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BUDGET 2005-06 IN RESPECT OF FEDERAL TAX OMBUDSMAN


SECRETARIAT, HEADQUARTERS ISLAMABAD AND TWO

REGIONAL OFFICES AT KARACHI AND LAHORE

Object Classification


Budget Estimates 2005-06

Islamabad

(Rs.in Million)



Lahore

(Rs.in Million)



Karachi

(Rs.in Million)



Total

(Rs.in Million)



1

2

3

4

5

A01 – Employees related expenses


8.426

3.314

3.198

14.938

A011 – Pay

5.948

1.744

1.846

9.538

A011-1- Pay of Officer

3.983

0.877

0.653

5.513

A011-2- Pay of Staff

1.965

0.867

1.193

4.025

A012 – Allowances


2.478

1.570

1.352

5.400

A012-1- Regular Allowances

2.223

1.490

1.287

5.000

A012-2 - Other Allowances

(Excluding T.A)



0.255

0.080

0.065

0.400

A03 - Operating Expenses

10.108

3.887

6.460

20.455

A06 – Transfer

0.130

0.010

0.010

0.150

A09 – Physical Assets

0.150

0.075

0.075

0.300

A013- Repairs & Maintenance

0.405

0.097

0.098

0.600

Total:

19.219

7.383

9.841

36.443


CHAPTER - IV
PERFORMANCE DURING THE YEAR

Every complaint in which maladministration is pointed out is noticed by the Federal Tax Ombudsman and after hearing the complainant and the department or person against whom such maladministration is pointed out, the Federal Tax Ombudsman gives its recommendation in order to get the wrong corrected. The recommendations given by the Federal Tax Ombudsman is got executed by the Compliance & Monitoring Section of the Federal Tax Ombudsman Secretariat. Execution is the process of enforcement of recommendations in order to enable the complainant to derive the benefit from that recommendation. It is the duty of the Revenue Division and the tax employees to implement the findings of the Federal Tax Ombudsman under section 11 and 12 of the FTO Ordinance, 2000 within thirty days of such decision being communicated to the concerned tax employee.

During the year 2006, 1347 complaints were registered. The balance of 262 complaints brought forward from the pervious year made the total number of complaints tune to 1609. Out of which 1274 complaints have been decided during the year 2006 leaving a balance of 335. (A statement showing the month-wise institution, disposal, and balance of complaints is placed at page No.30).

As a result of prompt and free of cost relief provided by the FTO, there has been a marked improvement in redressal of the taxpayers’ grievances. The steps taken and actions proposed by the FTO have resulted in meaningful reforms in the tax culture and the dispensation of relief to the aggrieved ones against injustice and administrative excesses by tax functionaries.

The FTO, in addition to addressing grievances of taxpayers, carried out investigations to diagnose the causes of maladministration and recommended appropriate remedial measures aimed at changing the mindset and hence improving the working of Revenue Division. The office of FTO has also been proactive in forestalling recurrence of complaints by recommending disciplinary action to the Revenue Division against their delinquent functionaries. (A statement showing the details of the disciplinary action taken by the CBR on the recommendation of the FTO is annexed at page No.31).

These actions of providing respite to aggrieved taxpayers by investigating maladministration will go a long way in creating awareness in the public about the positive and pivotal role played by the Federal Tax Ombudsman. It will help to create congenial ambiance for enlisting support of the stakeholders and winning confidence of taxpaying community to come forward and openly express their grievances.

The mandate of the FTO to eradicate malpractices in tax administration and thereby restore stakeholders’ trust and confidence, which, in fact, complements the efforts of the tax collecting agencies. Remedial measures recommended by the FTO are in no way adversarial to the Revenue Division as they are meant to improve the system of tax administration and provide correct tax assessments. And this in turn is bound to help promote the investment climate in the country.

FTO identified the following irritants and maladies and recommended appropriate steps for their eradication:-



  1. Improper maintenance of record of the taxpayers.

  2. General slackness in responding to taxpayer’s applications/enquiries.

  3. Subversion and disuse of prescribed office procedures.

  4. Lack of expertise in matters relating to Government Servants Conduct, Efficiency and Disciplinary Rules.

  5. Unlawful decision-making.

  6. Absence of policy of career planning of officers and staff.

  7. Biased conduct of the functionaries.

These irritants invariably cause:-

    1. Corruption

    2. Delay in decision-making.

    3. Yawning confidence gap between the taxpayers and the Revenue Division.

That results in:-

  1. Damage to the confidence of honest taxpayers;

  2. Discouragement to the investors, particularly the foreign ones and;

  3. Substantial loss to the national exchequer.

The Revenue Division and the tax employees showed positive response in a large number of cases. It is heartening to note that the Revenue Division, after receiving complaints for comments/reply, redressed the grievances of complainants in genuine cases and instantly informed the FTO about the action taken by them. During the year under report this meaningful attitude was betrayed in around 285 cases.

However, there was a visible trend to find excuses to delay, defer, avoid or even defy the recommendations on lame excuses, by moving uncalled for review applications, making frivolous representations to the President and at times showing disregard to the challenged remand orders of judicial forums. Measures have been taken by the FTO to arrest this trend. (A statement showing the tendency of filing the review applications and representations are at page Nos.32 & 33).

The FTO, in fact, acts to bridge the gulf of “trust deficit” that exists between the taxpayers and the revenue functionaries. Due to better performance of the FTO, considerable progress has been made in creating awareness in the public mind about the positive and effective role played by him in annihilating the sufferings of the aggrieved taxpayers. This has resulted in enlisting the support of the stakeholders and winning their side which helped a great deal to achieve the aim of good governance.

Every complaint in which maladministration had been noticed on the part of any tax employee, it invariably followed some recommendations in the FTO's findings and recommendations in order to get the wrong corrected. In order to achieve this goal, “Compliance & Monitoring Section”, established at the Federal Tax Ombudsman Headquarters at Islamabad, vigorously pursued the Revenue Division to get the FTO's recommendations implemented in letter and spirit.

If the allegation(s) contained in the complaint could not be proved and the accusation was found to be false, frivolous and vexatious, the FTO is empowered to award reasonable compensation to the Revenue Division or the tax employee against whom the complaint was lodged as envisaged under section 14(4) of the FTO Ordinance. The object of this provision is to act as a deterrent against frivolous complaint instituted against the tax employee(s). Thus it provides them protection so that they may not be dragged into false and baseless proceedings. e.g. in complaint No.961-L/2004 a show cause notice u/s 14(4) of the FTO Ordinance was issued to the complainant Mr. Tafzeel Ahmad Kazmi s/o Ikhlas Ahmad Kazmi, that why reasonable compensation be not awarded to the Revenue Division as he made false and frivolous complaint.

In this complaint the complainant alleged maladministration represented for non-issuance of refund of Rs.58,692/- for the assessment years 1990-91. No books of account were maintained. Assessment was completed u/s 62 of the Income Tax Ordinance, 1979 on 26-06-1991 determining income at Rs.327,037/-. After adjustment of deduction at source (etc), refund was created as per IT-30 at Rs.13,864/-. On appeal before the AAC, the complainant got relief on 03-11-1991, effect to which was given under Section 132 of the repealed ordinance on 18-01-93 enhancing the refund to Rs.37,126/- which was issued on 18-01-93. On further appeal to the Appellate Tribunal the complainant succeeded vide Order dated 18-10-95 with the result that the entitlement to refund was increased to Rs.58,692/-. This refund has not been paid despite application dated 30-10-2004 hence the complaint. It was prayed that in addition to the refund of Rs.58,692/-, Additional Payment for delayed refund under Section 170 of the Income Tax Ordinance 2001 be issued. The respondent through their parawise comments submitted that after relief by the Appellate Tribunal, refund came to Rs.42,076/- as per IT-30 dated 30-06-96 and the same was issued on 13-07-96 vide refund voucher No. 41 hence no refund was pending/due to the complainant.



Complainant in hearing proceeding vehemently denied receipt of refund voucher of Rs.42,076/-. On the other hand respondent brought on record photocopy of refund voucher No. 41 of book No. PV 9494 dated 13-07-96 for some of Rs.42,076/- which, as per statement of the State Bank of Pakistan was encashed on 22-07-96. In addition he presented a letter from the State Bank of Pakistan Lahore confirming that the said voucher was encashed of which intimation was duly sent to the department. The respondent, however, could not present any proof of delivery of the refund voucher to the complainant or to his representative. After thrashing the matter the following recommendations were given by the Hon’ble Federal Tax Ombudsman:

    1. The relief accruing as a result of Appellate Tribunal’s decision, be worked out afresh so as to remove the mistake in the calculation on the IT-30, as admitted by the DR.

    2. The Complainant be supplied copies of all the documents relating to consequential assessment as a result of relief by the Appellate Tribunal.

    3. The Refund in respect of the balance amount in excess of the disputed Voucher of Rs.42,076, be issued forthwith along with Additional Payment for delayed Refund commencing 30 days from the date of service of the Tribunal’s order on the Commissioner.

    4. As respects the disputed Refund Voucher for Rs.42,076/- an enquiry be conducted on the lines specified above and the outcome reported back within 3 weeks of the receipt of this Order for further recommendations.

    5. Enquiry be conducted to identify ‘tax functionaries’ responsible for the lapses identified hereinabove.

The contention of the complainant throughout remained that he did not receive the refund voucher and had been stressing for inquiry as was ordered in recommendation No. 6(iv). Accordingly the inquiry was conducted by the Commissioner of Income Tax, Special Zone, Lahore and according to inquiry report the complainant was asked to provide the detail of book account but he refused to provide the same on which the inquiry officer with some efforts traced his account number and summoned the concerned bank officer along with the relevant record. The bank account statement clearly showed the facts that the refund voucher amounting to Rs.42,076/- was deposited in the account of the complainant on 22-07-96 which was the same date regarding which confirmation was already made by the State Bank of Pakistan for the payment of refund voucher. The complainant withdrew total amount from his account on 27-01-96 including the amount of Rs.42,076/- thus closing his account. The inquiry officer sent photocopy of the account opening form, identity card of the complainant and the bank account statement along with the inquiry report. All these facts apparently showed that the complainant misled the Federal Tax Ombudsman believing that he did not receive the above said amount resulting above stated recommendations. He made false claim and frivolous complaint besides wasting precious time of the Federal Tax Ombudsman and his Secretariat. A show cause notice was issued to him as aforestated to which he replied and submitted unqualified and unconditional apology. He stated in his reply that he closed his business in 1996 and the matter of refund related to 1990-91. He has lost his record/book of account and due to 70 years old age did not remember having received refund voucher for Rs.42,076/-. Before submitting the complaint he approached his bank for verification as to whether the refund voucher had been credited in his account but the bank did not cooperate with him and did not provide him correct information. He highly regretted the false claim filed by him and threw himself at the mercy of Federal Tax Ombudsman. The Hon’ble Federal Tax Ombudsman keeping in view his old age, unqualified and unconditional apology forgave him and withdrew the show cause notice.

Under section 22 of the FTO Ordinance, compensation can be awarded to aggrieved parties for any loss or damage caused to them on account of maladministration committed by the Revenue Division or its functionaries.



Consolidated Statement

Showing Previous Balance, Institution and Disposal of Complaints

during the year 2006

Month

Balance

of 2005

Institution

Total Institution

Disposal

Balance

January

262

90

352

35

317

February

317

92

409

123

286

March

286

145

431

116

315

April

315

124

439

88

351

May

351

110

461

111

350

June

350

121

471

203

268

July

268

141

409

90

319

August

319

112

431

155

276

September

276

87

363

108

255

October

255

44

299

92

207

November

207

55

262

77

185

December

185

226

411

76

335

Total




1347




1521

174

Position Regarding Disciplinary Action

against Tax Officials during the year 2006

Sr. No.

(Summary)

Total Cases

Topics

1.

Exonerated/Dropped/Vacate

01

2.

Warned & Counseled

07



Total:


08



REFUND & COMPENSATION CASES



YEAR

TOTAL CASES OF REFUND

AMMOUNT ISSUED

Recommended


Issued

2006

235

178

Rs.18,37,75,564

TOTAL CASES OF COMPENSATION

2006

41

18

Rs.24,70,262

Out of 235 refund cases up to December 2006, relief has been granted to 178 complainants.

Review Applications

Filed & Disposed of till December 2006

Year

Institution

Disposal

Balance

2001

62

62

0

2002

142

142

0

2003

214

214

0

2004

94

94

0

2005

83

64

19

2006

99

88

11

Total

694

664

30



Statement showing the Progress of

Representation till December 2006


Year

Previous Balance

Institution

Total

Disposal

Balance

2001

0

29

29

9

20

2002

20

227

247

17

230

2003

230

324

554

269

285

2004

285

234

519

162

357

2005

357

200

557

123

434

2006

434

168

602

245

357

Total




1182




825

357




CASES RELATED

TO

SALES TAX

BEFORE THE FEDERAL TAX OMBUDSMAN

REGIONAL OFFICE

LAHORE

COMPLAINT NO.353/2006

M/s Ashfaq Traders

12-Qazafi Street, New Anarkali,

Lahore …Complainant


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