AZIM DYEING & BLEACHING WORKS, PROPRIETOR MOHAMMAD SAMI, KARACHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 145 (2002)

(a) Income‑tax‑‑‑

‑‑‑‑Establishment of Office f& Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9(2)(b)‑‑‑Maladministration‑‑‑Disregarding the applications of the complainant and apathy shown to the problems of the taxpayers amounts to maladministration.

The Complaint No. 1433 of 2001 rel.

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

‑‑‑S.65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10(3)‑‑‑Limitation‑‑‑Delay in filing of complaint ‑‑‑Condonation of‑‑‑Delay in filing the complaint was due to the time spent in approaching the concerned authorities of Department‑‑ Reasons given were cogent and convincing‑‑‑Delay in making the complaint was condoned by the Federal Tax Ombudsman.

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

‑‑‑‑S.65‑‑‑Tax Amnesty Scheme, 2000‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Declarations were filed in respect of machinery and immovable property‑‑‑Notice under S.65 was issued in respect of concealed rental income for the previous years from, such immovable property ‑‑‑Assessee/Complainant contended that since the declaration filed was accepted, it attained finality and the assessment for the relevant period could not be reopened under S.65 of the Income Tax Ordinance, 1979 and further asserted that undisclosed income from all sources was invested in the acquisition of assets shown in the declaration filed under the Tax Amnesty Scheme, 2000‑‑‑Validity‑‑‑Contentions of complainant were supported by the provisions of the relevant circulars issued regarding the Tax Amnesty Scheme, 2000‑‑‑Federal Tax Ombudsman recommended that Assessing Officer be directed to drop the proceedings initiated under S.65 of the Income Tax Ordinance, 1979 for the assessment years 1997‑98 and 1998‑99 and if any assessments had been framed in consequence of the action under S.65, those be cancelled under S.138 of the Income Tax Ordinance, 1979.

Khaliquzzaman, I.T.P. for the Complainant.

Sheikh Muhammad Hanif, I.A.C. and Muhammad Aslam A.C.I.T. for Respondent.

DECISION/FINDING

The complainant Mr. Muhammad Sami, Proprietor of Messrs Dyeing and Bleaching Works, Karachi is an existing assessee of Circle A‑9, Zone‑A, Karachi on National Tax Number 9‑13‑0263970.

2. It is stated that the complainant filed two declarations under Tax Amnesty Scheme in September, 2000 for Rs.60,00,000 and Rs.8,00,000 on which tax Was duly paid. It is alleged that the case has been reopened under section 65 of the Income Tax Ordinance on the ground of non disclosure of rental income in the assessment years 1997‑98 and 1998‑99. It is contended that the Assessing Officer was informed that no rental income was received during the said years but the notices under section 65 have not been withdrawn and the Inspector of the Department visited the business premises on 7‑3‑2002 for enquiries. It is further, alleged that although, the complainant did not receive any rental income, even if the Department is adamant to hold that rent was received at Rs.1,20,000 per annum, the quantum of declaration filed under the Tax Amnesty Scheme was far in excess of the alleged concealed income and therefore, the non‑disclosure of the rental receipt was covered in the declaration. The complainant has, therefore, prayed that directions may be issued to drop the proceedings under section 65 of the Income Tax Ordinance initiated by the Assessing Officer.

3. The case was fixed for hearing on 10‑5‑2002 and 1‑6‑2002. The authorised Representatives of the complainant and the respondents appeared and the case has been discussed with them. The respondents have also filed parawise comments on the complaint vide Letter No.Jud‑8/2001‑02/3549 dated 18‑3‑2002.

4. The Departmental Representative Mr. Muhammad Hanif, Inspecting Additional Commissioner of Income‑tax, Range‑I, Zone‑A, Karachi at the out set raised objection regarding the jurisdiction of this complaint in the light of the provisions of clauses (a) and (b) of subsection (2) of section 9 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. It is contended by him that since the complainant's application is still pending before the higher authorities of the department the provision of clause (a) of the aforesaid section applies to this case.

5. He has further asserted that since the matter relates to assessment of income, determination of liability of tax, the present complaint falls outside the purview of jurisdiction of this forum as provided in clause (b) of subsection (2) of section 9 of the aforesaid Ordinance.

6. The aforesaid contentions of the Departmental Representatives do not carry any weight. The complainant has also alleged that he was obliged to make this complaint as the higher authorities of the department did not respond to his applications. This utter disregard to the applications of the complainant and apathy to the problems of the taxpayers amounts to 'maladministration. It is also settled principle in this behalf that where maladministration is committed the provision of clause (b) of subsection (2) of section 9 of the aforesaid Ordinance does not apply and this forum is fully competent to investigate. This issue has been resolved in Complaint No. 1433 of 2001 by decision dated 15‑12‑2001 wherein it has been held that:

"It is clear the present complaint does not focus on the validity of the assessment or on the quantum of assessed income but primarily relates to the acceptance/rejection of a declaration filed under TAS‑2000 and this substantially distinguishes it from such cases as have been excluded from the jurisdiction of the FTO as per subsection (2) of section 9. The thin line that identifies 'maladministration' as respects arbitrary rejection of a declaration is to be focused upon when appraising whether rejection of the claimants declaration under the Amnesty Scheme against which no appeal is provided either in the Income Tax Ordinance or the TAS‑2000, is illegal arbitrary and unjust as distinct from a dispute concerning the determination of income and the process of assessment. Such a case falls the domain of Federal Tax Ombudsman. In this view of the matter, the objection by the department is overruled. "

7. Notwithstanding the aforesaid obligations regarding jurisdiction, the Departmental Representative has further objected that the present complaint has not been filed within the prescribed time as provided in subsection (3) of section 10 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. It is stated that the notice under section 65 was served on 24‑3‑2001 and the complaint has been filed in the month of March, 2002 i.e. much after the prescribed limit of time.

8. This objection is also not well‑founded as already referred above, the complainant approached the higher authorities as soon as he received a show‑cause notice for reopening the assessments, requesting them to restrain the D.C.I.T. from issuing notices under section 65 as his case was covered by the Immunity provided by the Tax Amnesty Scheme 2000. The complainant made applications to the higher authorities but none of them responded to his letters. A copy of application dated 7‑3‑2002 addressed to the Regional Commissioner of Income‑tax, Southern Region, Karachi, has been furnished in this behalf. It is contended by the complainant's Authorised Representative that since the concerned authorities of the department did not bother to listen to his request, the complainant was obliged to make complaint at this forum. The delay in filing the complaint is due to the time spent in approaching the concerned authorities of the department as stated above.

9. The contentions of the Authorized Representative have been given due consideration. The reasons given for the delay in filing the complaint are cogent and convincing. The delay in making the complaint is, therefore, condoned.

10. The respondents have stated in the parawise comments that the two declarations filed under the Tax Amnesty Scheme in September, 2000 for Rs.60,00,000 and Rs.8,00,000 were in respect of machinery and immovable property respectively. These declarations did not include the rental income received by the complainant during the assessment years 1997‑98 and 1998‑99 for which notices under section 65 have been issued.

11. The complainant's Authorised Representative has drawn attention during the course of hearing to his letter dated 25‑4‑2001 addressed to the Special Officer, Circle‑A 13, Zone‑A, Karachi, wherein it was contended that undisclosed income derived from property was deemed to be covered by declaration filed under the Tax Amnesty Scheme. This point was again emphasized in letter dated 1‑1‑2002 addressed to the D.C.I.T. of Income Tax, Circle A 9, Zone‑A, reiterating that the declaration filed under the TAS‑2000 covered the alleged undisclosed rental income relating to the assessment years 1997‑98 and 1998‑99.

12. It is contended by the A.R. of the complainant that since the declaration filed was accepted, it attained finality and the assessment for the relevant period cannot be reopened under section 65 of the Income Tax Ordinance. It is asserted that undisclosed income from all sources was invested in the acquisition of assets shown in the declaration filed under the Tax Amnesty Scheme. The Departmental Representatives have not been able to controvert/rebut the contentions of the complainant's Authorised Representative in this regard.

13. The contentions of the A.R. of the complainant are supported by the provisions of the relevant circulars issued regarding the Tax Amnesty Scheme 2000.

14. In view of the facts stated above it is recommended that:

(a) The Assessing Officer be directed to drop the proceedings initiated under section 65 of the Income Tax Ordinance for the assessment years 1997‑98 and 1998‑99 and if any assessments have been framed in consequence of the action under section 65, the assessments be cancelled under section 138.

(b) Compliance be reported within 30 days thereafter.

C.M.A./M.A.K./513/FTO Order accordingly.