2003 P T D 1723

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUAMAR RANA

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 775/L of 2002, decided on 17/01/2003.

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

----S. 59---C. B. R. Circular No. 4 of 2001, dated. 18-6-2001, para. 9(a)(ii)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Self-assessment---Setting apart of a case for total audit---Matter relating to assessment---Validity---Neither the process employed by the Regional Commissioner of Income 'fax under para. 9(a)(ii) of Central Board of Revenue's Circular No.4 of 2001, dated 18-6-2001 nor his decision to select the case for audit is a matter relating to assessment of income nor any remedy in the shape of appeal/revision against his decision, to select the case is available to the complainant/assessee.

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

----S. 59---C.B.R Circular No. 4 . of 2001, dated 18-6-200-1, para. 9(a)(ii)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Self-assessment---Setting apart of cases for total audit-- -Prejudice caused to assessee-- Complainant/assessee having earned privilege when his return of income qualified' for acceptance under Self-Assessment Scheme, denial of such privilege without valid reason would be a prejudice caused to the complainant/assessee.

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

----S. 59---C.B.R. Circular No. 4 of 2001, dated 18-6-2001, para. 9(a)(ii)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)., S.9---Self-assessment---Setting apart of case for total audit---Loss of return---Assessee in collaboration with officials of the Department managed to get his Return replaced in the record of the office and tampered with the original return to post his modeling receipts therein-- -Complaint against setting apart of the case of assessee- Validity---Without prejudice to the departmental enquiry leading to loss of genuine return from the record, there was sufficient evidence on record to believe that the version of return produced, before the authorized dealing officer, on behalf of the complainant/assessee was not the true copy of the original return---Complainant/assessee had not approached the office of Federal Tax Ombudsman with clean hand and as such no interference with decision of Regional Commissioner of Income Tax for selection of return for audit was warranted---Federal Tax Ombudsman recommended that Commissioner was to ensure completion of enquiry into the loss of original return from the file within 90 days and take action' under relevant rules against all those found guilty of substituting the original return with another and to ensure that the Taxation Officer having jurisdiction over the complainant's case proceeds to conduct the audit in accordance with law.

Muhammad Mansoor Ahmad, I.T.P. for the Complainant.

Ms. Nabila Iqbal, Taxation Officer for Respondent.

FINDINGS/DECISION

Maladministration is alleged in the instant complaint on the part of the RCIT, Eastern Region, Lahore for arbitrarily setting apart the return filed by the complainant under Self-Assessment Scheme, for total audit by invoking para. 9(a)(ii) of C.B.R. Circular No.4 of 2001, dated 18-6-2001. The complainant, an old assessee with the status of individual engaged in film industry as an actor and modeling in commercials, declared total income amounting to. Rs.78,180 for assessment year 2001-2002.

2. The RCIT confronted the complainant, through a notice envisaged under para. (a)(ii) of C.B.R. Circular No.4 of 2001, dated 16-5-2002, that return of income filed by the complainant, warranted audit for following reasons:

(a)He is maintaining a Merecedez Car No.LOZ-19, declared receipts at Rs.229,675 are insufficient to meet the expenses on maintenance of such an expensive car and other house-hold/ personal expenses.

(b)He is favourite, famous, attractive and busy Artist of Pakistan Film Industry. Every Director/Producer wants to cast him as hero of his film. His declared :income is low as compared to a parallel case at NTN: 21-10-0446909 who has declared income at Rs.338,000 against receipts of Rs.447,500.

3. It has been submitted before the RCIT on behalf of the complainant that the Merecedez Car No.LOZ-19 is not maintained or owned by the above assessee (Affidavit in this respect is

enclosed).

4. Regarding household expenses it is. stated that assessee is living in joint family system and the household expenses are shared by all family members who are existing; tax. payers namely:--

(a)Shafqat Rana NTN No.0196495-0

(b)Rehana Shafqat Rana NTN No.1301464-3

(c)Aamir Shafqar RanaNTN No.1301462 5

(d)Office of Zist international (Pvt.) Ltd. NTN No.1301461-7

5. It has been further submitted before the RCIT that the assessee is no doubt an upcoming film Artist, who has tried a lot to make his place in the Pakistan Film Industry. It is also a well-known fact that acting in Pakistan Film Industry is not a. very lucrative profession: The parallel case quoted at N.T. No.21-10-0446908 being the case of Mr. Babar Ali who started his career much before and is a seasoned artist who started from stage T. V. drama and is ire no way comparable to his case. He has prayed that as Circular No. 4 of 2001 read with para. 9(a)(ii) of SAS for 2001.-2002, does not establish any concealment nor the above circular/para. is attracted in the circumstances of this case, the return may not be selected for total audit.

6. However, the RCIT, found the foregoing explanation unsatisfactory and conveyed his decision to select the case for audit through order, dated 22-7-2002 because prima facie, CIT Zone-C has made out a valid case for setting it apart for audit considering the un reasonability of remuneration per film in comparison with other film stars and the ownership of Mercedez Banz warranting due verification.

7. Hence the instant complaint alleging maladministration on the ground that the decision of the RCIT is. arbitrary, unreasonable, unjust, biased, contrary to law, rules and regulations. According to complainant, the ratio of guidelines issued by C.B.R. for selection of returns for audit is not applicable to the facts of the case.

8. The RCIT, responding to the notice under section 10(4) of the Ordinance XXXV of 2000 raised following preliminary objections to the jurisdiction of this Office over the complaint:

(i)"Matter relates to assessment, hence falls outside jurisdiction of Federal Tax Ombudsman in light of provisions of section 9(2)(b) of Establishment of Office of Federal Tax Ombudsman.

(ii)No prejudice has so far been caused to assessee.

(iii)Remedy in shape of appeal/revision against assessment is available to complainant.

(iv)No maladministration has been caused in this case"

9. Representatives of the parties have been heard on the preliminary objections raised by the RCIT and after due consideration it 'is found that neither the process employed by the RCIT under para. .9(a)(ii) of C.B.R. Circular No.4 of 2001 nor his decision, to select the case for audit is a matter relating to assessment of income nor any remedy in the shape of appeal/revision against his decision to select the case is available to the complainant.

10. Further, the view canvassed by the RCIT that no prejudice has so far been caused to the complainant is also misconceived. It is a privilege already earned by the complainant when his return of income qualified for acceptance under Self-Assessment Scheme. Denial of such privilege without valid reason would be a prejudice caused to the complainant.

11. The contention of the RCIT that no. maladministration is committed in arriving at the decision to select the case for audit is subject-matter of investigation that will be dealt with hereinafter. Three of the four preliminary objections supra raised by the RCIT are, therefore, overruled and the fourth objection would be considered at the appropriate stage.

12. It has been further submitted that the case of the complainant is selected for audit on valid ground. According to RCIT the complainant was confronted with alleged discrepancies regarding (1) inadequacy of income vis-a-vis household/personal expense (2) suppression of receipts from film and commercials; (3) non-declaration of Mercedez Car No.LOZ-19. The complainant has filed reply in compliance to the show cause notice but the affidavit is filed only in denial of purchase of Merecedez Car No.LOZ-19 in the name of the complainant. It leave many questions unanswered. No act of maladministration has been committed according to RCIT and selection of case for Total Audit has been carried out in a judicious and transparent manner.

13. Heard Mr. Farrukh Naeem, the authorized Representative (AR) of the complainant and Ms. Nabila Iqbal, Taxation Officer (BS-18) Lahore on behalf of respondent.

14. It transpired on preliminary investigation that the return of income available on the Circle Record bearing 3 leaves was different from the copy of return manifestly certified by the circle and available with the AR bearing 5 leaves. Both contended that the copy available with them was genuine and the other one was forged.

15. A copy each of the two disputed returns of income for assessment year 2001-2002 was given to 'each party and signatures in acknowledgements of receipts of copy was obtained. Ms. Nabila Iqbal, Taxation Officer, Lahore and Mr. Mansoor Ahmed from the office of Mr. Farrukh Naeem, ITP were nominated to investigate the issue and the matter was remanded to them. A factual report on the remanded issue was required to be submitted.

16. Mr. Muhammad Mansoor Ahmed, the A.R. of the complainant submitted his report stating that he inspected the assessment records in the Circle. and found that firstly the Receipt Register No. 327 noted on the copy of return provided to him from Circle Record during the hearing in Federal Tax Ombudsman Office was interpolated to change the R.R. Number to 370. He submitted copies of the Receipt Register wherein the return of complainant received through CIT Office is entered at Serial No.370. Further the return on assessment record does not bear the DPC machine number either whereas the copy of return available with complainant bears the DPC No.1102278. It also bears the serial and batch number given by Circle Staff.

17. The Taxation Officer, Ms. Nabila Iqbal too has submitted the report through the RCIT which is reproduced hereunder:--

"(1) All the returns of income filed for the assessment year 2001-2002 were sent to the DPC for computer entry of all data showed in these returns. The return of the assessee under discussion ,as originally filed was also sent to and entered at DPC. Printout obtained in this regard (Annex-A) indicated that both the returns available with the department and the assessee are not genuine for the following reasons:--

(a)On the receipt of returns by the DPC machine number was affixed which is missing in the case of return available with the Department. It meant that this return was not sent to the DPC for computer entry of data.

(b)Copy of return available with the assessee though contains the said machine number but it seems to be managed. This return cannot be termed to be the original one for the reason that:--

(i)Computer printout reflects receipts during the year at Rs.229,675 instead of Rs.539,625 as shown in the said return (due to tampering) by tampering/over writing.

(ii)Processing of return at DPC was made on the basis of NIC Number and fictitious number was allotted by the DPC for its control, which was Z278651 for the year under-reference.

Data entered on the said fictitious number did only account for receipt of Rs.229,675 as per original return which was available with the DPC at the time of entry.

(2) Regarding the attestation of return submitted by the assessee, the Assessing Officer and Circle (T) I.T.I. (has) have submitted that those are not genuine and no such person exists in the circle with those initials. Thus it is not a lawful or legal attestation. The Circle Officer has also reported .that the assessment record was .tampered after the initiation of set-apart proceedings." ,

18. The RCIT has submitted with reference to the foregoing report that alongwith other factors the. case of assessee was selected for total audit on the basis of suppression of gross receipts. Declaration. of advertisement receipts through the process of tampering of return by the assessee at later stage proves departmental contention. The assessee in collaboration with officials of the department managed to get his return replaced in the record of the office and-tamper with the original return to post his modeling receipts therein. From the record of the DPC it is established that the declared receipts as per original return did not include receipts from commercials. Thus various factors that formed the basis for set-apart were very much valid and in line with prescribed parameters. The RCIT has ordered an enquiry against the concerned officials 'and intends to take action in accordance with the relevant provisions of law and rules.

19. The Authorised Representative of the complainant as well as the Representatives of the respondent have been heard again. They have reiterated their contentions considered supra. Misplacement of genuine return from the assessment record is an admitted fact and the respondent has instituted an enquiry to fix the responsibility to be followed by action against the guilty official /officials under the rules. Further, the respondent has questioned the genuineness and validity of the copy of the return available with the complainant as the true copy of actual return. The copy of return produced by A.R. of the complainant bears two remarks on first page ostensibly made by Inspector of Income Tax with initials and designation "ITI". First is a hand-written remark, "call for Part-V' of the return" acid the other is a rubber stamped, remark "Certified to be true copy". Both do not bear any date.. All the five pages comprising of first page of return of income, second page containing Parts-I and II of the return, third page containing "Verification" and "Annex-Income from House Property under section 19", fourth page containing "Estimated Trading, Manufacturing, Profit and Loss Account. As on 30-6-2001 " and fifth page a copy of "Tax Payment Receipt" bear the rubber stamped remark ."Certified to be true copy", with 'same initials and designation as on first page, without recording any date. The contention of respondent that both the ITI as will as the A.R. of the complainant are fully, aware of the fact that Inspector of Income Tax has no authority to ata8t any document as the true copy of any original document. Besides, the ITI has not only denied having attested the said return but his initials bear no similarity to the initials on the aforesaid pages. Statement of Profit and Loss at page 4 of the copy of aforesaid return bears following entries:--

"Salary to staff126,000Receipts229,625

Allowance56,700First Halfincluding A.D.

Traveling and Conveyance95,300Year 310,000

Newspapers and Magazines14,870

Entertainment. .18,000

Miscellaneous expenses:16,410

Tailoring expenses70,200

Dress Dressing35,450

Hair Dressing28,515

Net Profit78,180

Total539,625Total539,625"

20. Item 8 of Summary of Return at page 1 bears an entry of Rs.229,675 in appropriate column. However, words and figures "Six monthly Rs.310,000" are written by hand over printed description of Item 8. ."Sales/Receipts during the year" and on outer side of column where the amount of Rs.229,675 is written there is another handwritten remark. "Including (50,000) Advertisement".

21. Besides, the respondent in support of his contention that the version of return available with the complainant is not the true copy of genuine return, has relied upon the Extract of "Edit List" of PRAL where following Computer entries of summary of return are recorded from genuine return of income:--

Summary of Return

CodeAmount

1.78,180

2.2,400

5.2,450

8.229,675

11.78,180

13.70,000

22. Without prejudice to the departmental enquiry into the circumstances leading to loss of genuine return from the record, there is sufficient evidence on. record to believe that the version of return produced, before the authorised dealing officer, on behalf of the complainant is not the true copy of the Original Return because it is evident even from the aforesaid copy of return that receipts declared originally were only Rs. 229,675. As such the complainant too has not approached this office with clean hands; hence no interference with decision of RCIT for selection of his return for audit is warranted.

23. It is recommended that the Commissioner---

(i)to ensure completion of enquiry into the loss of original return, from the file within 90 days and take action under relevant rules against all those found guilty of substituting the original return C with another one:

(ii)to ensure that the Taxation Officer having jurisdiction over the complainant's case proceeds to conduct the audit in accordance with law.

C.M.A./653/FTO Order accordingly.