Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 3(2)---Survey for Documentation of National Economy Ordinance (XV of 2000), preamble ---C.B.R. Circular No.4 of 2001, dated 18-6-2001---Self-Assessment Scheme, Para. 9(a)(ii)---Assessment year 2001-2002---Assessment of sales by survey team---Objections---Limitation---Survey was conducted in August, 2000---Protest to Commissioner about the estimation and entries made by the Survey Team was made on 1-1-2001---No time limit had been fixed for filing objection at that time---Held, objection could be filed within 90 days from the date of decision in Complaint No.582 of 2001, which was made on 16-8-2001 and therefore, objection filed before 16-8-2001 will not be hit by the rule of 90 days-- Objection was filed on 1-1-2001, which had not been decided as yet-- Federal Tax Ombudsman recommended the Commissioner to decide the objection and thereafter the assessment proceedings be completed.  

Muhammad Zulfiqar Khokhar for the Complainant.

Aftab Alam (A-CIT) for Respondent.

DECISION/FINDINGS

The Complainant, feels aggrieved by the set apart' of his return for the assessment year 2001-2002 for Total Audit by resort to para-9(i) of SAS. It is prayed that the selection may be declared to be an act of maladministration" and return be accepted under SAS.

2. The facts leading to the complaint are that the Complainant is an existing taxpayer at NTN 4-16-082862 at Multan. Return for the year 2001-2002 was filed declaring Income at Rs.580.000 fulfilling all the requirements of SAS. In the preceding year of 2000-2001, return was accepted tinder section 59 at Rs.520,000 and in earlier years also assessments were framed under SAS. For the year under consideration the R-CIT initially issued a show-cause notice on 25-6-2002 pointing out that:--

(a) Sales were obviously suppressed because the Survey Team had estimated these; on "agreed basis", at Rs.12.0 (M) whereas the Return declared these at Rs.5.7 (M),

(b) Income was not commensurate with the declared Sales;

(c) Expenses were inflated.

In reply it was explained that the estimate by the Survey Team could not be called 'on agreed basis' because it was protested against, and hence profile by the Survey Team could not be utilized for selection of a case for Total Audit. Income was claimed to be commensurate with Sales and expenses characterized reasonable with reference to the Gross Proof and the Labour Receipts. The explanation was, however, rejected by the R-CIT and case selected for Total Audit vide letter, dated 29-6-2002. This has given rise to the complaint.

3. Respondent's reply, dated 12-12-2002 has forwarded R-CIT, Multan para-wise comments, dated 3-12-2002 which allege that (i) the show-cause notice was not responded to, (ii) the Complainant had entered into an agreement with Survey Team admitting Sales at Rs.12.0 (M), and (iii) selection was in accordance with Policy Guidelines issued by the C.B.R, because it was a "revenue potential case".

4. The learned counsel for the Complainant submitted that none of the reasons conveyed by the R-CIT for selection of the case for Total Audit fall in line with the Policy Guidelines issued by the C.B.R. on 26-3-2002. It was pleaded that Sales were higher as compared to past so also the GP rate whereas Overheads were comparatively lower which left no justification for the proposed action for `set apart'.

5. The representative of the Revenue on his turn insisted that transparency in the treatment was evident as proper show-cause notice was issued thus no "maladministration" was occasioned. The contradiction in the conduct of the Complainant was pointed out inasmuch as that at the time of Survey in August, 2000, Sales were admitted to be at Rs.2.5 (M) but in the Return, filed after a month in September, these were mentioned at Rs.5.6 (M) whereas in the third round the Survey Team had estimated Rs.12.0 (M). According to the DR, when Survey form clearly mentioned, at the bottom, that if the estimate is not to the satisfaction of taxpayer, on his protest a team would be formed to conduct physical stock taking, the mere fact that the Complainant agreed with the proposed estimates by the Survey Team clearly showed that there was no harshness or arbitrariness, as alleged now, which was the reason for agreement with Survey Team. The DR concluded by submitting that Guidelines by the C.B.R. permitted selection of the cases where "evidence, information or reason to believe" existed about true particulars of the income having been suppressed. It was submitted that the report of the Survey Team was at-least "information" falling in the this category, therefore, reliance was rightly placed on it.

6: The survey was conducted in August, 2000 but the protest to the Commissioner about the estimation and entries made by the Surveys Team was made on 1-1-2001. At that time no time limit had been fixed for filing objection. It was by decision in Complaint No.582 of 2001 that it was observed that reasonable time could be a period of 90 days. In another case it was held that objection could be filed within 90 days from the date of decision in 582 of 2001, which was made on 16-8-2001. Therefore, any objection filed before 16-8-2001 will not be hit by the rule of 90 days. In this case objection was filed on 1-1-2001, which has not been decided as yet.

7. It is recommended that---

(i) the Commissioner to decide the objection and thereafter the assessment proceedings be completed.

(ii) Compliance be reported within 30 days.

C.M.A./780/FTOOrder accordingly.