Procedure of Income Tax Refund

[Star]

Dear All,

In order to claim income tax refund under section 170 of ITO, an application is made to Commissioner under Rule 71 of IT Rules, 2002.

Section 170(2)

An application for a refund under sub-section (1) shall be –
(a) made in the prescribed form;
(b) verified in the prescribed manner; and
(c) made within two years of the later of -
(i) the date on which the Commissioner has issued the assessment order to the taxpayer for the tax year to which the refund application relates; or
(ii) the date on which the tax was paid.

Normally, if income tax return shows a refund, an application of refund is filed alongwith the tax return.

Section 170(4)

(4) The Commissioner shall, within 2[sixty] days of receipt of a refund application under sub-section (1), serve on the person applying for the refund an order in writing of the decision 3[after providing the taxpayer an opportunity of being heard].

Kindly update me;

• What would be the required action after the expiry of sixty days when tax department has shown no activity to process the refund application?
• Whether additional payment of delayed refund can be claimed under above situation?

Regards,

*

[LapTop]

Q1-
According to U/S 170 Sub-section 5- A person aggrieved by-
(a) an order passed under sub-section (4); or
(b) the failure of the Commissioner to pass an order under subsection (4) within the time specified in that sub-section, may prefer an appeal under Part III of this Chapter U/S 127.

App Appeal file kar sakty hayn after sixty days refund application jama karwany k baad.

Q2-
171. Additional payment for delayed refunds. – (1) Where a refund due to a taxpayer is not paid within three months of the date on which it becomes due, the Commissioner shall pay to the taxpayer a further amount by way of compensation at the rate of KIBOR per annum of the amount of the refund
Computed for the period commencing at the end of the three month period and ending on the date on which it was paid.

Provided that where there is reason to believe that a person has claimed the refund which is not admissible to him, the provision regarding the payment of such additional amount shall not apply till the investigation of the claim is completed and the claim is either accepted or rejected.

(2) For the purposes of this section, a refund shall be treated as having become due –
(a) in the case of a refund required to be made in consequence of an order on an appeal to the Commissioner (Appeals), an appeal to the Appellate Tribunal, a reference to the High Court
or an appeal to the Supreme Court, on the date of receipt of such order by the Commissioner; or
(b) in the case of a refund required to be made as a consequence of a revision order under section 122A, on the date the order is made by the Commissioner; or
(c) in any other case, on the date the refund order is made.


According to Section 171, additional payment of delayed refund sirf usi surat may mil sakti hay jab refund order ko jari howay 3 mahiny ho chuky hon or refund na mila ho.

[Star]

Thanks for the reply dear.


A company files refund application alongwith its income tax return. Tax department remained silent for six months. After six months company files an appeal and refund is ordered for a material amount i.e. 50 million.

Please tell me whether any provision exists (other than section 171) in income tax law to recover the damages/delayed refund charges or markup from tax department becasue it is fact that the company has suffered from loss of profits which can be earned if the refund was ordered on timely basis within 60 days.

I think if there is failure at tax department end, then they should bear the markup as a natural justice.

[LapTop]

HI Star bhai,,,,

App nay natural justice ki baat ki to to insaf usi ko milta hay jo takaza karta hay,,,,,

Aap ko chayea tha k aap jab aap ki refund application decide nahi hoi 60 dino may to aap foran appeal may chaly jaty..

Yahan delay FBR ki taraf say nahi aap ki taraf say howa hay,,,,,

App appeal may jaty to app ki application foran decide ho jati,,,,,, aap nahi gay is ka matla aap ko refund ki zarorat hi nahi thi,, or FBR ko kya pari hay k wo aaya howa paysa aap ko wapis kar day.

[Star]

I understand your point of view and think you are right, company should keep continued followup of such matters.

I just want to update my knowledge, if after 60 days company files appeal, off course appeal will not be decided in a day or two. It will take time minimum 2 or 3 weeks to issue refund order afterall FBR guys would definately scrutinize company record.

In the instant case it is the company which would bear loss (receiving its cash late).

This is just like, BAAL KI KHAAL UTARNY WALI BAAT. Anyway, thanks dear.


Regards,

*

[adnysam]

Please assist me on adjustment of Income tax (over deduction of tax) in the next fiscal year 2010-2011

[azeem10]

U can update yourself for income tax laws, forms etc. at http//www.pakcustoms.org/income_tax_forms/index.htm

[student_of_law]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Star</i>
<br />I understand your point of view and think you are right, company should keep continued followup of such matters.

I just want to update my knowledge, if after 60 days company files appeal, off course appeal will not be decided in a day or two. It will take time minimum 2 or 3 weeks to issue refund order afterall FBR guys would definately scrutinize company record.

In the instant case it is the company which would bear loss (receiving its cash late).

This is just like, BAAL KI KHAAL UTARNY WALI BAAT. Anyway, thanks dear.


Regards,

*
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Firstly I would like to share legal situation generally without reference to refund matter.
Under administrative law every citizen has right to file suit for damages against the unlawful act of statutory bodies in the civil court. Bar contained in s.227 of Income Tax Ordinance, 2001 does not prevent us to do so. As the remedy of award of damages is not provided by Special Law (i.e. ITO, 2001) so we may resort to civil court to claim damages. [PLD 1953 Lah 339]. Civil court may enterain the matter when certain act is not being done within four corners of ITO, 2001 or with mala fide intention or without jurisdiction.

"If any State functionary or functionary of a Local Government would take action in excess of his authority; and in consequence of that action a citizen was made to incur expenditure or suffer a loss, that citizen had remedy to recover damages from such functionary in accordance with the law."[2010 CLC 860] by Supreme Court of Pakistan


However, this practice of claiming damages is not prevalent in Pakistan because the amount of damages awarded is not attractive, the procedure of pursuing the matter in civil courts is so lengthy that people don't prefer rather not dare to adopt it.

Now coming to your specific query that can we claim damages for non grant of refund application within two months. In several laws the legislature has provided time period within which given matter is to be decided by executive or tribunal. However, the legislature has not provided any consequences or penalty for non-adherence to this time period. Hence the courts have declared that this time period is directory and not mandatory. It is a procedural matter but does not create substantial right in favor of applicant.

"Where inaction on the part of a public functionary within the prescribed limit was likely to affect the right of a citizen, the prescription of time was deemed directory ---Where a public functionary was empowered to create liability against a citizen only within the prescribed time , it was mandatory-" [2010 PTD 2670]


Even limit of making refund application within 2 years under s.170(2)(c) is held directory not mandatory. You may file application after two years also. "Belated claim of refund was not barred by time since time limit for issuance of refund was directory and not mandatory-"[2010 PTD 21]

We may pressurize the concerned officer to decide refund application through higher management or Ombudsman if he has not make decision within given time.

However, the question remains, if any person suffers loss owing to violation of directory provision of law, would he be entitled to claim damages for that.

I am unaware of any case law on this subject. It is my personal opinion and seems to me justifiable, that if the relevant authority has no cogent reason for not deciding the matter within time and other person does suffer loss for that delay which he successfully proves, then the damages should be awarded.

However, it is my personal opinion. Members are invited to share case law, foreign or national, on this point.

[student_of_law]

While making above detailed reply I completly missed the most relevant thing. It is s.22 of Federal Tax Ombudsman Ordinance, 2000,

Under s.22 FTO is entitled to award costs for the damages sufferred owing to maladministration of tax employee

According to s.2(3)(ii)of the said Ordinance of 2000, maladministration also include inaction , neglect and delay in discharge of duties.

"Under S.22 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 compensation may be award ed to an aggrieved party for any loss or damage suffered by him on account of maladministration committed by a tax employee or the Revenue Division---Proof of loss or damage due to the delay caused by non-payment of refund within time should be established and there should be some material or evidence to show that damage or loss has been caused to the aggrieved party by delay---Mere fact that delay in payment of refund has been proved as maladministration is not sufficient to grant compensation. " [2007 PTD 1977]