ATTIQ-UR-REHMAN VS SECRETARY, REVENUE DIVISION, C.B.R., ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2436 (2002)

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.3, 4(3) & 16(5)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 2(3)‑‑‑Charge of wealth tax‑‑‑Net wealth to include certain assets‑‑‑Ex parte assessment‑‑ Bald lump sum estimation of value of movable assets‑‑‑Validity‑‑‑Was not clear as to what kind and what quantity of "movable assets" were the subject‑matter of estimate‑‑‑Ex parte assessment though entailed an element of guess‑work, still it was mandatory to make a "best judgment" and an honest estimate of the value of each asset and each item claimed as liability, and as close to the real value as possible‑‑‑Caution had to be exercised to be fair and just, warding off even a remote possibility of arbitrariness or illegality ‑‑‑Legal infirmities which beset the assessment rendering them "arbitrary unreasonable, and unjust" amounted to maladministration‑assessment orders thus were illegal and arbitrary and consequently were of no legal effect‑‑‑To meet out substantial justice by removing oppressiveness in the dispensation of justice, Federal Tax Ombudsman recommended that the Assessment orders being illegal and of no legal effect, Wealth Tax Officer was to reassess/re‑compute the value of each movable asset after evaluating the explanation offered and evidence tendered by assessee for which fresh opportunity was to be provided.

In re: Sakhi Contractors & Engineers, Multan 1981 PTD 210 ref.

Complaint No. 1250 of 2001 rel.

Zahid Pervez for the Complainant.

Ghulam Rasool, D.C.I.T. for Respondent.

DECISION/FINDINGS

The facts in brief are that the complainant had not filed Wealth Tax returns for the Assessment Years 1993‑94 and 1994‑95. Consequently, notices issued calling for returns remained uncomplied resulting in ex parte assessment under section 16(5) of the Wealth Tax Act. These were confirmed by the First Appellate Authority to the extent of 'immovable assets but for redetermination of the value of movable assets, the assessments were set aside. The Department went in appeal but this dispensation was maintained by the Appellate Tribunal. In the second round, for determining value of movable assets, the default once again of statutory notices resulted in ex parte assessment under section 16(5) of the Wealth Tax Act which has since been upheld by the First Appellate Authority. It has been alleged that the learned CIT(A) has rejected the appeals. without discussing the grounds of appeals and value of movable assets has been assessed without any material evidence.

2. The respondent has raised the issue of jurisdiction. On this issue the 'learned counsel referred to the preamble to the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 and definition of 'maladministration' as per subsection (3) of section 2 and contended that the assessment orders were arbitrary, unreasonable, unjust and biased. In these assessments, the learned counsel went on, the W.T.O. proceeded to determine the value of movable assets as ordered by the Appellate Tribunal vide W.T.As. Nos.774 and 774‑A/LB of 1998, dated 2‑2‑1999 and (after some adjournments) fixed the hearing for 27‑5‑1999 on which date application seeking adjournment for a fortnight was moved but without communicating the fate of this application, the Assessing Officer completed the assessment on 12‑6‑1999 of which the complainant had no notice. For this assertion reliance was placed on a Lahore High Court decision reported as 1981 PTD 210 in re: Sakhi Contractors & Engineers, Multan. He referred to section 3 of the Wealth Tax Act and subsection (3) of section 4 of the same Act to canvass that assessment was to be made on "net wealth" which could not be determined unless the positive or negative impact of movable assets was determined to be clubbed with the value determined for immovable assets. Since the value of movable assets was estimated in an ex parte assessment arbitrariness was, according to him, imminent. The Department's Representative on his turn produced order sheet entries to show that on 27‑5‑1999 when adjournment was requested, it was specifically noted on the body of the application that the case was to be heard on 12‑6‑1999 and the person presenting the application had full knowledge of this date. Therefore, absence on a date for which the case was adjourned at the request of the complainant resulted in ex parte action, a fact which it was too late in the day to contest now. The Department's Representatives once again referred to the observation in the respondent's reply about lack of jurisdiction by the Federal Tax Ombudsman.

3. Having considered the arguments of the parties it need not take long to overrule Department's objection as respects jurisdiction because a conclusive verdict on this issue has already been pronounced on Complaint No.1250 of 2001, decided on 27‑12‑2001 where after an exhaustive analysis, of section 9 of the Federal Tax Ombudsman Ordinance, it was held:

"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. 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...

Considering the object of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 and its historical back ground, 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 ..

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 4he 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."

4. Reverting back to the main issue, it is noticed that the finding by the Appellate Tribunal in its order, dated 2‑2‑1999 vide W.T.As. Nos.774 and 774‑A/LB of 1998 for the years 1993‑94 and 1994‑95 was to the effect that the assessment orders were remanded back to the Assessing Officer for reconsideration, after proper opportunity, of the issue concerning "movable assets". It is not in dispute that the reassessments were ex parte due to non‑compliance of the statutory notices, still, at an earlier stage of the proceedings, the A.R. of the Complainant/Assessee had submitted explanation, vide letter, dated 27‑5‑1999 which the Assessing Officer considered "not plausible". Moreover, the Assessing Officer specifically mentioned about "failure to make proper compliance of statutory 'notice", which implies that some explanation and details, however, scanty, were indeed furnished. However, in the reassessment the Assessing Officer repeated the bald lump sum estimate of the value of movable assets at Rs.1.6 million in 1993‑94 and 1.65 million in 1994‑95. It is thus not clear what kind and what quantity of "movable assets" were the subject‑matter of estimate. There is no dearth of case‑law and rulings to the effect that the valuation should be made separately of each asset owned by an assessee. Although an ex parte assessment entails an element to guess‑work, still it is mandatory to make a "best judgment" and an honest estimate of the value of each asset and each item claimed as liability, as close to the real value as possible. Caution has to be exercised to be fair and just, warding off even a remote possibility of arbitrations or illegality. The assessments as framed are deficient on these principles laid down by Superior Courts. In the face of a remand order the learned Commissioner ought to have been more careful in observing and following the directives contained in the said order.

5. In view of the legal infirmities which beset the assessments rendering these "arbitrary, unreasonable, and unjust" which amounts to maladministration. The impugned assessment orders are thus illegal and arbitrary and, consequently are of no legal effect. To meet out substantial justice by removing oppressiveness in the dispensation, it is recommended that‑‑‑

(i) The Assessment Orders being illegal and of no legal effect the W.T.O. to reassess/re‑compute the value of the each movable asset after evaluating the explanation offered and evidence tendered, for which fresh opportunity be provided.

(ii) Compliance report be submitted to this Secretariat within 45 days of the receipt of this order.

C.M.A./M.A.K./333/FTO

Order accordingly.