Lt.-Col. (R) NAJAM HAMEED, FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2024 (2002)

(a) Civil Service---

‑‑‑‑Civil servant‑‑‑Charge of corruption‑‑‑Simultaneous initiation of departmental proceedings as well as criminal, proceedings against such civil servant‑‑‑Duty of department‑‑‑Where illegality and irregularity involving corruption are committed by civil servant, which is punishable under law, the department is duty bound to take prompt action for his prosecution, because departmental proceedings is no substitute for criminal proceedings.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S.9‑‑‑Income Tax Ordinance (XXXI of 1979), Ss.66A & 143B‑‑ Removal from Service (Special Powers) Ordinance (XVII of 2000), Ss.5 & 6‑‑‑Maladministration‑‑‑Complainant after filing statement under S.143B and issuance of notice under S.66A of Income Tax Ordinance, 1979 came to know that without his notice and knowledge, fraudulent assessments had been framed, manipulations and forgery had been committed; heavy amounts of refund had been drawn and cheques had been encashed through fictitious Bank account; and that his status had been fraudulently changed from individual to "Association of Persons"‑‑ Complainant in his reply to notice denied all such allegations, over which Department held inquiry and confirmed the fraud, forgery and withdrawal of refund, thus, cancelled the assessment and dismissed the Inspector from service, who fraudulently got encashed the refund and initiated disciplinary proceedings against another Officer under Removal from Service (Special Powers) Ordinance, 2000‑‑‑Department on complainant's suspecting foul-play in other cases probed into the matter and found that assessments had been made without knowledge of complainant‑‑‑Department found involved in the fraud its employees and a Bank‑‑‑Validity‑‑‑Fraud and embezzlement had been committed, in which officers named had been found involved either deliberately or negligently‑‑‑Notice for removal had been issued only in respect of one officer, while no information had been given about other four officers identified in report submitted to Central Board of Revenue‑‑‑Dismissal of one officer did not relate to the present case, but to some other case, which did not mean that he should have been excluded and no action should have been taken against him‑‑‑Department without producing record contended that special power conferred on second officer had been withdrawn and criminal proceedings were in progress, whereas no action in respect of fraud and embezzlement detected in the case had been taken against him‑‑‑Fourth officer had retired; against whom no action had been taken‑‑‑Department seemed to safeguard and protect its employees, although their role had been identified in commission of fraud, forgery arid embezzlement‑‑‑Non‑production of any document to show reference of case to police for investigation was another act of Department to protect its officials involved in the episode‑‑‑Fraudulent withdrawal of fund by identified members of the staff was a crime, but Department seemed to be satisfied with disciplinary action taken against them‑‑‑In case there was illegality and irregularity involving corruption punishable under law, Department was bound to take prompt action for their prosecution‑‑‑Federal Tax Ombudsman recommended to Revenue that assessments with regard to disputed periods be re‑framed within specified time, if any refund was payable., the same would be paid within specified periods, but fraudulent refund made would not affect complainant's right to claim and receive any refund, which might be found due under re‑assessment; that status of assessee be corrected and restored as individual; that Central Board of Revenue was required to lodge report within specified time .against six persons identified in inquiry report and also against persons having received cheques from department and encashed them and Bank involved in opening the account from where cheques had been encashed and Central Board of Revenue was directed to submit report regarding action taken and proceedings initiated against named persons with relevant record within specified time.

Lt.‑Col. (R) Najam Hameed and Lt.‑Col. (R) Shahid Hameed for the Complainant.

Muhammad Aslam Bhatti, I.A.C. and Javed Badar, A.C.I.T. for the Department.

FINDINGS/DECISION

By this complaint grievance has been expressed against the action taken by the department in respect of the following concerns:

1. Concrete Masters.

2. ESS. ESS Associates.

3. Hameed Educational Complex.

4. Hameed Restaurant.

5. Hameed Bar B Q.

2. Except in cases of Concrete Masters and ESS ESS Associates other matters are of minor nature. However each concern will be dealt with separately as follows:‑‑‑

(1) Concrete Masters:

3. It is a proprietary firm owned by Lt.‑Col. (R) Shahid Hameed engaged in consultancy and construction. It executed projects of defence forces payments for which were made after deducting income‑tax at source. For the Assessment Years 1996‑97, 1997‑98 .and 1998‑99 Statement under section 143B of the Ordinance was filed declaring the receipts and tax deduction as follows:‑‑‑

4. The complainant firm was served with a notice under section 66A of the Ordinance dated 11‑6‑2001 calling upon to explain why assessments already framed for assessment years 1996‑97, 1997‑98 and 1998‑99 should not be cancelled being erroneous and prejudicial to the Revenue. Lt.‑Col. Shahid Hamid sought particulars and information from the department. It was revealed that without any notice or knowledge of the complainant fraudulent assessments were framed, manipulations and forgery were committed, heavy amount of refund was drawn and cheques were enchased through a fictitious bank account, It has been pleaded that the status of the firm was fraudulently changed from individual to AOP and fraud has been committed by creating huge demand of refund obtain the cheques which were encashed from an account opened with Habib Bank Ltd. The complainant replied the notice as follows:‑

"1. On the details provided, I have following comments to make:‑‑

(a) I hereby certify that I have never applied for refund from your department.

(b) I never collected or received any cheque from your department as mentioned.

(c) There appears to be certain officials working within the department, who are involved in the misappropriation of Government money.

2. I have another income‑tax account under the name of 'ESS ESS Associates' NTN'03‑23‑3922875. I shall request you to look into subject title to find any misappropriation over the period under review. I have never received any rebate/refund from this account as well.

3. I submit for your information that in the process of this fraud, my record must have been tampered/changed to suit the requirement of fraud for issue of unauthorized refunds.

4. It is forwarded for your information that presently I am located at Rawalpindi in connection with certain defence projects. Due to certain unavoidable commitments, I am not in a position to attend your office on 21st June, 2001. However, I will be present on 25th June, 2001 in accordance with the understanding given to Commissioner of Income‑tax."

5. Besides the proceedings under section 66‑A an inquiry was also held by the department, which confirmed fraud, forgery and withdrawal of total refund of Rs.5,25,928 in respect of assessment years 1996‑97 to 1998‑99. The assessments on the basis of which refunds were fraudulently drawn are disowned by the complainant. In the circumstances the assessments were lawfully cancelled. The claimants want reassessment be made and the original status of individual be restored. In reply the department admitted that refund as alleged were fraudulently got encashed by Mr. Muhammad Sarwar, Inspector who has been dismissed from service. It has further pleaded that disciplinary proceedings against Mr. Amjad Ali Bhatti Special Officer (BPS‑14) has been initiated under the Removal from Service (Special Powers) Ordinance, 2000. In respect of officers of BPS‑16 and above appropriate action is being taken by the CBR. The reply states that "Disciplinary action (at the departmental level) against the culprits namely Mr. Muhammad Sarwar son of Hafiz Muhammad Ibrahim, Inspector has already been completed and he has been dismissed from service, Furthermore, his case has been referred to the Director Economic Crime Wing Federal Investigation Agency, Islamabad for criminal proceedings and necessary action under the law". It has been pleaded that the statement under section 143B filed by the assessee is alleged to be a fictitious document but no evidence of genuine statement under section 143B has been produced but these aspects can be investigated in case complainant furnishes proof of filing genuine return/statement.

(2) ESS ESS Associates:

6. It is a proprietary concern engaged in construction and consultancy executing work for defence forces. It filed statement under section 143B of the Ordinance. On receiving the information about fraud and embezzlement in the case of Concrete Masters Lt.‑Col (R) Shahid Hameed suspecting foulplay approached the Department to look into the accounts of ESS ESS Associates. On, examination embezzlement of Rs.18,30,677 was detected. .It is alleged that most of the pertinent records were missing or replaced to suit the embezzlement. Claimant's request for copy of documents was refused. On complainant's insistence to probe further in the fraud the ‑proprietor was pressurised not to pursue the case. After two months on 17‑8‑2001 the fictitious and fraudulent assessments for the years 1996‑97, 1997‑98 and 1998‑99, which were employed for obtaining refund fraudulently, were cancelled and notice dated 11‑11‑2001 was issued to appear with records. As. bank was also involved in the fraud a complaint was made to F.I.A. ‑A departmental inquiry was made by Mr. Iftekhar Ahmed Lali, Special Officer, which reported embezzlement and withdrawal of total refund of Rs.23,56,695. The name of the officers involved in granting the, refund and countersigning the refund vouchers were identified as follows:‑‑‑

(1) Sahibzada Siar Ahmad, ACIT.

(2) Mian Irshad Ahmed, IAC.

(3) Mr. Amjad Ali Bhatti, S.O.

(4) Mr. Abdul Ghani Ch., IAC.

(5) Mr. Noor Ahmed Khalid, ACIT.

The department has admitted fraudulent withdrawal of refund and pleaded the same facts as stated earlier in the case of Concrete Masters.

7. In this case it is confirmed that the assessments were made without the knowledge of the complainant. It has been alleged that, after the decision of Lahore High Court in Writ Petition No.540 of 1996 the complainant claimed refund but Mr. Noor Ahmed Khalid, ACIT asked to get it adjusted and no refund could be made. It has been pointed out that by that time the money had been embezzled which would have been in the knowledge of Mr. Noor Ahmed Khalid. The representative for the Department Mr. Muhammad Aslam Bhatti informed that report regarding embezzlement and fraud has been referred to C.B.R., which has forwarded it to its Inquiry Wing for investigation. He has submitted a notice issued by the Secretary, Revenue Division/Chairman, C.B.R. dated 4‑2‑2002 issued to Mr. Abdul Ghani Chaudhry, Appellate Additional Commissioner of Income Tax furnishing allegations against him and requiring investigation to be made under sections 5 to 8 of Removal from Service (Special Powers) Ordinance, 2000, appointing Hafiz Muhammad Anis, Director (Enquiries) Enquiry Wing, C.B.R. to conduct the inquiry. The inquiry was required to be completed within 25 days of the initiation of inquiry but the learned representative was not aware whether any inquiry has been initiated or completed.

8. From the above narration of facts which seems to be undisputed it is clear that fraud and embezzlement has been committed in which officers named above seem to be involved either deliberately or negligently. It is, therefore, amazing, to note that notice for removal has been issued only in respect of one officer and no information has been conveyed during the proceedings before me about other four officers whose names were identified in the report submitted to the C. B. R. Mr. Muhammad Aslam Bhatti stated that Mr. Muhammad Sarwar has been dismissed from service. On query it was revealed that his dismissal did not relate to this matter but to some other case. Dismissal in any other case does not mean that he should have been excluded and no action should have been taken against him. He further stated without producing any record that inquiry has been instituted by C.B.R. Enquiry Wing against Sahibzada Siar, ACIT. Mr. Amjad Ali Bhatti the Special Officer has been reverted as Inspector, Special Power conferred on him has been withdrawn and disciplinary proceedings are in progress. It seems no action has been taken against him in respect of fraud and embezzlement detected in this case discussed hereinabove. Mian Irshaa Ahmed, IAC has retired in the year 2000 against whom no action seems to have been taken. The entire episode is clouded by the fact that the department seems to safeguard and protect its employees although their role was identified in commission of fraud, forgery and embezzlement. It is note‑worthy that the. department in respect of criminal act of such a nature has not produced any document to show that the case has been referred to the Police for investigation. This is another act to protect its officials though they are alleged to be involved in the episode.

(3) Hameed Educational Complex:

9. The third case relates to Hameed Educational Complex for the assessment year 2000‑2001. In this case notice under section 61 was issued although the return for the assessment year 2000‑2001 was filed under Self‑Assessment Scheme. Lt.‑Col. (R) Shahid Hameed has alleged that notice was issued to harass the complainant and his family members. He has stated that inquiries were made in respect of this case from the Employees' Old‑age Benefits Institution and from the Board of Secondary Education although such inquiries were never made in the case of any other assessee. Department has‑justified its action by stating that they were making inquiry as discrepancy of Rs.807 was detected and the case was excluded from the Self‑Assessment Scheme. Department has assured that they had no intention to harass the complainant and assessment shall be framed fairly according to law. By consent Miss Irum Sarwar shall hear the case and frame the assessment in this case within a period of 30 days.

(4)Hameed Restaurant:

10. With regard to this concern the complainant alleged that notice under section 65 of Income Tax Ordinance was issued merely to harass the complainant's group, which had been pressing for action against the delinquent officers of the department. Mr. Muhammad Aslam Bhatti states that as notice under section 65 was issued without the prior approval of AIC, in terms of the decision and direction of the Federal Tax Ombudsman in another case and the instruction of C.B.R. the same has been withdrawn and there is no grievance in this regard. No further action is needed in respect of this assessee.

(5) Hameed Bar B.Q.

11. In this case the assessment has not been completed. Perhaps due to experience in Concrete Masters and ESS ESS Associates cases .the complainant had become more apprehensive about the action of the department. Both the parties agree that the assessment may be framed in the normal and routine manner by Miss Irum Sarwar in whom the complainant has expressed full confidence.

12. From the departmental investigation it is clear that the identified members of the staff were involved in the fraudulent withdrawal of refund, which is a crime under the laws of Pakistan. The Department seems to be satisfied with the disciplinary action taken against them. Where the illegality and irregularity involving corruption are committee which are punishable under lave, it is the duty of the Department to take prompt action for their prosecution. Departmental proceeding is no substitute for criminal prosecution.

13. In view of the above discussion it is recommended as follows:‑‑‑

(i) Assessments with regard to Concrete Masters for the assessment years 1996‑97, 1997‑98 and 1998‑99 be re‑framed as agreed by the parties. By consent the re‑assessment shall be made by Miss Irum Sarwar in whom the complainant has shown fun confidence. The re‑assessment be completed within one month. If any refund is payable the same shall be paid within 15 days. The fraudulent refund made will not affect the right of the complainant to claim and receive any refund, which may be found due under the reassessment.

(ii) The status of Concrete Masters be corrected and restored as individual.

(iii) With regard to ESS ESS Associates for the assessment years 1994‑95, 1995‑96, 1996‑97, 1997‑98 and 1998‑99 re‑assessment be made by Miss Irum Sarwar as agreed by the parties within one month. If any refund is due the same shall be paid within 15 days thereafter. The fraudulent refund made will not affect the right of the claimant to claim and receive refund which may be found due under the reassessment.

(vi) The C.B.R. to lodge report within 15 days against six persons identified in the inquiry report viz. Sahibzada Siar Ahmed, Mianl Irshad Ahmed, Mr. Amjad Ali Bhatti, Mr. Abdul Ghani Ch. anti Mr. Noor Ahmed Khalid and also against the persons who received cheques from the department and encashed them and the bank which is involved in opening the account from which the cheques were fraudulently encashed.

(vii) C.B.R. to submit report regarding action taken and proceedings initiated against Sahibzada Siar Ahmed, Mian Irshad Ahmed, Mr. Amjad Ali Bhatti, Mr. Abdul Ghani Ch., and Mr. Noor Ahmed Khalid with relevant records within three weeks.

(viii) Compliance with regard to (i) to (vi) be reported within one week of the date indicated therein.

All the files delivered on 13‑2‑2002 and the file of Kamran Sweets have been returned to the departmental representative.

S.A.K./M.A.K./244/FTO Order accordingly.