ISLAMABAD: Federal Tax Ombudsman Abdul Rauf Chaudhry has directed Federal Board of Revenue to take action against certain tax officials after taking serious notice of gross maladministration by the officials who have been deliberately blocking refunds of a foreign company for more than 13 years.
However, no action has so far been taken despite lapse of nearly one year. The order issued by the Federal Tax Ombudsman shows that in a case of two non-resident contractors, M/s Ghazi Barotha Contractors, Regional Tax Office (RTO) Peshawar has been deducting substantial amount of tax from contract receipts of the contractors. After completion of the project, the foreign contractors declared huge losses in their returns of income and consequently claimed refund of Rs 784 million for assessment years 1996-97 to 2002-03. Instead of processing their refund claims, the tax officers created huge demand to cover up refund claim by treating the taxpayers as Association of Persons. This assessment was annulled by the Income Tax Appellate Tribunal on the ground that assessment was unlawful and arbitrary. The High Court also endorsed the decision of the tribunal dismissing the departmental reference.
The taxpayers again applied for refund, but RTO Peshawar transferred the case to RTO Abbottabad to delay the refund claim. RTO Abbottabad transferred the case to Large Taxpayers Unit (LTU) Islamabad, where the Chief Commissioner refused to issue refund despite taxpayers’ repeated visits to his office and their meeting with FBR Chairman and Member IR. Instead, unlawful sales tax demand was created by LTU Islamabad – more than the refund claim but this demand was also deleted by the Appellate Tribunal. On complaint, the FTO had directed the department to issue lawful refund to the complainant. The representation filed by FBR to the President was also rejected.
Instead of issuing refunds, LTU Islamabad again raised income tax demand as high as Rs 3.7 billion on the pretext that the taxpayers did not deduct tax on the interest of foreign banks. This was done by the departmental officers after almost 13 years just to cover up the refund amount and to harass the foreign investors. Once again third cycle of appeals started and the Appellate Tribunal annulled the orders of the department being unlawful and tax demand was quashed. The department filed reference in the High Court just to delay the claim of refund.
In the meantime LTU Islamabad transferred the case to RTO Rawalpindi, afterwards it was transferred to RTO Peshawar again and RTO Peshawar transferred the case back to LTU Islamabad, which was the fifth transfer of the case. On review petition by the complainant contractors, the FTO, in review application No 49/2013, has taken serious notice of this highhandedness and gross malpractice/maladministration, and directed the FBR to take disciplinary action against officers concerned and to issue refund with compensation without delay. In this case, the foreign investors were not only harassed and unnecessary litigation up to the high court, but their case was transferred five times unlawfully to block genuine refund claims, right under the nose of FBR, sources added.
