SHABBIR FEED MILLS (PVT.) LTD., MULTAN vs The COMMISSIONER INLAND REVENUE, CTO, MULTAN Ss

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SHABBIR FEED MILLS (PVT.) LTD., MULTAN VS The COMMISSIONER INLAND REVENUE, CTO, MULTAN Ss. 120, 221 & 170---Income Tax Rules, 2002---Refunds---Adjustment of prior year's excess payment of tax, disallowing of---Rectification proceedings, invoking of---Mistake---Format of Return for a year---Return Adjustment of other Year(s)---Established past practice---Verification by the Department, absence of---Officer Inland Revenue while observing that Taxpayer (private limited company) had wrongly adjusted unverified refund of previous year towards the current year's tax liability, termed as mistake warranting rectification under S.221 of the Income Tax Ordinance and subsequently disallowed adjustment of previous year refund against liability for tax year (2019); Commissioner Appeals also confirmed the impugned / said treatment---Validity---Format of Return of total income, admittedly, had been prescribed under the Income Tax Rules, 2002---Format of Return for the year 2019, relating to present case, indicated that under the head computation there was a column with description " Return Adjustment of Other Year(s) against Demand of this year" at Code [92101]; in said column the adjustment-in-question had been made---As per Format of Return and instruction thereof contained in the Rules, there was no requirement or additional documentation for making the adjustment-in-question---As per facts, neither there was any recent change in S. 170 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') nor in the column of adjustment of refund---It appeared that the adjustment-in-question was being considered to be an order under S.170(3) of the Ordinance, 2001, whereas as per principles of law, an established past practice had the force of law---Unless refund claimed by a taxpayer was found inadmissible , after due verification under the law , the same could not be disallowed merely on basis that it was "unverified"---In the present case, the Department had neither disputed tax overpaid for preceding year nor was there any verification process employed by DCIR to declare it as inadmissible, therefore, disallowing adjustment of prior year's refund was not found justified under the circumstances and that too through rectification proceedings---Order passed by the Commissioner (Appeals) showed that he , by relying on S.170(3) of the Ordinance, 2001, observed that refund was only due when the Commissioner was "satisfied" that tax had been overpaid and there was an adjustment order under S.170(3)(a) of the Ordinance, 2001---Said finding was misconceived since said provision envisaged issuance of refund or its adjustment by the Department and not adjustment by the taxpayer---Secondly, if the Commissioner , in the present case, was not "satisfied regarding excess payment of tax ", which also meant that the Commissioner was not "unsatisfied" as well on said account---Record revealed that, undisputedly, no order under any provision of the Ordnance, 2001 had been made by the Department to the effect that , in the present case, tax had not been overpaid---Verification of correctness of refund claim of a taxpayer was the responsibility of Department; if said responsibility was not fulfilled, the taxpayer could not be punished for inaction of the Department---Before disallowing refund adjustment, in the present case, the OIR should have made attempt to verify refund claim of the taxpayer for relevant year and if, after verification, tax paid in excess was not verified, only then he could issue notice for disallowing adjustment of the same against tax payable for subsequent year---In the absence of any finding on record, the observation that taxpayer had adjusted "unverified" refund was not sustainable---When the ground on which rectification was not established from record, question of there being any mistake apparent from record did not arise, hence S. 221 of Ordinance, 2001 was wrongly invoked under the circumstances---Mistake, if any, could at best be attributed to the relevant tax year to which the said " unverified refund" pertained to and not said subsequent year---Adjustment of prior year's refunds appearing in the acknowledgment as " refundable income tax" was in accordance with law, rules and established past practice, therefore, there was no mistake apparent from record which could be rectified through order under S. 221 of the Ordinance, 2001---Tribunal set aside orders passed by the Authorities below, being not maintainable---Appeal filed by the taxpayer was allowed, in circumstances.

SHABBIR FEED MILLS (PVT.) LTD., MULTAN vs The COMMISSIONER INLAND REVENUE, CTO, MULTAN Ss — 2024 PTD 511 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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