Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.12(9A)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Deemed income‑‑‑Assessment year 1999‑1000‑‑‑Unappropriated profits for the preceding years‑‑ Assessee/company sustained losses for the assessment year 1999‑2000‑‑ Assessing Officer intended to assess the balance un-appropriated profits‑‑ Assessee contended that the provisions of S.12(9A) of the Income Tax Ordinance, 1979 could be attracted for a specific assessment year only if profit had been earned during the relevant income year, and since the complainant/assessee did not earn any profit during the income year relevant to the assessment year 1999‑2000, tax was not chargeable on such un-appropriated profit‑‑‑Validity‑‑‑Department conceded that the provisions of S.12(9A) of the Income Tax Ordinance, 1979 did not apply in the present case and the Assessing Officer was being directed to drop the proceedings‑‑‑Such directions having not yet reached the Assessing Officer, the Federal Ombudsman recommended that the directions may be conveyed to the Assessing Officer at the earliest who may inform the complainant regarding the dropping of the proposed action under S.12(9A) of the Income Tax Ordinance, 1979.

Nemo for the Complainant.

Khawaja Sardar Ali, DCIT, Circle 2, Company Zone, Peshawar for Respondent.

FINDINGS/DECISION

This is .a complaint by a public limited Company regarding the assessment proceedings in its case relating to the assessment year 1999‑2000. It is stated in the complaint that the company sustained losses of Rs. 5,788,468 for the assessment year 1999‑2000 but there were un-appropriated profits for the preceding years amounting to Rs. 103,148,102 and that the Assessing Officer has expressed the intention of assessing the balance un-appropriated profits under section 12(9A) of the Income Tax Ordinance inserted through Finance Act, 1999. The complaint is rather lengthy but its main point is that the provisions of section 12(9A) can be attracted for a specific assessment year only if profit has began earned during the‑relevant income year. It has been prayed that since the complainant did not earn any profit during the income year relevant to the assessment year 1999‑2000, the respondent may be directed not to charge tax on the complainant's un-appropriated profits for the earlier years.

2. The respondent's reply has been received and the complaint was fixed for hearing on 14‑11‑2001. On 10‑11‑2001 an application was received by post from the Advocate representing the complainant, stating that he was unable to attend the proceedings on the date fixed for hearing due to "professional pre‑occupation" at Muzaffarabad, Azad Jammu and Kashmir where he had to appear in two cases on 14th instant viz. Messrs Al‑Khair Industries Ltd. v. Inspecting Additional Commissioner of Income‑tax and Messrs Mehran Falcon Ltd. v. Inspecting Additional Commissioner of Income‑tax, Mir Pur. It was prayed that‑ the hearing may be adjourned to some other day. An employee of the Advocate attended on 12‑11‑2001 and explained that the Advocate had to appear in the two cases before the Income‑tax Appellate Tribunal, Azad Jammu and Kashmir. Since this was not an adequate reason, for seeking adjournment from this Office the employee was informed that no adjournment was granted. On 14‑11‑2001, however, another person has brought another application for adjournment stating the same facts. The application has not been accepted for the reasons already given. In any case, since the respondent has conceded the point, as indicated in para.3 below, there was even otherwise no reason to prolong the proceedings any further.

3. In the respondent's reply it has been stated that since the complainant had not earned any profit during the income year ending 30‑6‑1999 and had in fact, suffered loss of Rs. 5,788 million, the provisions of section 12(9A) did not apply in its case and. the Assessing Officer was being directed to drop the proceedings.

4. It appeared during the hearing, however, that the directions had not yet reached the Assessing Officer. It is, therefore, recommended that the directions may be conveyed to the Assessing Officer at the earliest who may inform the complainant regarding the dropping of the proposed action under section 12(9A) of the Income Tax Ordinance.

5. Compliance be reported within 15 days.

C.M.A./M.A.K./259/FTO

Order accordingly.