Income Tax Ordinance (XXXI of 1979)---

----Ss. 63, 59(1) & 5(1)(c)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3(2) & 9(2)(d)---C.B.R. Circular No.4 of 2001, dated 18-6-2001---Self-Assessment Scheme, Para. 9(a)(i)---Assessment year 2001-2002---Computer random ballot-- Best judgment assessment---Not providing proper opportunity of hearing to the assessee---Assessee was allowed two days for compliance of notice under S.62 of the Income Tax Ordinance, 1979 demanding details-- Validity---Such was a typical example of harsh, unjust, unreasonable and perverse assessment framed in complete disregard of the rule to the effect that even when proceeding ex parte the assessment should be based on "best judgment" and should not be vindictive or punitive---Act of omission, like undue haste and unimaginative assessment without caring to carry out legal obligations, amounted to "maladministration" under S.3(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) and where "maladministration" crept in, the Federal Tax Ombudsman had the jurisdiction to investigate and S.9(2)(d) of the Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), did not stand in the way---Federal Tax Ombudsman recommended the concerned Commissioner of Income Tax to amend the assessment framed under S.63, dated 20-6-2002 by resort to S.122 of the Income Tax Ordinance, 2001 so as to make alternations, as he considered necessary, to ensure that "the taxpayer was liable for the correct amount of tax for the tax year to which the assessment order related and the concerned Inspecting Additional Commissioner be counselled to refrain from framing assessments with undue haste which may render the assessment unreasonable or arbitrary.

Ahmad Shuja Khan for the Complainant.

Mirza Nadeem Munawar Baig, IAC for Respondent.

DECISION/FINDINGS

The Complainant, an AOP is engaged in the business of rice husking and sale of rice. It accuses numerous Tax Employees for acts of omission/commission which fall under the definition of maladministration" as per the Establishment of the Office of Federal Tax Ombudsman Ordinance (hereinafter called the FTO Ordinance), as under:---

Secretary, C.B.R., Islamabad.

(i) The selection of the Complainant's return for the assessment year 2001-2002 for Total Audit was not in accordance with the SAS for this year as enunciated through Circular No.4 of 2001, dated 18-6-2001.

(ii) The selection of the Complainant's return for the assessment year 2001-2002 for Total Audit was not through random ballot and contrary to the information given by the Special Officer, Chunain to the Complainant through his letter, dated 1-3-2002.

Special Officer, Circle 4, Chunian

(iii) The Special Officer failed to inform the IAC Range-I Zone B Lahore about sudden death of Managing Member of the Complainant and about the telephonic request for adjournment.

IAC Range-I, Zone-B, Lahore.

(iv) The IAC has allegedly committed "maladministration" by-

(a) mis-stating that fact of transfer of jurisdiction was conveyed to the Complainant also.

(b) issuing notice under section 62 without first examining the books of accounts,

(c) allowed inadequate time to comply with notice under section 62,

(d) framing an ex parte assessment on mere presumptions.

2. The brief facts are that for the Assessment year 2001-2002 the Complainant declared under SAS Income at Rs.300,442. The case got selected for Total Audit, through a computer random ballot. Assessment proceedings were then initiated and the case assigned to an IAC by resort to section 5(1)(c) of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). The Complainant was then served notices under sections 61 and 62 and for alleged non-compliance, an ex parte assessment was framed on 20-6-2002 under section 63 of the repealed Ordinance. This has aggrieved the Complainant.

3. The R-CIT in his para-wise comments, dated 16-9-2002 has observed that the selection of the case was made in accordance with SAS, hence "maladministration" is out of question. It further submits that section 9(2)(b) of the FTO Ordinance, exclude from its jurisdiction such issues for which appellate forums are available to adjudicate on validity of action and the quantum of income.

4. Mr. Ahmad Shuja Khan (Advocate) appearing for the Complainant contended that return for the year 2001-2002 declaring the highest income in the three preceding years hence it was not fair to subject it to Total Audit. He emphatically stated that intimation about the selection of the case for Total Audit was communicated on 1-3-2002 i.e. 5 months after the results of the random ballot were declared. According to him it was not correct to say that the computer had picked up the case of the AOP for Total Audit because, as per the print out, it was the case of Mian Noor Muhammad (a Member of the AOP) whose return was picked up by the computer. Moreover, according to the learned counsel, the IAC continued to issue notices under section 61 and 62 without even intimating the Complainant that jurisdiction of the case had been assigned to him. On top of it, he mis-stated in the assessment "the assessee was informed about the transfer of the case and was also requested to attend the office .in connection with further proceedings for the finalization of 'the assessment". It was alleged that though jurisdiction over the case was assigned by the CIT to IAC on 26-4-2002, the proceedings were not taken up immediately and the IAC slept over the matter for more than one-and-half month, with the result that action was commenced much towards the close of the financial year. In anxiety to complete the assessment before 30th June, it was hurriedly finalized in a haphazard and highhanded manner which is evident from the fact that notices under sections 61 and 62', dated 14-6-2002 and 16-6-2002, (served on 18-6-2002) demanded compliance by 20-6-2002, thus allowing the Complainant extremely inadequate time of just two days to prepare the case and submit the reply. It was pleaded that the IAC acted in a highly unjust and unfair manner to frame an exparte assessment just on one default which also was the result of tragedy in the family of which due telephonic information was given to the Special Officer for conveying to the IAC. Gross "maladministration" was said to have been committed by making harsh, unjust, unreasonable and perverse assessment determining income at 40% of the disclosed turnover "by imposing tax which is almost 3 times higher than the entire capital investment". The learned counsel blamed that the Special Officer acted irresponsibly, if not malafidely, by not informing the IAC Range I, Zone B, Lahore about the sudden death of Managing Member of AOP although he was telephonically informed about the unfortunate happening with the request to adjourn the hearing and to inform the IAC. This irresponsible conduct of the Special Officer resulted in an exparte assessment to the detriment of the Complainant.

5. Mr. Nadeem Munawar Baig (IAC), the author of the assessment, appeared for the Revenue. He could not offer any convincing explanation to such vital objections as not informing the taxpayer about the change of jurisdiction. He, however, said proceedings could not be taken up promptly, firstly, because the assessment record took time in transfer and, secondly, he had other cases to deal with, and lastly, this was additional load of work beside this normal supervisory duties. As soon as he found time out of his schedule of duties, he took up the assessment proceedings in the Complainant's case. The DR vociferously denied the allegation that notices under section 61 and 62 were issued without summoning/examining the books of accounts and submitted that all relevant information in the shape of copies of statement of accounts, various lists and details etc. were available on record which were minutely studied whereafter further particulars, as thought necessary, were summoned under sections 61 and 62 which unfortunately remained un-complied thus forcing him to proceed ex prate believing that attempts to frame assessment were being deliberately frustrated so that the assessment year may run out.

6. The investigation show that there is no validity in the allegation that in view of the higher income and better, results the return should not have been selected for Total Audit because the, SAS specifically provides that the selection for Total Audit is to be made only out of returns qualifying for SAS. Incidently the Complainant's return was picked up by the computer on which the Tax functionaries had no control. The allegation that the return selected for Total Audit was not that of the AOP but of the Managing Member (Mian Noor Muhammad) does not have much validity because .the data to be fed in the computer is taken from the return itself which contains a column to specify the name of the Managing member/partner. There is no discrimination or arbitrariness because the computer print-out contains correct particulars to identify the AOP with reference to NTN, quantum of income declared, and the Machine Number on the Return. It is true that the print-out shows the I.D. card number and the name of the Managing partner, but these were filled in the prescribed columns, of the return by the, AOP itself. Moreover, similar details, in a similar fashion, were fed in the computer for selection of returns in all other, cases, hence neither there is any discrimination nor" maladministration".

7. It also could not be proved through any evidence that Special Officer, Chunian was contacted to seek adjournment due to death of a family member particularly when such a request could directly be made to the IAC who was acting as an Assessing Officer and was available on telephone as well. After transfer of case to IAC under section 5(1)(c) the Special Officer ceased to have any role to play. The accusation against the Secretary, C.B.R. is also clearly devoid of any merit because selection of the case for Total Audit is made on different levels and the Secretary, C.B.R. is not at all involved:

8. Perusal of the assessment record as presented by the IAC, reveals that no intimation in fact was given to the Complainant about the assignment of the case to the IAC under section 5(1)(c) of the repealed Ordinance. 'The proceedings were initiated just by issuing notices under sections 61 and 62 on 14-6-2002 and 16-6-2002. It is glaring that the IAC did not handle the case with much sagacity, maturity and dexterity which is expected from a senior officer of his status. Cases are assigned to senior officers under section 5(1)(c) so that the experienced expertise be brought into play to frame a just and fair assessment after evaluating such aspects as normally go undetected by officers of lesser experience and knowledge. Much against the expectation, the investigation reveals, the sacred principle of affording reasonable opportunity to the taxpayer was sacrificed at the alter, of unusual haste to some how frame an assessment With the result that income was determined at a staggering figure of Rs.14,941,202 (declared Rs.300,442) creating a tax demand of Rs.5,565,264, with further threat of penalty under section 110 for non compliance of statutory notices. This arbitrary and harsh dispensation meted out just for one default occasioned due to demise of the Managing Member of the AOP is, all the more glaring because just two days' time was allowed for compliance of a notice under section 62 demanding details spread over 5 pages. It is thus proved beyond reasonable doubt that the Complainant's case is a typical example of harsh, unjust and unreasonable and perverse assessment framed in complete disregard of verdict by superior Courts to the effect that even when proceeding exparte the assessment should be based on "best judgment" and should not be vindictive or punitive. To sum up, it may be said that acts of omission, like undue haste and unimaginative assessment without caring to carry out legal obligations, amounted to "maladministration" under section 3(2) of the FTO Ordinance and where 'maladministration' creeps in, the FTO has the jurisdiction to investigate and section 9(2)(d) of the FTO Ordinance, does not stand in the way as has been discussed in detail in decision on Complaint No.1250 of 2001. It is, therefore, recommended that:--

(i) The CIT Zone B, Lahore to amend the assessment framed under section 63, dated 20-6-2002 by resort to section 122 of the Income Tax Ordinance, 2001 so as to make alternations, as he considers necessary, to ensure that "the taxpayer is liable for the correct amount of tax for the tax year to which the assessment order relates".

(ii) IAC, Mr. Nadeem Munawar Baig be counselled to refrain from framing assessments with undue haste which may render the assessment unreasonable or arbitrary.

9. Compliance report be submitted within 30 days of the receipt of this Order.

C.M.A./782/FTO Order accordingly.