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Petitioner: DepartmentAssessee VS Respondent: Assessee
Court Name: Income Tax Appellate Tribunal Judge(s): Farhat Ali Khan, Saiyid Saeed Ashhad, Manzoor-ul-Haque Title: DepartmentAssessee vs Assessee Case No.:I.T. As. Nos. 1778/KB to 1786/KB, 1788/KB of 1985-86 and 230/KB to 233/KB of
1987-88 Date of Judgment:1990-05-12 Reported As: PTCL 1993 CL. 135 Result: Order accordingly Judgment ORDER MANZUR-UL-HAQUE (ACCOUNTANT MEMBER).--1. Appeals in cases from Serial Nos. 1 to 10 have been filed by the department against the orders of learned A.A.C. Setting aside the orders passed under section 99(3) of the Income Tax Ordinance, 1979. Appeals from Serial Nos. 11 to 14 have been filed by the assessee against the order of the learned A.A.G 'F Range, Karachi, confirming the order of the I.T.O, under section 99(3) of the Income Tax Ordinance, 1979. 2. Mr. Nasrullah Awan, Legal Advisor, along with learned D.Rs. Messrs Shahid Jamal and Khurshid Anwar appeared on behalf of the department while a number of learned Advocates, I.T.Ps. And C.As. Appeared to express their views on the issue involved in the above appeals. Besides Messrs I.N. Pasha, Siraj-ul-Haque and Mansoor Ahmed Khan were invited as Amicus Curiae to assist the Court. 3. In a not very lengthy submission, Mr. Nasrullah Awan, Advisor, wrapped up his arguments inviting our attention to the provisions of sections 96 to 100 under Chapter X of the Income Tax Ordinance, 1979 and also rule 193 of the. Income Tax Rules which prescribes the form for claiming refund. Provisions of section 96 of the Income Tax Ordinance, 1979 read as under:- "96. Refunds.-(1) Where any person satisfies the Income Tax Officer that the amount of tax paid by him or on his behalf, for any year exceeds the amount with which he is properly chargeable under this Ordinance for that year, he shall be entitled to a refund of the amount so paid in excess. (2) Where any advance or loan, to which sub-clause (e) of clause (20) of section 2 applies, is repaid by an assessee, he shall be entitled to a refund of the tax, if any, paid by him as a result of such advance or loan having been treated as dividend under the aforesaid provision."
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4. The learned counsel pointed out that section 96 stipulates that if a person has paid tax for any year which exceeds the amount which he is properly chargeable to under the Ordinance, he shall be entitled to a refund. The two essential conditions are that:-- (a) the tax must have been paid directly; or (b) indirectly by deduction at the source. To claim refund of such amount; section 99 of the Income Tax Ordinance suggests the procedure. Section 99 reads as under:-- "99. Form of application, disposal of claims for refund and limitation.--(1) An application for refund under section 96, 97 or 98 shall be made in the prescribed form and verified in the prescribed manner. (2) An application under sub-section (1) shall be made,- (a) in any case to which sub-section (2) of section 96 applies, within one year or the end of the income year in which the advance or loan is repaid; and (b) in other cases, within two years of the end of the assessment year to which it relates; Provided that an Income Tax Officer may, after obtaining the previous approval in writing of the Inspecting Assistant Commissioner, admit an application made after the expiration of the aforesaid period, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period. (3) *** *** *** *** *** *** *** *** *** (4) *** *** *** *** *** *** *** *** *** (5) *** *** *** *** *** *** *** *** *** (6) *** *** *** *** *** *** *** *** *** 5. From the provision of the above section it follows that to claim refund an application must be made on a proper form as laid down under Rule 193 and within the period prescribed by sub- section (2) of section 99. 6. If the I.T.O, is satisfied he will allow the refund under section 99(3) of the Income Tax Ordinance but where he is not satisfied he may reject the application under the provision of the same sub- section. 7. Not only under section 96 but also under the provisions of sections 97 and 98 of the Income Tax Ordinance, in order to claim a refund, an application must be made on prescribed form and within the prescribed time, the learned counsel contended. These are mandatory provisions: he said. To claim refund under section 96 the limitation is of one year and in other cases it is two years. As regards section 100 of the Income Tax Ordinance, the learned counsel opined that it does not do away with the limitation. He cited the following two cases (1954) ITR 670 and (1963) 50 ITR 637 and also Palkhi Wala, Seventh Edition, page 1106. 8. In his submission, Mr. In. Pasha, the learned amicus curiae, pointed out that in the first 8 cases assessm ents were made under section 62/65 of the Income Tax Ordinance and in none of these cases quantum of refund was determined. The respondents had, however, filed letters for rectification of the orders made by the I.T.O, and for determination of refund. The I.T.O, treated these letters as application for refund and passed order under section 99 instead of rectifying the order under section 156 of the Income Tax Ordinance. In appeal the learned AAC. Set aside the orders and directed the I.T.O, to verify assessee's claim of refund of payments made under section 50(5) at the custom stage. The learned counsel also relied on (1938) 6 I.T.R 414. He pointed out that there is no appeal if application for refund becomes time-barred but an appeal can lie on rejection of the refund application. The departmental appeals in all the 8 cases from serial Nos. 1 to 8 should, therefore, be dismissed because in none of the cases the question of limitation is involved. Mr. In. Pasha, the learned counsel supported the decision of this Tribunal bearing I.T.A. Nos. 1485 and 1486/KB dated 24th January, 1990 and pointed out that section 99 deals only with those cases of
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refund where no assessm ents have been made. A refund can be claimed even before assessment. 9. The next speaker called upon to assist the Court was Mr. Siraj-ul-Haque, the learned Advocate, who also supported Tribunal's decision contained in I.T.A. Nos. 1485 and 1486/KB of 1985-86 dated 24th January, 1990. He however, pointed out that the provision of section 100 as substituted by Finance Act, 1985 was quoted on page 8 of the order instead of the contents of the original section 100. This has created some confusion. The original section 100 reads as under:-- "100. Refund on appeal, etc.-Where as a result of any order passed in appeal, revision, reference or other proceedings under this Ordinance, (not being an order setting aside an assessment) refund of any amount becomes due to the assessee, the Income Tax Officer shall, except otherwise provided in this Ordinance, refund the amount to the assessee irrespective of whether he has or has not made any claim in that behalf." 10. It is stated that the substituted section 100 is more clear than the one which existed before. An application for refund, in his opinion was mandatory before the amendment as the title given was that of "Refund on appeal etc." whereas in the substituted section the words are clear, "Refund on assessm ent and appeal etc." Besides, the sections under which assessments have been finalised and refunds determined as a result of such assessment have clearly been stated in the substituted section 100. The substituted section reads as under:- "100. Refund on assessment and appeal, etc.-Whereas as a result of any order passed under section 59, 59-A, 62 or 63 or in appeal, revision, reference or other proceedings under the Ordinance (not being an order setting aside an assessment), refund of any amount becomes due to the assessee, the Income Tax Officer, shall, except as otherwise provided in this Ordinance, refund the amount to the assessee irrespective of whether he has or has not made any claim in that behalf." He further argued that where an amendment is brought in, it should be presumed that status of law was different. The learned Advocate drew support from the following case-laws:-- (1962) 46ITR 523; (1981) 132 ITR 875; (1967) 69ITR 67; (1985) 52 Taxation 21; (1988) 62 PTD 66 and (1934) 2 ITR 52. Mr. Faruq Ali, the learned counsel for Messrs Barkat Bros, and Peoples Medical Supply Agency submitted that refund was determined on IT-30 in both the cases. It was only the application for refund which was submitted after a period of three years. The learned counsel also relied on circular No. 3 of 1978, dated 2nd February, 1978, which reads as under:-- "CIRCULAR NO.3 OF 1978 (INCOME TAX) Subject:-- ISSUE OF REFUND VOUCHER I have been directed to say that the Board has decided that where on assessment any refund is found due to any assessee, refund voucher "account payee only" should be sent to the assessee by registered post upon completion of assessment." He argued that circular does not provide for any application. Refund has to be issued along with the assessm ent order. 11. Mr. Mudassar Shah, the learned counsel, in his submission presented the scheme of Chapter X of the Income Tax Ordinance under the head "Refund and Tax Credit". Explaining the provisions of sections 96 to 98, he said, refunds covered by these sections can be claimed only under section 99. Whereas, section 100 speaks of assessment. He discussed the provision of section 99(3) in detail and pointed out that under the provision' of this sub-section assessment proceedings are not necessary. He also pointed out that under section 64(1) limitation for assessment has been provided. No assessm ent under that section could be made after the expiry of two years from the end of assessm ent year in which the total income was assessable. Whereas section 99(2) reads as under:-- "99(2) An application under sub-section (1) shall be made,-
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(a) in any case to which sub-section (2) of section 96 applies, within one year or the end of the income year in which the advance or loan is repaid; and (b) in other cases, within two years of the end of the assessm ent year to which it relates: Provided that an Income Tax Officer may, after obtaining the previous approval in writing of the Inspecting Assistant Commissioner admit an application made after the expiration of the aforesaid period, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period.'' In this way, he argued, no refund can be claimed. The learned counsel also pointed out that section 100 was not amended, it was substituted by Finance Act, 1985, by making the provision more clear and comprehensive. 12. The next learned counsel called upon to assist the Tribunal was Mr. Mansoor Ahmad. He supported the finding of the Tribunal contained in I.T.As. Nos. 1485/KB and 1486/ KB of 1985-86 dated 24th January, 1990. He also drew the attention of the Bench to the language of section 50(5) of the Income Tax Ordinance which reads as under:- "50(5) Notwithstanding anything contained in any law for the time being in force. (a) the Collector of Customs shall, in the case of every importer of goods, collect advance tax commuted, on the basis of the value of such goods as increased by the customs duty and sales tax, if any, leviable thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such importer for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessm ent year, in which the 'said date' as referred to therein, falls, whichever is the later; (b) the tax under clause (a) shall be collected in the same manner and at the same time as the customs duty, as if such goods (even though exempt from such duty) were liable to such duty, and all the provisions of the Customs Act, 1969 (IV of 1969) shall, so far as may be, apply accordingly: Provided that nothing contained in clause (a) or clause (b) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified in this behalf by the Central Board of Revenue by notification in the official Gazette. Explanation.--As used in this sub-section; (i) "value" in relation to any goods, means the value as determined under section 25 of the Customs Act, 1969 (IV of 1969), as if goods were subject to ad valorem duty; and (ii) "Collector of Customs" means a person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969) and includes a Deputy Collector of Customs or an officer of Customs appointed as such under the aforesaid section." 13. The learned counsel argued that from the language of law as it appears in section 50(5) of the Income Tax Ordinance, a duty has been cast on the I.T.O, to give credit for the advance tax. There does not, therefore, appear to be any need or occasion for a formal refund application to be made when the statute itself recognises the 'advance tax' and provides adjustment as 'credit'. It thus becomes an essential and statutory part of the assessment proceedings falling within the ratio of the Trib's D.B. Decisions, dated 24th January, 1990 in I.T.As. Nos. 1485 and 1486/KB of 1985- 86..."Continuing his argument the learned advocate pointed out that if no notice is taken of the payment made under section 50(5) then it becomes justiciable matter and the learned A.A.C. In the cases cited above has rightly set aside the issue directing the I.T.O, to dispose it of according to law. He also referred to section 96 of the Income Tax Ordinance, sub-clause (1) of which reads as under:- "96. Refunds.-(1) Where any person satisfies the Income Tax Officer that the amount of tax paid by him, or on his behalf, for any year exceeds the amount with which he is properly chargeable under
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this Ordinance for that year, he shall be entitled to a refund of the amount so paid in excess." and pointed out that according to this sub-section one has to satisfy the I.T.O, that he has paid tax in excess and is, therefore, entitled to a refund. But the language of section 100 is quite different. The unamended section 100 reads as under:-- "100. Refund on appeal, etc.--Where, as a result of any order passed in appeal, revision, reference or other proceedings under this Ordinance, (not being an order setting aside an assessment) refund of any amount becomes due to the assessee, the Income Tax Officer shall, except otherwise provided in this Ordinance, refund the amount to the assessee irrespective of whether he has or has not made any claim in that behalf." He further said that the letters etc. Used after the words "Refund on appeal" is significant as it referred to the assessm ent made under the Income Tax Act which has later been clarified by amendment in 1985. The new section 100 is of varificatory nature which spells out the assessment orders passed under section 59(1), 62 or 63 or in appeal, revision, reference or other proceedings under the Ordinance in clear terms. He also referred to section 329 of the Indian Income Tax Act, 1961 to suggest that Indian Act is basically different from the provisions of the Income Tax Ordinance, 1979. The learned counsel also relied on 8 ITC 387 and AIR 1979 SC 1144. In the latter case it was held:-- "Here it is obvious that the claim of the respondent was a just claim supported as it was by the recommendation of the Assistant Collector of Customs and hence in the exercise of our discretion under Article 136 of the Constitution, we do not see any reason why we should proceed to hear this appeal and adjudicate upon the pleas of the appellant based on section 110 of the Madras Port Trust Act (II of 1905)." 14. Mr. Z.A. Jaffery the learned I.T.P, supported the D.B. Judgment of this Tribunal bearing I.T As . Nos. 1485 and 1486/KB of 1985-86 dated 24th January, 1990. Mr. Rehan Naqvi the learned counsel made a written submission. His arguments briefly were as under:-- "(i) That so far as the eight cases list of which is attached herewith, these relate to rejection of application made under section 156 of the Income Tax Ordinance, 1979 which the Income Tax Officer treated as application for refund ^pd thus in these cases no question of law regarding limitation for submission of application of refund is involved. (ii) In my opinion the questions which require a decision from the learned Income Tax Appellate Tribunal are as under:- (a) Whether or not in cases where refund of tax has been determined as a consequence of orders passed under sections 59, 59-A and 62 or 63 of the Income Tax Ordinance, 1979, application for claiming refund under Rule 193 of Income Tax Rules, 1982 is to be made and if made whether limitation as laid down under section 99(2) (b) of the Income Tax Ordinance, 1979 would be attracted? (b) Which are those cases where application for refund under Income Tax Rule 193 is to be made and when the limitation as laid down under section 99(2)(b) of the Income Tax Ordinance, 1979 would be attracted? In respect of the question No. 1 it may be submitted that after section 100 of the Income Tax Ordinance, 1979 was substituted vide Finance Act, 1985, once the amount of refund was shown in IT-30, it was to be issued straightaway and thus no application for refund under Income Tax Rule 193 was required to be submitted and thus no question of limitation under section 99(2) (b) of the Income Tax Ordinance, 1979 arises and in this connection your honour's kind indulgence is invited to an extract from C.B.R. Circular letter No ITB-3(21)/1985, dated November 24, 1985 which is as follows:- "Calculations of tax payable are made on IT-30 form which is a part of the assessment order. While preparing IT-30, credit for the payments made by the taxpayer is required to be given. Credit for
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tax paid once given legally becomes final. Thus, subsequently, tax already paid shown in the IT-30 cannot be challenged by the Department nor can the Department, for the purposes of refund, ask the taxpayer concerned to produce further evidence in support of the tax claimed and shown to have been paid. After the recent amendment in section 100 of the Income Tax Ordinance, 1979 the requirement of filing applications for issuance of refund stands dispensed with. Now the refund vouchers have also to be issued along with demand notices. In these circumstances, the Assessing Officers will not be in a^position to carry out any verification of payments if the same have been shown in the IT-30. The refund shown in IT-30, if any, will have to be issued straightaway. The problem has been examined in the. Board and I am directed to state that wherever any tax payment is claimed to have been made by the taxpayer it may be verified before giving credit for the same in the IT-30. Thus, in all cases, where in the returns tax payments are shown to have been made, effort must be made by the assessing officers to verify such payments before finalising the assessm ent. No credit for unverified tax payment should be given in IT-30s. This should enable the Income Tax Officers invariably to issue refund vouchers along with the assessment orders, without delay in all cases where refund have been created on IT-30s. All concerned may please be advised accordingly." Further, your honour's kind indulgence is also invited to an extract from Circular Letter C. No. ITB- 3(6)/1985, dated March 27, 1985 which deals with the refund due in respect of exempt income and is as under:- "A question has been referred to the Board as to whether filing of return is necessary for claiming refund where income is exempt under Income Tax Ordinance, 1979. The issue has been examined and I am directed to say that filing of returns solely for the purposes of claiming refund is not required. In such circumstances application for refund under section 99 of the Income Tax Ordinance, 1979 can be given without filing the return." From the above your honour would appreciate that in the case of exempt income, the application for refund is required to be submitted without return of income although according to Note 1 of the application this was a specific requirement. Now this is the case where limitation under section 99(2) (b) of the Income Tax Ordinance, 1979 would be attracted as the assessm ent of refund is to be made within the prescribed period of limitation under section 64 of the Income Tax Ordinance, 1979. (vii) Coming to question No. 2 which relates to sections 96, 97 and 98 of the Income Tax Ordinance, 1979 it may be submitted that these sections cover not assessed to income- tax and in such cases, therefore, the requirements of section 99(1) and (2) of the Income Tax Ordinance, 1979 read with Income Tax Rule 193 are to be complied with keeping in view the provisions of section 64 of the Income Tax Ordinance, 1979. (viii) Incidentally your Honour's kind indulgence is invited to section 48(2) of the Repealed Income Tax Act, 1922 which provided for issue of refund as a consequence of orders passed by the Appellate Assistant Commissioner or the. Appellate Tribunal Indian Income Tax Act, 1961 also had the similar provision vide section 240 of the Income Tax Act, 1961. Keeping in view the aforesaid provisions therefore, the legislature thought for causing a refund to be made by the Income Tax Officer under section 100 of the Income Tax Ordinance, 1979, if the order has been passed by the Income Tax Officer under sections 59, 59-A, 62 and 63." 15. Replying to the arguments of the learned Advocates, and the learned I.T.P.'s Mr. Nasrullah Awan, the learned L.A., for the department submitted that provisions of section 99 are mandatory and to claim any refund an application has to be filed on the prescribed form within the prescribed time. At this point of time Mr. Shahid Jamal, the learned D.R. Wanted to make his own submissions which he was allowed to do. He drew our attention to note No. 1 appended to rule 193 of the Income Tax
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Rules, and suggested that a refund becomes due only after assessment/ Because with every prescribed application under section 99, a return of total income has to be filed and it is only as a result of the assessm ent that refund becomes due to an assessee. It may be filed before the assessm ent or with the return of income or after the assessment He relied on (1936) 4 ITR 100. He also supported the views of the learned counsel for the department that refund application under section 99 is compulsory. He was also of the view that refund does not become due even after the working given on IT-30. He referred to Circular No. 7 of 1977 bearing No. 1(17)ITI-77 dated 2nd July, 1977, to point out that refund becomes due only after an order to this effect is passed by the I.T.O, as in the case of charging additional tax under section 87 of the Income Tax Ordinance which is not valid without a separate order under that section. Is working on IT-30 is not considered sufficient. On that analogy refund does not become due by a simple working or credit given on IT-30. He also pointed out that the issue of refund has assumed special importance with the introduction of the self-assessm ent scheme where returns are accepted without any question. Hence the possibility of bogus claims cannot be ruled out. 16. Besides making submissions at the Bar, Mr. In. Pasha, the learned Advocate, also made a written submission regarding taxes paid under section 50(5) of the Income Tax Ordinance, 1979. He explained that since no credit for taxes paid under section 50(5) of the Income Tax Ordinance was granted by the I.T.O, in the assessm ents made under section 59(1), the appellants from serial Nos. 1 to 8 applied for rectification of the order under section 156 and allowing the refund claimed. The I.T.O, considered their requests as applications under section 99(1) of the Income Tax Ordinance and discarded them as time barred. The learned C.I.T. (A) in appeal set aside the order with direction to settle the appellant's claim of refund. This time the department felt aggrieved and filed a second appeal before the Tribunal. 17. The main points -of Mr. In. Pasha's submissions are as under:- "(a) There is no appeal against the order passed under section 99(3). The I.T.O, made efforts, in vain, to shut out the appeals by treating assessee's application for rectification as application for refund under section 99(1): Reliance placed on (1938) 6 ITR 414 in which it was held by the Privy Council: "The mere fact that in assessments purport to have been made under that sub-section does not shut out the appeal; it must be shown that the circumstances of the case bring it within the scope of that sub-section." (b) The learned AA.C. Rightly equated assessee's…
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