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Refund claims delay contrary to law: FTO rules case of misrule come within its purview

Refund claims delay contrary to law: FTO rules case of misrule come within its purview

ISLAMABAD: The Federal Tax Ombudsman (FTO) has declared that appeal to Commissioner (Appeals) is not the only option left for a taxpayer/refund claimant when the department fails to dispose of refund claim. The FTO exercises jurisdiction without any restraint in all cases involving maladministration by FBR functionaries.

According to details, in verdict, the FTO ruled that the department had failed to adhere to ‘the mandatory 60 days’ timeframe prescribed for disposal of refund claim and this lapse was ‘contrary to law’ that tantamount to ‘maladministration’ under section 2(3) of the FTO Ordinance. The FTO elaborated that in case the refund claimant fails to respond to a short document notice issued by the department requisitioning tax payment information relevant to a refund claim, an order under section 170(4) of the Ordinance must be passed within the mandatory 60 days timeframe.

The FTO order reads that complainant sought refund for Tax Year 2012 as per application e-filed on 07.09.2013. The refund arises as a result of excess deduction of tax. As the refund claimed as per return filed/deemed assessment finalised u/s 120(1) of the Ordinance was not processed/disposed of within the mandatory 60 days timeframe stipulated in the statute, the complainant sought the intervention of the FTO. The dept had served no notice on the complainant to furnish explanation or documentation to clarify the refund claimed.

The dept filed a reply raising a preliminary objection that as the complainant had an option under the statute to file an appeal before the first appellate authority in case of non-disposal of his refund claim, there was no cause for the FTO to assume jurisdiction in the matter. The FTO was not an appellate forum and was not competent to dilate on matters involving interpretation of statutes. Therefore, he could also not dilate on the merits or otherwise of statutory provisions governing issuance of refunds.

Commissioner Inland Revenue is under a mandatory obligation to dispose of any refund claim arising as per return of income filed that has been deemed to have been assessed under section 120(1) of the Ordinance within 60 days of the date of deemed assessment and order under section 170(4) of the Ordinance must then also be passed within the 60 days timeframe. If this is not done delay in the disposal of the refund claim is evident and compensation for the delay is payable under section 171 of the Ordinance. The deemed assessment under section 120(1) of the Ordinance is an assessment order applicable “for all purposes of this Ordinance” (emphasis supplied) as stated in the statute itself. The deemed assessment order is therefore relevant for refund purposes as well. This judgement of the tribunal is binding on all departmental functionaries.

The department has failed to adhere to the mandatory 60 days timeframe prescribed for the disposal of the refund claim and this lapse on its part is an action ‘contrary to law’ and therefore tantamount to ‘maladministration’ under section 2(3) of the FTO Ordinance. The Chief Justice of the Lahore High Court in judgement disposing of Writ Petition No 11545 of 2012 (Muhammad Saleem versus FTO and others) held that the FTO exercises jurisdiction without any restraint in all cases involving maladministration by the FBR functionaries.

Appeal before the Commissioner (Appeals) is not the only option available to a taxpayer/refund claimant when the dept. fails to dispose of a refund claim. It is to be noted that the FTO has not made any attempt to interpret the statute when disposing of this complaint. He has relied instead on interpretation of law by the competent appellate forum including the Supreme Court of Pakistan, the High Court and the Appellate Tribunal.

As for the dept’s contention that the complainant also has a responsibility to ensure that tax payment documentation is verified in time by the deducting authority, it is pointed out that the complainant can be expected to play his role only after the dept has served formal notice on him in time confronting him with the precise verification problems faced by the department in specific cases. Issuance of any such notice was not brought to the attention of the FTO in the present case. The elaborate arguments made by the department to justify wholly unwarranted delay in disposing of pending refund claims in itself tantamount to maladministration as it shows department’s reluctance to refund due amounts to taxpayers in brazen violation of the Supreme Court of Pakistan judgement in the Pfizer Ltd case.

Under the given facts and circumstances of the case, as explained supra, the exercise of jurisdiction by the FTO in the complainant’s case is in order as the department has not passed any order under section 170(4) of the Ordinance within the mandatory 60 days timeframe prescribed under the statute and the departmental officials concerned are responsible for the delay in disposal of complainant’s refund claim, the FTO order added.