KARACHI: In an interesting case an account holder suffered deduction of withholding tax at a higher rate on banking transactions despite the account holder’s name was on the Active Taxpayers List (ATL).
According to a case study, a complainant lodged a complaint before the Banking Mohtasib Pakistan that the concerned bank had deducted withholding tax on the transactions while treating the account holder as non-file despite the fact the name was on the ATL.
The case study revealed the complainant stated that he was maintaining a current account in his company’s name with a bank and was also a filer having registered tax payer status which also appeared in Active Taxpayer List (ATL) issued by Federal Board of Revenue (FBR).
On January 23, 2019, the Bank’s branch deducted a sum of Rs 600/- from the Company’s account treating the Complainant as a Non-Filer to which he protested.
The branch after completion of certain procedural formalities confirmed that henceforward no withholding tax on cash withdrawals will be recovered as the account status was of a filer, but to his surprise the bank continued recovering withholding tax and each time he was asked to furnish some more documents which he did accordingly, but to no avail.
Upon reconciliation of his account, he found that the branch has recovered around Rs 293,000/- from the account since January 2019 towards tax deduction.
On raising the issue, the branch verbally advised him to file income tax refund application with FBR which he found unjust because the branch had illegally recovered WHT from his account and did not rectify its own mistake despite notice since January 2019.
He demanded that the bank should reverse the withholding tax and flag his account as a filer so that such a lapse did not recur.
The bank did not pay any heed to his request. Therefore, he approached the office of Banking Mohtasib for redressal of this complaint.
On Banking Mohtasib Pakistan query, the Bank informed that the said account was opened in November 2018 and the complainant approached the branch in September 2019 for marking of tax exemption on his account, provided NTN Certificate which was sent to the Bank’s central processing unit (CPU) for necessary updating in system, but the same was returned by CPU with the reason “Updated NTN Certificate is required”.
The branch approached him and he confirmed that the provided certificate was the only updated one and no other certificate was available with him. The branch also checked the stated NTN number on the Bank’s Online Tax Verification Portal that gave NIL report apparently confirming that given certificate was not correct and updated one.
Upon subsequent request by the branch, on a hit and trial error method basis started adding 0 to 9 in start and end of provided NTN number and checked each Online Tax Verification Portal.
On query, the branch came to know that one digit (6) was missing on NTN Certificate and was added in writing by hand which is evident from attached certificate and finally account was marked Filer in October 2019.
Since the deducted tax was already deposited in Government Treasury within 7 days after deduction and cannot be refunded, therefore, he was requested to obtain Tax Deduction Certificate from the Bank and claim advance tax deduction in his Tax Return of 2018-2019 or may lodge his tax refund claim with FBR on the basis of Tax Deduction Certificate.
The Bank’s comments were shared with the Complainant who through his Income Tax Consultant stated that the last digit in any NTN number is called Check Digit which is not required to check the NTN details and /or ATL status of any tax payer, which showed that the concerned Bank officers (s) have never bothered to check the ATL status or NTN details of the tax payer.
Upon sharing the above stance of the Complainant, the Bank asserted that the Bank’s internal system does not verify NTN without checking number. In order to ascertain the veracity of both parties’ assertion a demo was arranged in office of Banking Mohtasib Pakistan, visited FBR site for Online Verification System and put Registration No (without check digit) which gave the result that Complainant’s Filing status as “Active”.
This clearly demonstrates that Bank’s misrepresented the facts to Banking Mohtasib which has been viewed very seriously.
The Bank was, therefore, advised to refund or adjust the excess tax deducted from the Complainant’s account and the Bank may obtain the refund of the sum so paid from the FBR with the necessary help and coordination from the Complainant, if desired.
The Bank, however, filed a Representation against the findings of the Banking Mohtasib before the President of Islamic Republic of Pakistan.
