ISLAMABAD (July 03 2003) : Evolving a new income tax refund procedure under Income Tax Ordinance 2001, the Central Board of Revenue (CBR) has made it mandatory for the Commissioners of Income Tax (CITs) to pay compensation to the taxpayers in cases where the department fails to issue refund voucher within three months from the date the refund order is made.
The Commissioner would have to pay a further amount, by way of compensation, at the rate of 15 percent per annum of the refund amount computed for the period commencing at the end of the three-month period and ending on the date on which it was paid.
The CBR has directed Regional Commissioners of Income Tax (RCITs) that the payment of compensation under section 171 of the Ordinance 2001 must be avoided under all circumstances.
According to Income Tax Circular 5 of 2003 issued here on Wednesday, the Commissioner is bound to pass or serve on taxpayer an order within 45 days of the receipt of a refund application.
The CBR has further directed the income tax officials that the tax verification process should be completed within 30 days of the receipt of refund application.
However, the refund rejection order would not be passed merely for want of tax verification where the original challan of tax or evidence of tax deducted/collected has been furnished by the taxpayer.
In such cases, order shall be passed within the stipulated period, even if the tax verification process has not been completed.
However, tax verification process shall be completed expeditiously so that refund is issued within three months to avoid statutory payment of compensation under section 171 for the delayed refund.
The text of the Income Tax Circular 5 of 2003 issued here on Wednesday:
The concept of Universal Self-Assessment is embodied in section 120 of the Income Tax Ordinance, 2001. Accordingly, all returns of income, other than the revised returns under sub-section (6) of section 114, filed for the tax year 2003 onwards shall be returns of Universal Self-Assessment. In view of clause (b) of section 120, a return qualifying for acceptance under Universal Self-Assessment shall be deemed to be the assessment order made and issued by the Commissioner on the date the return was furnished.
2. REFUND APPLICATION. A taxpayer is entitled to a refund of tax under sub-section (1) of section 170 where the tax paid is in excess of the amount of tax that is properly chargeable. In order to claim refund of the excess tax, the taxpayer is required, under sub-section (2) of section 170, to file a refund application in the prescribed form and verified in the prescribed manner (Annex).
3. ADJUSTMENT OF REFUND. In accordance with the provisions of sub-section (3) of section 170, the Commissioner, on being satisfied that the tax has been overpaid, shall apply the excess:
(i) in reduction of any other tax due from the taxpayer under this Ordinance;
(ii) in reduction of any outstanding liability of the taxpayer to pay other taxes; and
(iii) the remainder of the excess tax, if any, shall be the amount refundable.
4. LIMITATION OF REFUND ORDER. As provided in sub-section (4) of section 170, the Commissioner shall, within forty five days of the receipt of a refund application, pass and serve on the taxpayer an order in writing of the decision.
5. ISSUANCE OF REFUND. The Commissioner shall issue the refund voucher within three months from the date the refund order is made. Otherwise, the taxpayer shall be eligible under section 171 for a further amount of compensation which must be avoided under all circumstances.
6. DUE DATE OF REFUND. According to sub-section (2) of section 171, a refund shall be treated as having become due:
(i) on the date when the Commissioner receives an order passed by the Commissioner (Appeals), the Appellate Tribunal, the High Court or the Supreme Court;
(ii) on the date the Commissioner makes an order of revision under section 122A; and
(iii) in any other case, the date on which refund order is made by the Commissioner under sub-section (4) of section 170.
7. PROCESSING OF REFUND APPLICATIONS. The following procedure shall be followed where refund applications are received :
(i) All refund applications shall be entered in the prescribed Refund Register.
(ii) All returns of taxpayers claiming refunds shall be examined immediately to verify the correctness of income and tax computation.
(iii) Simultaneously, the process of verification of tax paid shall be initiated as follows:
(a) In case of a single challan of tax or an identifiable multiple challan of tax, verification shall be made from the DPC, DPU or the Treasury.
(b) In case of an unidentifiable multiple challan of tax or payment of tax through book adjustment, the prescribed certificate of tax deduction/collection shall be relied upon after necessary verification from the issuing office.
(c) The tax verification process shall ordinarily be completed within thirty days of the receipt of refund application.
(iv) The refund rejection order shall not be passed merely for want of tax verification where the original challan of tax or evidence of tax deducted/collected has been furnished by the taxpayer. In such cases, order shall be passed within the stipulated period even if the tax verification process has not been completed. However, tax verification process shall be completed expeditiously so that refund is issued within three months to avoid statutory payment of compensation under section 171 for the delayed refund.
(v) The Commissioner shall accordingly pass the necessary refund order and serve it on the taxpayer within forty five days from the date of receipt of refund application.
(vi) Refund voucher shall preferably be issued along with the refund order where verification of tax has already been completed. In case of pending verification, refund voucher shall be issued within three months from the date the refund order is made.
(vii) Refund orders and refund vouchers may be delivered to the taxpayers by registered post or courier service.
(Nadir Mumtaz Warraich)
Secretary (Revenue Budget)
PART VI OF THE FIRST SCHEDULE
GOVERNMENT OF PAKISTAN
DEPARTMENT OF INCOME TAX
Office of the ______________
(See Rule 71)
Prescribed application for refund of tax.- An application for refund of tax under section 170 shall be made in the following form, namely: –
I, ____________________________________________________ of_________________________________________ hereby declare
(a) that my total income computed in accordance with the provisions of Income Tax Ordinance, 2001 (XLIV of 2001), during the year ending on _____ being the income year for the assessment for the year ending on the _______ amounted to Rs. ________.
(b) that the total tax chargeable in respect of such total income is Rs. _____.
(c) that the total amount of tax paid is Rs.__________.
I, therefore, request that a refund of Rs._________ may be allowed to me.
I hereby declare that I am resident/non-resident* and that what is in this application is correct.
Date __________ Signature _____________