Ordinance, 2001

Order of First Appellate Authority was set aside by the Appellate Tribunal to the extent of interpretation of S.170(4) of the Income Tax Ordinance, 2001 on limitation

Case was remanded back to First Appellate Authority with direction to decide the appeal on merits and in accordance with law.

Department had contended that taxpayer had filed statement under S.115(4) of the Income Tax Ordinance, 2001 and subsequently revised the return under S.114(6) of the Income Tax Ordinance,, 2001 with the same source of income, which was not permissible under the law and the Taxation Officer had rightly rejected the claim of refund as applied by the taxpayer

Validity

First Appellate Authority had rightly found the order of the Taxation Officer rejecting the refund application was not sustainable in the eyes of law as nature of services was established and the tax deducted under S.153(1)(b) and (c) of the Income Tax Ordinance, 2001 was also adjustable w.e.f. 1-7-2002

No exception could be taken to the observation of First Appellate Authority that Taxation Officer had failed to serve the order within time and without allowing opportunity of being heard to the taxpayer

Return filed by the taxpayer were an assessment in terms of S.120 of the Income Tax Ordinance, 2001 and excess deduction, if any shall be liable to be refunded to the taxpayer

Appeals of the department were dismissed by the Appellate Tribunal.

Taxpayer contended that Order-in-Original for rejection of taxpayer's refund claim amounting to Rs.20,70,907 had illegally been passed by the Assistant Collector (Refund) under S.11(2) of the Sales Tax Act, 1990, as the Assistant Collector was not lawfully empowered to adjudicate the cases falling under S.11(2) of the Sales Tax Act, 1990 being beyond the pecuniary limit of one million rupees as specified under Cl. (iii) of Sub-S. (1) of S.45 of the Sales Tax Act, 1990

Validity

Assistant Collector had transgressed his jurisdiction and. powers of adjudicating by issuing show-cause notice upon which consequent proceedings were initiated for rejection of refund which was beyond the threshold limit of Rs. 10,00,000 as admittedly, the amount of refund involved was Rs.20,70,907

Under S.45(1)(ii) of the Sales Tax Act, 1990, it was the Deputy Collector who should have issued the show-cause notice and to pass consequent order

Order-in-Original passed by Assistant Collector (Refund) was illegal and without any lawful jurisdiction

Power vested in an authority could only be exercised by that authority and by none-else

Exercise of that authority by any other, would be without jurisdiction

Original passed by the Assistant Collector and upheld by the Collector was also not sus­tainable in the eyes of law

Orders of the authorities below being suffering from grave legal infirmities, were declared to be illegal and without jurisdiction and were vacated by the Appellate Tribunal.

Refund claim was not processed by the Department on the ground that returns and other records were not available and inference was drawn that the complainant had not filed returns

Validity

Complainant had approached concerned officials several times after the announcement of the apex court judgment for its implementation and payment of resultant refund and compensation due to him but there was no response

In case any document was required by the Department to dispose of refund claim, the same should have been formally requisitioned by issuing notice to the complainant

No notice was issued and the Department seeked to further delay matters on the pretext of loss of complainant's assessment record

Application filed by the complainant seeking payment of refund and compensation cite the complainant's National Tax Number which showed that the complainant was indeed borne on the Departmental record as a taxpayer and Department should have taken action to implement the judgment of apex court and issued any refund found due to the complainant as a result of income tax deducted at source on lump sum payment of golden handshake amount

Delay in issuance of refund was tantamount to maladministration

Delay also created the complainant's right to receive compensation under S.171 of the Act

Federal Tax Ombudsman recommended Federal Board of Revenue to direct the Chief Commissioner to issue refund due /compensation due, as per law, within 21 days.

Difference was fully reconciled and explained to the Departmental authorities-Explanation was found to be plausible as in depth appraisal of any alleged discrepancy was not called for, these being not assessment proceedings but proceedings to dispose of a pending refund claim.

Under S.170 of the Income Tax Ordinance, 2001, the satisfaction of the Departmental authority examining the refund claim was necessary to the extent that documentary evidence having a direct bearing on refund claim was in order

Such documentary evidence includes tax payment challans, deduction certificates and other relevant documentation like electricity bills, utilities bills, bank certificates, etc.

If said documents were found to be in order, then the claimed refund could not be withheld

Other matters having a possible bearing on the quantum of income assessed, like variations in Gross Profit rate, sale rate, apparent discrepancies in sales and capital shown on different documents, etc., were to be disposed of separately through an order other than an order under S.170(4) of the Income Tax Ordinance, 2001

Before starting said other, separate, assessment proceedings, the Department was bound under the law to first settle the refund claim.

When deemed assessment under S.120(1) of the Income Tax Ordinance, 2001 or assessment under S.122(3) of the Income Tax Ordinance, 2001 stood finalized, the refunds could not be withheld.

First Appellate Authority directed the Taxation Officer to issue refund voucher as the Taxation Officer had not issued the same in accordance with law

Order of First Appellate Authority was upheld and not interfered with by the Appellate Tribunal

Appeal filed by the Department was dismissed.

Agreements arrived at between the Collector, Sales Tax through a committee formed by him with the Confectioners Association

Said agreement was regarding the deduction of tax on packing material that it would not be claimed beyond the limit of 20% of the total value of the exported goods

Whosoever made an agreement though would bind itself to the extent of said agreement under the law of contract as provided in S.24 of the Contract Act, 1872, however, if an agreement was otherwise void, its application could not be enforced

Agreement in question being against the law of Sales Tax, no exception could be made

Appeal filed by the taxpayer was allowed with the direction that the agreement in question was illegal and the assessee's matter of refund should be processed following the law and rules within one month.

Recovery of tax not levied or short-levied or erroneously refunded-Refund-Limitation-Show-cause. notice available on record dated 17-4-2008 for the taxable period of 2003-2004 confirmed with clarity that it was issued after the expiry of stipulated period of three years, rendering same time barred and as such not enforceable.

Invocation of S.36(1) of Sales Tax Act, 1990 in the absence of allegations and material confirming "deliberate act" or "collusion" of the registered tax-payer-Validity-Show-cause notice was completely silent in regard to allegations of a "deliberate act' and "collusion "

It was for the Additional Collector before issuing the show-cause notice to examine the veracity, competency and reliability of the audit report and then issue the show-cause notice under respective subsection of S.36 of the Sales Tax Act, 1990

Additional Collector before issuing the show-cause notice had not determined the veracity of the audit report and hurriedly issued the show-cause notice, which was not relevant in the subject case by virtue of wordings of show-cause notice, which did not remotely hint in the direction of the "deliberate act" of submission of false refund application or supportive documents for processing or regarding the "collusion" with the Sales Tax Officers

Such action 'rendered the show-cause notice and the subsequent proceedings void ab initio.

Section 170(5) of the Income Tax Ordinance, 2001 provides a taxpayer an opportunity to get early refund without unnecessary delay by filing an appeal before the First Appellate Authority against the failure of the Commissioner/Taxation Officer to pass an order under S.170(4) within the stipulated period

Where an appeal is filed against such failure of the Commissioner/Taxation Officer, the power of the Commissioner/Taxation Officer shifts to the Appellate Authority and the Commissioner/Taxation Officer could not pass an order on refund application

If a taxpayer did not file any appeal after 45 days and the refund application remains pending before the Commissioner/Taxation Officer the law does not prohibit the Commissioner/Taxation Officer to pass an appropriate order on the same

Admittedly, appellant, in the present case, had not filed any appeal before First Appellate Authority against the failure of the Commissioner before the passing of order under S.170(4) of the Income Tax Ordinance, 2001 and the refund application remained pending before the Commissioner/Taxation Officer, Commissioner, in circumstances had jurisdiction to pass an order under S.170(4) of the Income Tax Ordinance, 2001 even after the expiry of 45 days

Failure to pass an order within prescribed period of 45 days (now 60 days) reflected a lack of interest and inefficiency of the Commissioner/Taxation Officer.

Claim regarding over-payment of tax was to be verified from record and if the record was not available, due to lapse of a long period and claim could not be verified and refund is allowed without verification from original record, same may lead to bogus refunds and corrupt practices

Legislature had set a time limit of two years in order to avoid inconvenience and bogus refund, besides discouraging the delayed application/claims which could not be verified

If over-payment of tax was easily verifiable, there was no bar to adjust or refund the same even if an application was made after the period of two years

Provision did not mean that a taxpayer was free to claim the refund of an overpaid tax at his sweet will at any time even after the expiry of many years as the laches may defeat the claim.

Forms for "Return of total income ""statement of final taxation" for tax year, 2007 onwards, contained a specific column about tax refundable and most of them also contain a column for request that net tax refundable may be credited to the bank account of the tax payer as mentioned in the column

Income Tax Authority processing the "Return of Total Income/Statement of Final Taxation" was bound to proceed in accordance with law

When, on verification, it was established that taxpayer had over paid the tax, Income Tax authorities were bound to refund the same even without any separate application for refund from the taxpayer and refusal to refund the same was violation of Articles 2A, 3 4(2)(a), 9, 24, 25, 29, 31, and 37 of the Constitution.

When a refund claim was verifiable and genuineness, of over-payment of tax established after verification, but it was refused mere on technicalities it was unfair.

First Appellate Authority directed to issue refund on the ground that the Taxation Officer had acted beyond his jurisdiction by passing order on refund application after lapse of about one year and nine months as S.170(4) of the Income Tax Ordinance, 2001 did not allow him to pass an order after the lapse of 45 days

.Validity

Finding of First Appellate Authority was not legally tenable

If the view of the First Appellate Authority was accepted as correct same would render all orders passed under S.170(4) of the Income Tax Ordinance, 2001 after the stipulated period of 45 days (now 60 days) liable to be annulled even in cases where refund had been allowed

Such was against the spirit and intention of law

Authorities acting under an enactment were bound to see and interpret the law as a whole and not to examine any provision in isolation

First Appellate Authority had examined the case in light of subsection (4) of S.170 of Income Tax Ordinance, 2001 and had failed to realize the impact of subsection (5) of S.170 of the Income Tax Ordinance, 2001

First Appellate Authority had also ignored that S.170(3) of the Income Tax Ordinance, 2001 provided that before passing any order of refund it was the duty of the Commissioner/ Taxation Officer to satisfy himself that the tax had been over paid by the taxpayer

No such finding was available on the record

First Appellate Authority ought to have remanded the case to the Taxation Officer for verification of the claim of the taxpayer and issuance of the refund if the tax had been over paid strictly in accordance with law but the First Appellate Authority had straightaway directed the Taxation Officer to issue refund

Orders passed by First Appellate Authority and the Taxation Officer were vacated by the Appellate Tribunal and the' case was remanded to the Taxation Officer/Commissioner with directions to obtain and verify the proof of tax paid; to determine the tax overpaid by the taxpayer and to refund the same as per law, but within a period of 30 days from the receipt of the order.

Assessing Officer instead of verifying the claim of taxpayer for refund rejected the same on the ground that refund application filed after lapse of statutory limit provided in section 170(2)(c) of the Income Tax Ordinance, 2001 could not be entertained after the prescribed period of two years

Provisions of S.170(2) of the Income Tax Ordinance, 2001 were directory and not mandatory

Word "shall" though has been used in subsection (2) of S.170 of the Income Tax Ordinance, 2001 yet it was not couched in negative language.

Law assumes non passing of an order under S.170(4) of the Income Tax Ordinance, 2001 as an order against the taxpayer rather than in his favour.

When the Commissioner fails to pass an order within 45 days of the receipt of a refund application under S.170(1) of the Income Tax Ordinance, 2001, the person aggrieved by the failure of the Commissioner to pass an order under subsection (4) of S.170 of the Income Tax Ordinance, 2001 was entitled to prefer an appeal under Part-III of Chapter X of the Income Tax Ordinance, 2001

By no stretch of imagination it could be assumed that the Assessing Officer had no jurisdiction to pass an order under S.170(4) of the Income Tax Ordinance, 2001 after the specified period of 45 days unless an appeal had been preferred by the aggrieved person, for the failure of the Commissioner to pass an order under subsection (4) of S.170 of the Income Tax Ordinance, 2001, within the time specified in said subsection, before passing of such order after 45 days.

Public servants hold such amount as an "Amanah" and are supposed to refund/return same to the person entitled to it.

Section 170(4) of the Income Tax Ordinance, 2001 prescribed the period of 45 days (now 90 days) within which the matter of fund should be decided by Taxation Officer

In case of failure of Taxation Officer to pass any order within the prescribed period as per government policy for early issuance of refund to assessee, right of appeal under S.170(5) of the-Income Tax Ordinance, 2001 had been provided to assessee, where appeal was filed the power of Taxation Officer shifted to First Appellate Authority and he after satisfaction of required conditions and evidence could pass any order about the refund

If the assessee did not file any appeal after 45 days and matter still remained pending before the Taxation Officer, the law did not place any bar on Taxation Officer to give any "decision or to pass any order

If the order was passed against the assessee, he could file appeal as provided in the Income Tax Ordinance, 2001, while during pendency of appeal Taxation Officer ceased to pass any order on the issue of refund.

Return filed by the assessee had to be treated as deemed assessment order and through such deemed assessment order refund claimed also be treated as created.

Application for refund of excess amount tax deducted was filed which fact had been denied by the department, while assessee once again appealed for issuance pf refund

Taxation Officer rejected application being barred by limitation

Validity

Refund had been refused being barred by limitation i.e. after the prescribed period of two years

Assessee contended that not only the application was filed within time but genuine refund could not be refused otherwise

Assessee produced the acknowledgment receipt of application submitted before the Taxation Officer and signed by the official of department

Such application bore the seal and stamp of the department and also initial of income tax official

Order treated as passed under S.120(1)(b) of the Income Tax Ordinance, 2001 was still intact and had not been amended under the provision of S.122 of the Income Tax Ordinance, 2001

Appellate Tribunal held that refund claimed and created under the deemed assessment order should be issued accordingly.