Sh. SHAN-E-ELAHI VS SECRETARY, REVENUE DIVISION, C.B.R., ISLAMABAD
2002 P T D 1918
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Sh. SHAN‑E‑ELAHI
versus
SECRETARY, REVENUE DIVISION, C.B.R., ISLAMABAD
Complaint No. 1250 of 2001, decided on 27/12/2001.
(a) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S. 2 (3) (i)‑‑‑Maladministration‑‑‑Cognizance‑‑‑Validity‑‑‑Allegation that assessment order and demand notice were not served upon the complainant/assessee carried force as the signature of receipt on the Demand Notice did not tally with the complainant's signature on the Identity Card filed with the complaint‑‑‑Since important documents such as the assessment order, the demand notice the IT‑30 for the previous years were missing from the record and complainant's signatures on the demand notice appeared to be highly doubtful, it was difficult to brush aside the allegation of maladministration in the face of glaring acts of omission and commission which were contrary to law, the rules and office procedure, and was cognizable under S.2(3)(i) of the Federal Tax Ombudsman Ordinance, 2000.
(b) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S.2(3)(i)‑‑‑Maladministration‑‑‑Declaration of sales by assessee 12 times of the capital‑‑‑Validity‑‑‑Declared sales worked out to be 12 times of the capital invested was quite normal and reasonable in retail .business ‑‑‑Assessing Officer, in the present case, instead of showing appreciation, resorted to estimate sales at almost double the declared figure, it was therefore, obvious that the assessments were undoubtedly unreasonable, unjust, perverse, and oppressive, and therefore, attracted the provisions of S.2(3)(i) of the Federal Tax Ombudsman Ordinance, 2000--By act of omission or commission maladministration was established.
(c) Interpretation of statutes‑‑‑
‑‑‑‑Intention of Legislature‑‑‑Statute to be expounded according to the intention of the Legislature or authority which made it.
(d) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑Preamble‑‑‑Object and nature of the Ordinance‑‑‑Object of establishment of the office of the Federal Tax Ombudsman Ordinance is to eradicate maladministration and. grant relief to the aggrieved parties‑‑‑Ordinance is in the nature of a welfare legislation introducing accountability in tax administration for achieving good governance, healthy tax culture and providing clean and friendly atmosphere which may restore trust of taxpayers and confidence of investors, thereby increasing the Revenue‑‑‑Federal Tax Ombudsman has to diagnose, investigate, redress and rectify any injustice done to a person through maladministration by functionaries administering tax laws.
(e) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S.2(3)‑‑‑Maladministration‑‑‑Definition‑‑‑Scope‑‑‑Jurisdiction of the Federal Tax Ombudsman' extends to all acts of maladministration as defined in S.2(3) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000‑‑‑Definition of maladministration is wide and inclusive in nature and includes decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory or is based on irrelevant grounds or involves exercise of powers or refusal to do so for corrupt or improper motives such as bribery, jobbery, favouritism, nepotism and administrative excess ‑‑‑Maladministration also includes neglect, inattention, delay, incompetence, inefficiency and inaptitude in the administration or discharge of duties and responsibilities‑‑‑Wilful error in determination of refund, rebate or duty draw back, deliberate withholding or non‑payment of determined refund, rebate or duty drawbacks, coercive method of recovery where default is not apparent on record and avoidance of disciplinary action in certain circumstances had been termed as maladministration, therefore, whenever on complaint or suo Motu or on reference after investigation it is found that maladministration had been committed, the Federal Tax Ombudsman had the jurisdiction to intervene.
(f) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S. 9 (2) (a)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Scope‑‑‑Bar on jurisdiction ‑‑‑Applicability‑‑?Section 9(2)(a) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 provided that matters which were sub judice before a Court of competent jurisdiction or Tribunal or Board or Authority on the date of the receipt of a complaint or motion, the Federal Tax Ombudsman would have no jurisdiction to investigate or inquire into the matter‑‑‑Bar would apply where any complaint was received during the pendency of any matter‑‑‑If, however, the complaint motion or reference had been reviewed in the Federal Tax Ombudsman Secretariat before the same matter became subject‑matter of any proceeding in a competent forum, the bar would not apply‑‑‑Even in matters which were sub judice prior ,to filing of complaint, if any allegation of maladministration had been made independent of the issues raised in the pending matter, then the Federal ‑Tax Ombudsman would have jurisdiction to investigate or inquire into such allegations.
(g) Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑‑
‑‑‑‑S.9(2)(b)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Scope‑‑‑Not wide and literal‑‑‑By considering the object of the Office of Establishment of Federal Tax Ombudsman Ordinance, 2000 and its historical background, the provisions of S.9(2)(b) could not be given wide and literal meaning as it will not only frustrate the very object of the Ordinance but will result in contradiction as it could never have been the intention of the Legislature to create an institution with the object to eradicate maladministration and yet to deny the jurisdiction for investigation and granting relief under the Ordinance.
(h) Interpretation of statutes‑‑‑
‑‑‑‑Principles‑‑‑Plain, literal and grammatical construction is applied subject to the. qualification that the language is to be subordinate or is given a restricted meaning when it is opposed to the object or scheme of the statute or may lead to illogical, absurd or unconstitutional result‑‑?Where the Legislature taking notice of a particular situation enacts a law to provide relief, then the legislative intent must be given effect to and cannot be ignored‑‑‑For determining the intention of the Legislature one has to look to the preamble and if necessary to the history of the legislation.
(i) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss.129 & 138‑‑‑Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)(b)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Department pleaded that assessments in question were appealable under S.129 of the Income Tax Ordinance, 1979 and the complainant/assessee was entitled, to file revision petition also under S.138 of the Income Tax Ordinance, 1979, therefore, the complaint fell outside the jurisdiction of the Federal Tax Ombudsman as provided by S.9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Validity‑‑‑In cases where allegations of maladministration had been made the Federal Tax Ombudsman will have jurisdiction to investigate‑‑‑Bar to the jurisdiction in respect of investigation in assessment of income or wealth, determination of, liability of tax or duty, classification or valuation of goods, interpretation of, law, rules, regulation relating to such assessment, determination, classification or valuation in respect of which remedies specified were available but there was no bar against investigation in respect of allegations of maladministration which were completely independent of the specified proceedings.
(j) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss.138 & 62‑‑‑Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Non‑service of assessment order‑‑‑Loss, of assessment order, IT‑30s and Demand Notice ‑‑‑Maladministration‑‑‑Assessee alleged that the assessments under S.62 for the years 1999‑2000 and 2000‑2001 were based on preceding assessments for the years 1997‑98 and 1998‑99 and assessment orders for those years were never served on him‑‑‑Documents regarding assessments for the years 1995‑96 to 1997‑98 made ex paste were also not available on Department's record‑‑‑Validity‑‑‑Federal Tax Ombudsman recommended that: the Commissioner of Income‑tax to invoke suo motu provisions of 5.138 of the Income Tax Ordinance, 1979 for the years 1997‑98 to 2000‑01 and pass order to meet the ends of justice and that inquiry be initiated and responsibility 'be fixed for the loss of assessment orders, IT‑30s and the Demand Notice for the years 1995‑96 to 1997‑98 from the file.
Nemo for the Complainant.
Ahmad Ali, D.C.I.T. and. Anwarul Haq, Special Officer for Respondent.
DECISION/FINDINGS
The complainant carries on business in a rented shop selling shoes and does not own any immovable property. It has been alleged by the Complaint that for the years 1999‑2000 and 2000‑2001 assessments have been made at Rs.75,000 and Rs.85,000 respectively. These assessments have been based on the preceding assessments for the years 199798 and 1998‑99, yet the assessment orders for those years were never served on him hence maladministration.
2. The complainant was not present when called out far hearing despite proper service of summon. For the respondent Mr. Ahmad Ali, D‑CIT and Mr. Anwar‑ul‑Haq, Special Officer. Circle 19, Kasur appeared with relevant record.
3. The respondent in his reply vide No.RCIT/J‑85/TO/SO‑1/2077, dated 12‑10‑2001 has taken the stand that since the assessments in question are appealable under section 129 of the Income Tax Ordinance, 1979 and the complainant is entitled to file revision petition also under section 138, therefore, the complaint falls outside the jurisdiction of the Federal Tax Ombudsman as provided by section 9(2)(b) of the E.O.F.T.O. Ordinance, 2000. It has been pleaded that assessments under section 62 were framed after providing opportunity of being heard and the complainant having failed to furnish evidence in support of the turnover declared at Rs.360,000, the sales were estimated at Rs.700,000 for the year 1999‑2000 and at Rs.727,000 for the year 2000‑01. It is further stated by the respondent that the assessment order for the year 1998‑99 was served on the complainant on 17‑12‑1999. Para. 3 of the reply further submits:
"There is no bar on the assessee for filing an appeal against the assessment for the years 1997‑98 and 1998‑99, as assessment orders had already been served upon the assessee, as mentioned in para. 2."
4. The assessment records produced by the respondent were perused. These revealed that neither assessment order for the year 1997‑98 nor the Demand Notice and the IT‑30 are available on record. Order sheet entry on 30‑4‑1998, however, shows that the assessments for the years 1995‑96 to 1997‑98 made ex parte under section 63 of tile Income Tax Ordinance, were entered in D.C.R. at Serial Nos.4544 to 4546 of which Demand Notices were served by affixture on 3‑6‑1998. Surprisingly, none of these documents are available on record. The signatures (in English) of receipt on the Demand Notice for the year 1998‑99, statedly served on 17‑12‑1999, do not tally with the complainant's signature on the Identity Card filed with the complaint. The complainant's contention that the assessment order and Demand Notice for the years 1997‑9.8 and 1998‑99 were not served upon him, therefore, carries force. Since: (a) important documents such as the assessment order, the Demand Notice, the IT‑30 for the years 1995‑96 to 1997‑98 are missing from the record, and (b) the complainant's signatures, dated 17‑12‑1999 on the Demand Notice for the year 1998‑99 appear to be highly doubtful, it is difficult to brush aside the allegation of maladministration in the face of 'glaring acts of omission and commission which are contrary to law, the rules and office procedure. These are cognizable under section 2(3)(i) of the F.T.O. Ordinance. Moreover, it is prima facie a case of real hardship. In the consolidated assessment for the years 1999‑2000 and 2000‑01 the Assessing Officer. has specifically mentioned that the assessee admitted, in the wealth statement, business capital at Rs.30,000 and that sales were declared at Rs.360,000. These figures have not been disputed nor there is any insinuation about the capital‑in‑business being understated. Taking this figure of capital as bench‑mark the declared sales work out to 12 times .of the capital invested which is quite normal and reasonable in retail business. Instead of showing appreciation, the Assessing Officer resorted to estimate sales at almost double the declared figure, It is, therefore, obvious that the assessments were undoubtedly, unreasonable, unjust, perverse and oppressive and, therefore, attract the provisions of section 2(3) (i) of Ombudsman Ordinance, 2000. By act of omission or commission maladministration is established.
5. The question of Jurisdiction of the Federal Tax , ombudsman (F.T.O.) revolves round the provisions of section 9 of the Establishment of the Office of Federal Tax Ombudsman Ordinance (E.O.F.T.O. Ordinance) which reads as follows:
9. Jurisdiction, functions and powers of the Federal Tax Ombudsman.‑‑‑(1) Subject to subsection (2), the Federal Tax Ombudsman may on a complaint by any aggrieved person, or oh reference by the President, the Senate or the National Assembly, as the case may be or on a motion of the Supreme Court or a High Court made during the course of any proceedings before it or of his own motion, investigate any allegation of maladministration on the part of the Revenue Division or any Tax Employee.
(2) The Federal Tax Ombudsman shall not have jurisdiction to investigate or inquire into matters which‑‑‑
(a) are sub judice before a Court of competent jurisdiction or Tribunal or board or authority on the date of the receipt of a complaint, reference or motion by him; or
(b) relate to assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods, interpretation of law, rules and regulations relating to such assessment, determination, classification or valuation in respect of which legal remedies of appeal, review or revision are available under the relevant Legislation.
(3) Notwithstanding anything contained in subsection (1) the Federal Tax Ombudsman shall not accept for investigation any. complaint by or on behalf of a Tax Employee concerning matters relating to the Revenue Division in respect of any personal grievance relating to his service.
(4) For carrying out the objectives of this Ordinance and, in particular for ascertaining the causes of corrupt practices and injustice, the Federal Tax Ombudsman may arrange for studies to be made or research to be conducted and may recommend appropriate steps for their eradication.
(5) The Federal Tax Ombudsman may set up regional offices as when and where required.
6. Before embarking upon the analysis, meaning and applicability of section 9 it will be appropriate to take into consideration the principles governing this exercise. The cardinal principle of construction and interpretation of a statute is that it is expounded according to the C intention of the Legislature or authority which made it. The object of E. O. F. T. O. Ordinance is to eradicate maladministration and grant relief to the aggrieved parties. It is in the nature of a welfare legislation introducing accountability in tax administration for achieving good governance, healthy tax culture and providing clean and friendly D atmosphere which may restore. trust of taxpayers and confidence of investors, 'thereby increasing the Revenue. The F.T.O. has to diagnose, investigate redress and rectify and injustice done to a person through maladministration by functionaries administering tax laws. While examining the question of jurisdiction the definition of maladministration as provided by subsection (3) of section 2 of E.O.F.T.O. Ordinance must be kept in view as it is the centre point for exercise of jurisdiction.
7. The jurisdiction of the Federal Tax Ombudsman extends to all acts of maladministration as defined in subsection (3) of section 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. The definition is wide and inclusive in nature. It includes decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory or is based on irrelevant grounds or involves exercise of powers or refusal to do so for corrupt or improper motives such as bribery, jobbery, favoritism, nepotism and administrative excesses. It also includes neglect, inattention, delay, incompetence, inefficiency and ineptitude, in the administration or discharge of duties and responsibilities. Further, willful error in determination of refund, rebate or duty drawback, deliberate withholding or non‑payment of determined refund, rebate or duty drawbacks, coercive method of recovery where default is not apparent on record and avoidance of disciplinary action in certain circumstances have been termed as maladministration. Therefore, whenever on complaint or suo motu or on reference after investigation it is found that maladministration has been committed, the Federal Tax Ombudsman has the jurisdiction to intervene.
8. According to subsection (2)(a) of section 9 matters which are sub judice before a Court of competent jurisdiction or tribunal or board or authority on the date of the receipt of a complaint or motion, the F.T.O. will have no jurisdiction to investigate or inquire into the matter. It is clear that the bar will apply where any complaint is received during the pendency of any matter. But if the complaint, motion or reference F has been reviewed in the F.T.O. Secretariat before the same matter became subject‑matter of any proceeding in a competent forum, the bar .will not apply. It may further be clarified that even in matters which are sub judice prior to filing of complaint, if any allegation of maladministration has been made independent of the issues raised in the pending matter, then the F.T.O. will have jurisdiction to investigate or inquire info such allegations.
9. Subsection (2)(b) of section 9 provides that Federal Tax Ombudsman shall not have jurisdiction to investigate or inquire into matters which relate to assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods, interpretation of law, rules and regulations relating so such assessment, determination, classification or valuation in respect of which legal remedies of appeal, review or revision are available under the relevant legislation. The law is limited to the relevant legislation as defined in subsection (6) of section 2 of the Ordinance. The objection of the Department is that as in the present case the remedy of appeal has been provided and the matter relates to the assessment the complaint cannot be entertained and is outside the jurisdiction, it should be borne in mind that the Ordinance has been promulgated for the benefit of the assessee/public and to eradicate evils created by acts of maladministration. The Ordinance is in the nature of welfare legislation intended to provide relief and to do justice according to law. There would hardly be any effective proceedings affecting assessee's interest under the Income Tax Ordinance, Customs Act and Sales Tax Act for which remedies of appeal or revision and review have not been provided. If the contention of the Department is accepted then jurisdiction cannot be exercised by the Federal Tax Ombudsman in any matter. Such interpretation will frustrate the object and intention of the law‑makers. Such meaning leads to absurdity and makes the appointment of Federal Tax Ombudsman completely nugatory. Can it be the intention of the Legislature to create an office with a particular object and do not vest any power or jurisdiction to perform the duties prescribed by the Ordinance or restrict it to make it non‑existent. In the face of such complex situation, the real meaning in consonance with the intention of the law‑maker has to be found out.
10. Considering the object of the Office of Establishment of Federal I Tax Ombudsman Ordinance, 2000 and its historical background, the provisions of section 9(2)(b) cannot be given wide and literal meaning as it will not only frustrate the very object of the Ordinance but will result 'in contradiction. It could never have been the intention of the Legislature to create an institution with the object to eradicate maladministration and yet to deny the jurisdiction for investigation and granting relief under the Ordinance. It is a settled rule of interpretation that the plain, literal and grammatical construction is applied subject to the qualification that the language is to be subordinate or is given a restricted meaning when it is opposed to the object or scheme of the statute or may lead to illogical absurd or unconstitutional result. Where the Legislature taking notice of a particular situation enacts a law to provide relief, then the legislative intent must be given effect to and cannot be ignored. For determining the intention of the Legislature one has to look to the preamble and if necessary to the history of the legislation.
11. According to Maxwell "There are certain objects which the Legislature is presumed not to intend, and a construction which would lead to any of them is, therefore, to be avoided. It is not infrequently necessary, therefore, to limit the effect of the words contained in an enactment (specially general words) and some times to depart not only from their primary and literal meaning but also from the rules of grammatical construction in cases where it seems highly improbable that the primary or grammatical meaning actually express the real intention of the Legislature it is regarded as more reasonable to hold that Legislature expressed its intention in a slovenly manner than that a meaning should be given to them which could not have been intended".
12. Now reverting to the language of subsection 2(b) of section 9 it seems apparent that a literal construction offends the intention and object of the Legislation, "involves injustice, oppression or absurdity or leads to unreasonable result plainly at variance with the policy of a statute as a whole". In this situation a harmonious construction should be adopted keeping in view the intention of the Legislature, the language of the statute with its context and to avoid conflict absurdity and injustice. In view, of this analysis, in cases where allegations of maladministration have been made the Federal Tax Ombudsman will have jurisdiction to investigate. The bar is in respect of investigation in assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods, interpretation of law, rules, regulation relating to such assessment, determination, classification or valuation in respect of which remedies specified are available but there is no bar against Investigation in respect of allegations of maladministration which are completely, independent of the specified proceedings.
13. It is recommended that;
(i) That the CIT Zone‑B, Lahore invoke sue motu provisions of section 138 of the Income Tax Ordinance, 1979 for the years 1997‑98 to 2000‑01 and pass order to meet the ends of justice.
(ii) Inquiry be initiated and responsibility be fixed for the loss of assessment orders, IT‑30s and the Demand Notice for the years ` 1995‑96 to 1997‑98 from the file.
Compliance report be submitted on or before 31‑1‑2002.
C.M.A./M.A.K./256/FTO ?????
Order accordingly.