FAQIR MUHAMMAD NASIR, LAKKY MARWAT VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1978 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.85 & 138‑‑‑C.B.R, Circular Letter C. No.7(2)Dt. 14/94, dated 24 1‑1994‑‑Establishment of Office of Federal Tax Ombudsman. Ordinance (XXXV of 2000), Ss. 9. & 2(3)(ii)‑‑‑Demand notice ‑‑‑Assessee had died and assessment of entire property income was made in the hands of one legal heir/complainant and tax was demanded from him ‑‑‑Validity‑‑ Assessment had been framed in a very careless and casual manner‑‑‑Assessment order served on the complainant did not bear any date, while the demand notice was served on the complainant alongwith the assessment orders‑‑‑Recovery notice was served before the service of demand notice‑‑‑Assessment framed foisting the entire liability of the estate of the deceased on the complainant was illegal‑‑‑All the legal heirs of the original assessee should have been brought on record and demand notice under S.85 of the Income Tax Ordinance, 1979 should have been served after completion of assessment proceedings on the heirs before the issuance of the recovery certificate‑‑‑Federal Tax Ombudsman recommended that the Commissioner Income Tax should cancel the illegal assessment creating an illegal demand on the complainant in exercise of powers vested in him under S.138 of the Income Tax Ordinance, 1979; if the limitation period permits, reassessment proceedings should be initiated in accordance with law on all the legal heirs according to their respective shares in inheritance of property and that disciplinary proceedings may be initiated under the Efficiency and Discipline Rules, 1973 against Assessing Officer for his acts of omission and commission who had little regard for the instructions issued by the Central Board of Revenue vide Circular C. No.7(2)(Dt 14/94, dated 24‑1‑1994.

Begum Nusrat Bhutto v. Income‑tax Officer 1981 SCMR 1192 and Syed Ghulam Abbas Shah v. Income‑tax Officer, Mirpur 1985 CLC 1581 rel.

Sher Mast Khan for the Complainant.

Faridullah Jan, D.C.I.T. for Respondent.

DECISION/FINDINGS

This complaint filed by Mr. Faqir Muhammad Nasir of Lakky Marwat City calls in question the manner in which a combined assessment order for the three years 1998‑99 to 2000‑2001 was framed which smacks of neglect, incompetency and inefficiency in the discharge of duties which tantamounts to maladministration as defined under section 2(3)(ii) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (for short, "the Ordinance").

2. Relevant facts leading to the instant complaint are that the complainant is the only son of late Ghulam Haider. His deceased father left behind a widow and four daughters besides the complainant. During his lifetime the deceased gifted seven shops out of .a total of 16 shops built in Ghulam Haider Market situated in Lakky Marwat City. The Inspector of Income Tax conducted an inquiry on 9‑7‑1996, which formed the basis of the assessment, framed by the Assessing Officer.

Instead of allocating the share in the estate of the deceased left by his father he assessed the entire property consisting of 16 shops in the hands of the complainant, creating a demand of Rs.20,930.

3. The department in its reply explained that as per Hibanama the complainant received 8 shops from his father during his lifetime on 17‑12‑1993. During the assessment proceedings the complainant was asked to produce document relating to the legal heirs but he did not comply with the request. According to the inquiry report of the Inspector total number of shops had been admitted at 16 (8 received through Hibanama and other 8 through inheritance in the estate of his late father) out of total number of shops declared at 30. A normal routine notice was issued from the arrear register on 27‑11‑2001, although the assessment order and the demand notice were served on 24‑1.1‑2001. The net total income was worked out at Rs.1,22,880 after allowing a deduction for 115 for repairs.

4. The learned counsel for the complainant submitted that the basis for the combined assessment order was an inquiry conducted by the Inspector of Income Tax on 9‑7‑1996, and assessments for the charge years 1996‑97 and 1997‑98 were made for 8 shops and income determined at Rs.16,450 per year. But the assessments for the three years under complaint i.e. 1998‑99 to 2000‑2001 were made `on the entire estate of the deceased, which consisted of 16 shops. Continuing further, the learned counsel submitted that the Assessing Officer ignored the share of the other legal heirs of the deceased namely Mst. Zohra Bibi widow of the deceased Iqbal Begum, Najam‑un‑Nisa, Shamshad Begum and Shahnaz Begum daughters of the deceased. The demand notice should also have been, served on all the legal heirs alongwith assessments framed on these legal heirs. In this regard the learned counsel relied upon the decision of the Supreme Court of Pakistan in the case of Begum Nusrat Bhutto v. Income Tax Officer reported as 1981 SCMR 1192. According to this decision a legal heir would be liable only to his or her share of the net estate of the deceased. The demand made for the entire liability of the deceased could not be made from one legal heir only. The Supreme Court held that on this ground alone notices are prima facie, illegal. The learned counsel also relied on the decision of the High Court of AJK in the case of Syed Ghulam Abbas Shah v. Income Tax Officer, Mirpur reported as 1985 CLC 1581. In this case the Income‑tax Authorities had proceeded against only one of the legal heir for recovery of tax. It was held that this action was illegal. Besides, the recovery certificate could not be issued without serving demand notice on all the legal heirs.

5. The learned counsel further produced C.B.R. Circular Letter C. No.7(2), Dt. 14/94, dated 24‑1‑1994 whereby dissatisfaction was expressed with the quality of the assessments being made in a slipshod manner. The learned counsel vehemently urged that the proceedings taken against the complainant were arbitrary and illegal and may be declared as such.

6. In. reply, the D.R. submitted that the learned counsel representing the complainant was asked on 14‑3‑2001 to submit death certificate and documents, with regard to the legal heirs of the deceased, and the case was adjourned to 28‑3‑2001, but he did not attend. The department had, therefore, no other choice but to proceed on the basis of record available and framed the assessment on the complainant.

7. After hearing the parties to the dispute and examining the record, it was evident that the then Assessing Officer Mr. Habib ur Rehman Special Officer at the relevant time had framed these assessments in a very careless and casual manner. The assessment order served on the complainant did not bear any date, while the demand notice was served on the complainant on 24‑11‑2001 alongwith the assessment orders. The recovery notice was served before the service of the demand notice. While the assessments for the years 1996‑97 and 1997‑98 were framed on an income of Rs.16,450 per year, the income for the three years under dispute was completed at Rs.1,22,880 per year. The assessments framed foisting the entire liability of the estate of the deceased on the complainant was illegal as correctly pointed out by learned counsel. In fact all the legal heirs of the original assessee Ghulam Haider should have been brought on record and the demand notice under section 85 of the Income Tax Ordinance should have been served after completion of assessment proceedings on the heirs before the issuance of the recovery certificate.

8. For the foregoing reasons, it is recommended that:‑‑‑

(i) The Commissioner Income Tax should cancel the illegal assessments creating an illegal demand on the complainant for the assessment years 1998‑99 to 2000‑2001, in exercise of powers vested in him under section 138 of the Ordinance. However, if the limitation period permits, reassessment proceedings could be initiated in accordance with law on all the legal heirs according to their respective shares in inheritance of property.

(ii) Disciplinary proceedings may be initiated under the Efficiency and Disciplinary Rules, 1973 against Mr. Habib‑ur‑Rehmant Special Officer presently posted as Staff Officer to the Commissioner Income Tax, Peshawar Zone for his acts of omission and commission including inefficiency and showing little regard for the instructions issued by the C.B.R. vide Circular No.7(2) Dt. 14/94, dated 24‑1‑1994.

(iii) Compliance be reported within 60 days.

C.M.A./M.A.K./299/FTO Order accordingly.