HABIBULLAH MULLAH VS SECRETARY, REVENUE DIVISION
2002 P T D 2740
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
HABIBULLAH MULLAH
Versus
SECRETARY, REVENUE DIVISION
Complaint No. 210 of 2002, decided on /01/.
th
April, 2002 (a) Income‑tax‑‑‑
‑‑‑‑Improper service of assessment order/demand notice‑‑‑Effect‑‑‑In the absence of proper service of the assessment order/demand notice the assessee could not agitate the legality of the assessment order before the Appellate Authority.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss. 65, 63 & 13(1)(aa)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Non‑service of notice and non‑maintenance of‑record properly‑‑‑Various. notices assessed had either not been properly served or had been served on persons totally unconcerned and unauthorized‑‑‑Additions under S.13(1)(aa) of the Income Tax Ordinance, 1979 admittedly had not been made with the prior approval of Inspecting Additional Commissioner and the addition made by the Assessing Officer was, therefore; untenable and illegal‑‑ Assessing Officer having jurisdiction of the case of the assessee had admitted in clear words that assessment order under Ss.65/63 of the Income Tax Ordinance, 1979, demand notice and IT‑30 were not served on the complainant/assessee and for this reason regretted the omission and inconvenience caused to the complainant inevitable conclusion was that the records had not been maintained properly, there was ample evidence of maladministration in the proceedings conducted right from the issuance of notice under S.65 of the Income Tax Ordinance, 1979 till the finalization of the assessment under Ss.65/63 of the Income Tax Ordinance, 1979‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income Tax who had powers vested in him under S.138 of the Income Tax Ordinance, 1979 should cancel the assessment order for the year 1998‑99 which suffered from patent illegality and mal administration fresh assessment for the year should be finalized in accordance with law and fact after providing the complainant adequate opportunity to explain his case.
Habibullah Mullah, the Complainant.
Farooq Memon, DCIT, Hyderabad Zone.
DECISION/FINDINGS
The complainant is proprietor of a Rice Mills being run under the name and style of Messrs Umair Rice Mills, K.N. Shah. His case is borne on NT No.08‑18‑195‑4070. The assessment proceedings of the complainant were finalized by the Special Officer, Dadu who held valid jurisdiction at that point of time. However, subsequently the jurisdiction of the case was transferred to the DCIT, Professional Circle, Hyderabad.
2. In response to the necessary notice, the complainant Mr. Habibullah Mullah attended in person. The, department was represented by Mr. Farooq Memon, DCIT, Hyderabad Zone. He also produced necessary records of the complainant which have duly been examined. From the scrutiny of the records it was revealed that the assessment for the year 1998‑99 was finalized by the Special Officer, Dadu. However, it transpired subsequently that the complainant had purchased an Alto Car (800 c.c.) for a sum of Rs.250,000. The car was registered in the complainant's name on 15‑5‑1998. The ownership of the car was, however, not declared in the wealth tax return in the relevant year i.e. 1998‑99 nor in the wealth statement for this period. The complainant has pleaded that he had owned this car for two months only and before the close, of the financial year i.e. 30‑6‑1998, the car was sold. The complainant has been able to produce receipt of purchase but not been able to produce the receipt of sale. It has also been contended by the complainant that the car was purchased out of loan raised by him from the bank.
3. The departmental representative Mr. Farooq Memon, DCIT has stated that 'the Excise and Taxation Department had furnished a list of owners of cars to the Income Tax Department. On cross verification of this information, the Special Officer, Dadu discovered that the complainant had not disclosed the car in the wealth tax return or his wealth statement. In other words the said asset was concealed. He confronted the complainant with this fact and also issued notice under section 65 for reopening his case on the basis of this definite information and after having obtained necess4ry permission from the IAC concerned which was mandatory under the law, notice under section 65 was issued. However, no compliance was made on the due date. The complainant vehemently agitated the validity of the service of the notice. It transpired from the scrutiny of the records that the notice under section 65 was served on one Mr. Abdul Karim on 26‑6‑2001. Mr. Abdul Karim is not known to the complainant and is in no way connected with his business affairs. Thus the service of this notice is disputed. Yet another notice dated 21‑7‑2001 was issued for compliance within three days. This notice was served on the complainant and its service is not disputed. Notice under section 62 dated 27‑7‑2001 was served again on Mr. Abdul Karim. The complainant has vehemently disputed service of this notice. The notice was, therefore, not valid and hence it is of no legal effect. The Special Officer, Dadu finalized the assessment for the year 1998‑99 under sections 65/63 on 7‑8‑2001 and an addition of Rs.250,000 was made on account of Suzuki Car (Alto 800 c.c.). This addition has been made under the provision of section 13(1)(aa) of the Income Tax Ordinance, 1979. However, the record does not disclose that this addition has been approved by the IAC which was of mandatory nature. The addition is thus contrary to law. The records further revealed that the service of assessment order for 1998‑99 under sections 65/63 or demand notice for the year 1998‑99 was disputed by the complainant. In the absence of proper service of the assessment order/demand notice the complainant could not agitate the legality of the assessment order under sections 65/63 before the Appellate Authority.
4. Meanwhile the jurisdiction of this case was transferred to the DCIT, Professional Circle, Hyderabad. When the complainant applied for copy of order under sections 65/63 and demand notice for the assessment order for 1998‑99, the DCIT, Professional Circle who held valid jurisdiction of this case at that point of time wrote a letter of apology to the complainant bearing No. DCIT/Prof. Cir./2001‑2002/812, dated 14‑1‑2002 in which he owned the fact that due to mistake "assessment order, IT‑30 and demand notice" was overlooked hence the Letter No.261 dated 13‑11‑2001 and all other notices issued after 7‑8‑2001 are withdrawn. He further regretted the mistake committed by the office.
5. After having heard the complainant and also the departmental representative it is more than clear that the various notices mentioned earlier have either not been properly served or have been served on person totally unconcerned and unauthorized, such as service of notice on one Mr. Abdul Karim. It is a proven fact that the additions under section 13(1)(aa) have not been made with the prior approval of IAC and the addition made by the Special Officer is, therefore, untenable and illegal. The DCIT now holding jurisdiction over the case of the complainant has admitted in clear words that assessment order under sections 65/63, demand notice and IT‑30 were not served on the complainant and for this reason he has regretted the omission and inconvenience caused to the complainant. After all this the inevitable conclusion is that the records have not been maintained properly, there is ample evidence of maladministration in the proceedings conducted in this case right from the issuance of notices under section 65 till the finalization of the assessment for the year 1998‑99 under sections 65/63 of the Income Tax Ordinance, 1979.
6. It is, therefore, recommended that:
(i)The CIT who has powers vested in him under section 138 of the Income Tax Ordinance, 1979 should cancel the assessment order for the year 1998‑99 which suffers from patent illegality and maladministration. Fresh assessment for this year should be finalized in accordance with the law and facts after providing the complainant adequate opportunity to explain his case.
(ii)Final copy of the order should be sent to this office within a period of 60 days from receipt of this order.
C.M.A./M.A.K./418/FTO
Order accordingly.