Messrs LATIF COTTON MILLS LTD., KARACHI VS SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD, 2002 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2638 (2002)

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑C.B.R.'s Letter C.No.4(6)IT.3/88, dated 17‑2‑1991‑‑‑Rectification of mistake‑‑‑Inordinate delay‑‑‑Maladministration‑‑‑Inordinate delay in passing order under S.156 of the Income Tax Ordinance, 1979 without any justification was certainly unreasonable, unjust and amounted a mal‑administration‑‑ Central Board of Revenue had also been issued instructions from time to time stressing on prompt disposal of rectification.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.156(2)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Rectification of mistake‑‑ Opportunity of being heard‑‑‑Order under S.156 of the Income Tax Ordinance, 1979 rejecting the complainant's request to carry forward the loss without providing an opportunity of being heard to the complainant as provided in S.156(2) of the Income Tax Ordinance, 1979 had no legal sanctity as the complainant had been deprived of its statutory right of being heard and this was a glaring example of maladministration committed by the Assessing Officer.

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

‑‑‑‑Ss.9(2)(b) & 2(3)‑‑‑Income Tax Ordinance (XXXI of 1979), S.156‑‑‑Jurisdiction‑‑‑Maladministration‑‑‑In presence of gross mal administration committed by the Assessing Officer, objection regarding jurisdiction in terms of S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 was not tenable.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.156 & Second Sched., Cl (118D)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑C.B.R.'s Letter C. No.4(6)IT.3/88, dated 17‑2‑1991‑‑‑Rectification of mistake‑ Assessing Officer accepted the claim of exemption under Cl. (118D) of the Second Sched. of the Income Tax Ordinance, 1979 but declared that business loss and unabsorbed depreciation were not carried forward‑ ‑Application to rectify the mistake and carry forward the declared business and depreciation losses‑‑‑Assessing Officer rejected the application and refused to carry forward the determined loss without providing opportunity of being heard‑‑‑Validity‑‑‑Federal Tax Ombudsman recommended that the order passed under S.156 of the income Tax Ordinance, 1979 be cancelled under S.138 of the Income Tax Ordinance, 1979 with the directions to the Assessing Officer to pass a fresh order after providing reasonable opportunity of being heard to the complainant.

Rehan Hasan Naqvi and Ms. Lubna Pervez for the Complainant.

Shaheen Aziz Niazi, IAC, Special Zone and Mrs. Lubna Ayub Asif, DCIT Circle, Special Zone, Karachi for Respondents.

DECISION/FINDINGS

The complainant is a Public Limited Company listed on Stock Exchange and is borne on N.T.No. 14‑02‑0802415. The complainant is engaged in the business of manufacturing of yarn.

2. It is alleged that while completing ,the assessment under section 62 of the Income Tax Ordinance, 1979 for the assessment year 1997‑98 the Assessing Officer accepted the claim of exemption under clause (118‑D) of the Second Schedule of the Income Tax Ordinance,. 1979 but the declared business loss and unabsorbed depreciation of Rs.6,98,12,384 were not carried forwarded to the assessment year 1998‑99.

3. It is further alleged that the complainant requested the Assessing Officer vide letter dated 27‑8‑1999 to rectify the order under section 156 of the Income Tax Ordinance and carry forward loss of Rs.6,98,12,384 to the assessment year 1997‑98. Thereafter, the complainant again addressed a letter on 5‑1‑2001, reminding the Assessing Officer to rectify the mistake and carry forward the declared business and depreciation losses to the next assessment year.

4. The authorised representative of the complainant again reminded the Assessing Officer vide application dated 7‑5‑2001 for rectification of the order.

5. It is vehemently alleged that no response was made by the respondent to the aforesaid applications for rectification and after lapse of 11 months the respondent rejected the application under section 156 on 5‑12‑2001 and refusal to carry forward the determined loss of Rs.6,98,12,384 to the assessment year 1998‑99.

6. The case was fixed for hearing on 4‑3‑2002. The above cited representatives of the complainant and the respondents appeared. The records of the case have also been produced by the departmental representative. The respondent has also filed parawise comments vide Letter No. 5024, dated 4‑2‑2002.

7. The complainant's authorised representative has vehemently contended that the action of the respondent in refusing to carry forward the determined loss of Rs.6,98,12,384 under section 156 of the Income Tax Ordinance, 1979, is perverse, arbitrary, unreasonable, unjust, biased, oppressive and is based on irrelevant grounds.

8. The perusal of records shows that the first application for rectification under section 156 was made by the complainant on 27‑8‑1999 and thereafter reminders were issued on 5‑1‑2001 and 7‑5‑2001.

9. The respondent did not pass any order under section 156 till 5‑12‑2001. This inordinate delay without any justification is certainly unreasonable, unjust and amounts to maladministration.

10. It is pertinent to point out that the Central Board of Revenue has also been issuing instructions from time to time stressing on prompt disposal of rectification application by the Assessing Officer and extract from C.B.R.'s Letter C.No.4(6)IT.3/88, dated 17‑2‑1991, is reproduced hereunder in this behalf:

"I am directed to say that inordinate delay in passing rectification orders, wherever called for, not only irritates the taxpayers but also proves to be a hurdle in clearance of tax liabilities, issuance of refunds etc. Although the statutory provisions require passing of an order on an application for rectification by the end of the financial year next following the year in which such application is received, yet it is not necessary that such order must be delayed till that date."

11. During the course of hearing it also transpired that the respondent passed orders under section 156 on 5‑12‑2001 rejecting the complainant's request to carry forward the loss to the assessment year 1998‑99, without providing an opportunity of being heard to the complainant as provided in subsection (2) of section 156 of the Income Tax Ordinance, 1979. The order passed under section 156 on 5‑12‑2001 has, therefore, no legal sanctity as the complainant has been deprived of its statutory right of being heard. This is a glaring example of maladministration committed by the respondent.

12. The respondent's objection regarding jurisdiction in terms of section 9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000 is not tenable in the presence of gross maladministration committed by the concerned officers as discussed above.

13. In view of the above facts it is recommended:

(1) The order passed under section 156 on 5‑12‑2001 be cancelled under section 138 of the Income Tax Ordinance, 1979 with the directions to the Assessing Officer to pass a fresh order after providing reasonable opportunity of being heard to the complainant.

(2) The action as mentioned in para. (1) to be completed within 30 days of the receipt of this order and compliance be reported within a week thereafter.

C.M.A./M.A.K./393/FTO

Order accordingly.