President Arif Alvi has approved the Federal Tax Ombudsman’s (FTO) ruling against the Federal Board of Revenue (FBR), finding that the tax officials engaged in bad administration by willfully rejecting the complainant’s request for an income tax refund on the basis of spurious arguments.
In order to give effect to the tax deduction made under Section 236A of the ordinance for Tax Year 2013, the FTO has instructed FBR to recall the order dated July 4, 2022 by invoking the provisions of section 122A of the ordinance for Tax Year 2013 and to handle the refund claim in accordance with the law and following a proper hearing.
Later, the FBR’s representation in this matter was rejected by the President.
For payment of a refund claim totaling Rs. 0.214 million in accordance with Section 170(4) of the Income Tax Ordinance, 2001, the complaint was made pursuant to Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance).
The (complainant), a timber merchant, claimed a tax deduction in a 2013 income tax return under section 236A of the Income Tax Ordinance, 2001 after purchasing wood at auction. The complainant submitted a refund application along with all necessary supporting documentation and received reminders, but the department
‘did not consider the request for a refund. The Complainant, who had been wronged, complained to the FTO. The FTO office forwarded the case to the Secretary of Revenue Division for comments after the department rejected the refund claim on the grounds that the complainant was not given a fair opportunity to be heard.
It was argued that while the complainant had provided various tax-related documents in accordance with Section 236k of the Income Tax Ordinance, she had neglected to submit the required certificate as required by Rules 42 of the Income Tax Rules, 2002 (the Rules) and CPR of tax deduction.
In accordance with Section 170(4) of the Ordinance, the complainant was confronted for providing excessive tax deduction documentation. No one showed up on the scheduled date, and no adjournment request was submitted. Given these facts, the department had no choice but to deny the complainant’s request for a refund.
However, it was noted that the complainant submitted all required supporting documentation with a refund application dated May 21, 2022. However, the Department rejected the Complainant’s request for a refund on the grounds that the Complainant had not submitted the required certificate under CPR Rule 42. According to Section 164 of the Ordinance, either the CPR or an equivalent document must be submitted, both of which the Complainant had already done.
The FTO may not have been justified in ordering the Commissioner-IR Gujrat Zone, RTO Sialkot, to recall the orders made in accordance with section 122(A), according to the FBR representative, who made the initial argument. According to section 9(2)b of the FTO of 2000, none of the assessment- and refund-related issues that the taxpayer can appeal at the appropriate appellate forum fall under the definition of maladministration and are outside the purview of the FTO.
In this case, CIR (Appeals) Sialkot was the appropriate forum to appeal the decisions made in accordance with section 170(4) of the Ordinance. He has prayed that the President of Pakistan will accept his representation and disregard the FTO’s directives.
It was noted that the matter was thrashed by the knowledgeable Federal Tax Ombudsman in accordance with Order Paragraph 6 as follows:
Maladministration in accordance with Section 2(3)(ii) of the FTO Ordinance would be the deliberate rejection of the complainant’s refund claim under Section 170(4) of the Ordinance for Tax Year 2013 on the basis of flimsy grounds by ignoring Section 164 of the Ordinance. Deduction u/s 236A being based on a CNIC is internally verifiable from FBR’s ITMS as well, so the grounds for rejection’s fallacy is glaringly obvious.
The Federal Tax Ombudsman’s recommendations that FBR instruct the Commissioner-IR, Gujrat Zone, RTO Sialkot to recall the order dated 04.07.2022 by invoking the provisions of Section 122A of the Ordinance for Tax Year 2013 to give effect to the deduction made under Section 236A of the Ordinance and dispose of the refund claim in accordance with the law and after giving a proper hearing and reporting compliance within 45 days are unquestionable and tenable.
It is merely a reminder that the departmental authority must decide the case in accordance with the law after giving the complainant a chance to be heard. In accordance with the law, the agency has the rightful authority to decide the case on its merits. There was no legitimate reason to question the learned FTO’s order. This representation was likely to be rejected in those circumstances.
As a result, the President rejected the FBR’s representation in accordance with his decision.
