ISLAMABAD: The Federal Tax Ombudsman (FTO) Office played a key role in facilitating a foreign investor who was punished for filing genuine refund claims with the tax department. The FTO directed the FBR to take disciplinary action against the officials who deliberately changed investor jurisdiction five to six 6 times to avoid payment of refunds pertaining to past years.
As per details, in a case of M/s Ghazi Barotha Contractors, RTO Peshawar had been collecting substantial deduction of tax from contract receipts. After completion of the project, the foreign contractors declared huge losses in their returns of income and consequently claimed refund of Rs784 million for assessment years (1996-97 to 2002-03).
However, the tax officers, instead of processing their refund claim, created huge demand to cover up refund claim by treating the taxpayers as Association of Persons (AOP). 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 department’s reference. Consequently, the taxpayers again applied for refund.
However, the Peshawar RTO transferred the case to RTO Abbottabad to avoid liability of refund payment. RTO Abbottabad transferred the case to LTU Islamabad for the same reason, where the Chief Commissioner refused to issue refund despite taxpayers’ repeated visits to his office and his meeting with Chairman and Member FBR. Instead, unlawful sales tax demand was created by LTU Islamabad which exceeded the refund claim. This demand was also remitted by the Appellate Tribunal.
At which the contractors filed a complaint against this maladministration in terms of the FTO Ordinance, 2000. After investigation and hearing of the parties, the FTO directed the tax department to issue lawful refund to the complainant. Opposing the decision, the FBR filed a representation to the President of Pakistan in terms of Section 32 of the aforesaid Ordinance.
The representation was rejected. Instead of issuing refund, the LTU Islamabad again raised income tax demand against the complainant as high as Rs3.7 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, the third cycle of appeals started and the Appellate Tribunal annulled the orders of the Dept being unlawful and tax demand was quashed. The Dept filed reference in the High Court just to delay the claim of refund. In the meantime, LTU Islamabad transferred the case to RTO Rawalpindi, which transferred it further to RTO Peshawar and RTO Peshawar once again transferred it back to LTU Islamabad which was the fifth transfer of the case. On Review Petition No 49/2013 filed by the complainants, the FTO took serious notice of the highhandedness involved in this case of maladministration of a very serious nature, and directed the FBR to take disciplinary action against officers concerned and issue refund with compensation without delay.
In this case, the foreign investors were not only entangled in three cycles of arbitrary and unnecessary litigation up to the high court, but their case was also arbitrarily and unlawfully transferred five times to different jurisdictions to block genuine refund claim, right under the nose of the FBR.
