NISAR HAMEED WEAVING (PVT.) LTD., FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 194 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 61, 62, & 54, Expln.‑‑‑C.B.R. Letter No.7(55) S. Asstt./29 dated 27‑9‑1999‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000); S.9 & (2)(b)‑‑‑Mal administration‑‑‑Universal Self‑Assessment Scheme‑ ‑Assessment year 1999‑2000‑‑‑Assessee, a private limited company‑‑‑Loss declared for the assessment year 1998‑99 was not accepted and income was assessed‑‑ Assessee paid tax more than 30% as compared to tax payable on last assessed income and the requirement of the Universal Self‑Assessment Scheme 1999‑2000 was thus fulfilled‑‑‑Copy of the return filed in duplicate was received back by the Assessee from the department which constituted the assessment order under S.59(1) as provided in para. 12(b) of the Universal Self‑Assessment Scheme of the assessment year 1999‑2000‑‑‑Assessing Officer issued notice under S.61 of the Income Tax Ordinance, 1979 by excluding the return of the assessee from Universal Self‑Assessment Scheme on the ground that return did not qualify for acceptance under the Universal Self‑Assessment Scheme in the light of the clarification made by the Central Board of Revenue under Letter C. No.7(55) S.Asstt/29 dated 27‑9‑1999 although the assessment already stood completed‑‑‑Validity‑‑‑Said letter of Central Board of Revenue was addressed to the President, Income Tax Bar Association. Karachi and the clarification quoted by the Assessing Officer did not appear anywhere in the said letter and during the hearing the representative of the department was unable to show as to where the clarification had been taken from‑‑‑Furthermore, even if it was assumed that the said clarification was contained in some other Circular and was valid in the context of the Universal Self‑Assessment Scheme for the assessment year 1999‑2000 it was evident that according to said clarification turn over tax (i.e. tax under S.80(D) of the Income tax Ordinance, 1979) could be made the basis for comparison "where tax was payable or paid on income last declared or assessed due to loss"‑‑ Factual position, was that in the complainant's case, although loss had been declared for the assessment year 1998‑99 but the income was assessed at Rs.98,012 and the tax payable by the complainant consisted of tax on Rs.98,012 plus tax under S.80‑D of the Income Tax Ordinance, 1979 consisting of tax @ of 0.5 % of the complainant's total turnover minus tax on the assessed income thus it could not be said that for the year 1998‑99 turnover tax (viz. tax under S.80‑D of the Income Tax Ordinance, 1979) was payable on account of loss and that such tax under S.80‑D of the Income Tax Ordinance, 1979 formed the basis for comparison with the tax for the assessment year 1999‑2000‑‑‑Even the alleged disqualification contained in the Central Board of Revenue clarification did not apply in the complainant's case‑‑‑No valid basis existed for any attempt to exclude the Complainant/assessee's return for the assessment year 1999‑2000 from the purview of the Universal Self -Assessment Scheme‑‑‑Since such an attempt amounted to maladministration, there was no merit in the preliminary objections of the department‑‑‑Federal Tax Ombudsman recommended that the proceedings relating to normal assessment for the year 1999‑2000 be dropped and the complainant's return be accepted under the Universal Self‑Assessment Scheme.

Ch. Abdul Ghafoor, ITP and Imran Rashid, A.Rs. for the Complainant.

Mian Munawar Ghaffar, IAC, for Respondent.

DECISION/FINDINGS

This is a complaint regarding non‑acceptance of the complainant's income‑tax return under the relevant Self‑Assessment Scheme. The main points in the complaint are as follows:‑‑

(i) the complainant‑company filed its income‑tax return for the assessment year 1999‑2000 under the Universal Self‑Assessment Scheme declaring income of Rs.159,000. The tax payable came to Rs.68,370 which was duly paid with the return.

(ii) The tax paid was more than 30% as compared to tax payable on last assessed income and the requirement of the USAS 1999 2000 was thus fulfilled. One copy of the return filed in duplicate was received back from the department which constituted the assessment order under section 59(1) as provided in para.12(b) of the Scheme.

(iii) On 29‑6‑2000 the complainant received a letter dated 27‑6‑2000 from the Deputy Commissioner of Income Tax Companies Circle 11, Faisalabad that the complainant's return did not qualify for acceptance under the USAS in the light of the clarification made by the CBR under the Letter C.No.7(55)S.Asstt/29, dated 27‑9‑1999 although the assessment already stood completed as explained above.

(iv) The C.B.R. 'clarification as intimated by the Deputy Commissioner of Income‑tax was as follows:‑‑

"In cases of R.Fs. and eligible companies where tax was payable or paid on income last declared or assessed due to loss, turnover tax cannot be made the basis for comparison for the purpose of para. 5 of the Scheme."

(v) In the complainant's case the last assessment viz. assessment for the year 1998‑99 was completed under normal law at an Income of Rs.98,012 and comparison for the assessment year 1999‑2000 was to be made with the tax payable for the assessment year 1998‑99 (including tax under section 80D). In this connection the relevant explanation to section 54 is as under:‑‑

"54. Payment of tax with return of income. ‑‑‑(Explanation): For removal of any doubt, it is declared that the expression "tax payable" as used in this section includes the tax under section 80D".

(vi) The complainant explained the facts of the case with reference to the provisions of the USAS but the Assessing Officer did not respond and instead issued a notice under section 61, dated 14‑10‑2000."

(vii) Considerable correspondence has taken place since then but the Deputy Commissioner of Income‑tax is still misinterpreting the C.B.R. clarification and is determined to finalize the assessment under the normal law although the assessment already stands completed under section 59(1).

It has been prayed that the complainant's grievance be redressed.

2. The respondent's reply has been received and the representatives of the complainant and the respondent have attended and have been heard. In the respondent's reply the usual preliminary objections have been raised in the context of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. With regard to the merits of the case, the crux of the respondent's contentions' is contained in para.5 of the reply which reads as under:‑‑

"5. Although the assessment was completed at an income of Rs.98,012 but tax under section 80D @ 0.5% of the turnover was levied because the tax payable on the assessee's income was less than the tax payable under section 80D. Although the tax payable under section 80D is included in admitted liability payable under section 54 of the Ordinance, yet it is important to note that section 54 does not have over‑riding effect on section 59(1) of the Income Tax Ordinance, which fully empowers the C.B.R. to formulate a Scheme of Self‑Assessment for any year and prescribe conditions for acceptance of returns under such Scheme as it may deem necessary. The fact of the matter is that a specific basis was spelt out by the C.B.R. that the tax paid under section 8013 in the previous year cannot be taken for comparison with tax payable under Self‑Assessment Scheme on the mere fact that tax under section 80D is a part of admitted liability under section 54 of the Income Tax Ordinance, 1979."

It is stated that in view of the above position, the Deputy Commissioner of Income Tax is quite justified in processing the case under the normal law though complainant is statedly still avoiding the compliance of valid notices. It has been prayed that the complaint' be rejected as without jurisdiction and being devoid of merit.

3. During the hearing, the two sides repeated their contentions and a due consideration the contention of the respondent was found to be quite untenable for several reasons. Firstly in the DCIT's letter dated 27‑6‑2000 addressed to the complainant, the so‑called C.B.R. Circular No.7(55)S. Asstt./99 dated 27‑9‑1999 was referred to which statedly contained the clarification reproduced in para.1(iv) above. The said C.No.7(55)S.Asstt/99 dated 27‑9‑1999 is, however, a C.B.R, letter to the President, Income Tax Bar Association, Karachi and the clarification quoted by the DCIT does not appear anywhere in the said letter and during the hearing the respondent's representative was unable to show where the so‑called clarification had been taken from.

4. Furthermore, even if it is assumed that the said clarification is contained in some other circular and is valid in the context of the USAS for the assessment year 1999‑2000 it is evident that according to this clarification (as quoted by the DCIT), turnover tax (i.e. tax under section 80D) cannot be made the basis for comparison "where tax was payable or paid on income last declared or assessed due to loss". The factual position, however, is that in the complainant's case, although loss had been declared for the assessment year 1998‑99 income was assessed at Rs.98,012 and the tax payable by the complainant consisted of tax on Rs.98,012 plus tax under section 80D consisting of tax @ of 0.5% of the complaipant's total turnover minus the tax on the assessed income. Thus in the complainant's case it cannot be said that for the year 1998‑99 turnover tax (viz. tax under section 80D) was payable on account of loss and that this tax under section 80D formed the basis for comparison with the tax for the assessment year 1999‑2000. Thus even the alleged disqualification contained in the so‑called CBR clarification did not apply in the complainant's case.

5. In the light of the above, there is no valid basis for any attempt to exclude the complainant's return for the assessment year 1999‑2000 from the purview of the USAS. Since such an attempt amounts to mal administration, there is no merit in the respondent's preliminary objections either.

6. It is, therefore, recommended that:

(i) the proceedings relating to normal assessment for the year 1999‑2000 be dropped and the complainant's return he accepted under the USAS.

(ii) Compliance be reported within 30 days.

C.M.A./508/FTO Order accordingly.