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

----S. 138---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Revision by Commissioner-- Duplicate assessment---Since assessment had already been made under Self-Assessment Scheme, this had to be cancelled, being a 'duplicate assessment, when revision petition was filed under S.138 of the Income Tax Ordinance, 1979 to Zonal Commissioner.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Income Tax Ordinance (XXXI of 1979)---Maladministra tion---Transfer of documents---Duty of the Assessing Officer of the Circle who received the documents, to transfer these documents was to the relevant circle.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)(ii)---Maladministration---Negligence---Effect---Negligence deprives a taxpayer of his vested legal right to be judged fairly and, at the same time betrays unjust conduct of tax functionaries.

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

----S. 63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Ex parte assessment did not vest the Assessing Officer with the authority to be arbitrary or vindictive---Ex parte assessment had to be a "best judgment assessment" having an imprint that effort was made to determine the income as nearly as possible to correct figure.

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

----S.63---Income Tax Ordinance (XLIX of 2001), S.122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Ex parte assessment---Income was determined by a `rule of thumb' at net figures, without any computation or working---Assessment order was a cyclostyled in which blanks had been blindly filled---Neither there was discussion of past history nor an enquiry was conducted to determine the extent and volume of business-- Validity---Department's plea that orders were not `perverse, arbitrary or unreasonable' or that these were not "contrary to law" and a departure from established practice or procedure as per provision of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 could not be accepted---Federal Tax Ombudsman recommended that Commissioner of Income Tax by suo motu resort to S.122 of the Income Tax Ordinance, 2001 amend the impugned assessments for the years 1994-95 and 1995-96, so as to levy "the correct amount of tax for the tax year" and .the then Assistant Commissioners of Income Tax (wherever posted now) be given a warning, placing a copy thereof on their character rolls, for being arbitrary and negligent in the discharge of their duties.

A.A. Zubari, Adviser.

Nemo for the Complainant.

Syed Muhammad Ali, D-CIT for Respondent.

DECISION/FINDINGS

The Complainant is an Iron-Smith engaged in the manufacture and sale of gates and shutters. He claims to be an old person, a taxpayer since 1981-82 and alleges arbitrary, excessive and ex parte assessments for the years 1994-95 and 1995-96 when, due to sickness, his business dwindled which was the cause of fall in the declared income. He prays that the appeals having been withdrawn from the Appellate Tribunal, necessary relief be granted to save him from the coercive recovery action by the Department.

2. The facts leading to the complaint are that return was not filed for the assessment year 1994-95 and notices under section 56 as also under section 61, remained uncompiled. The ex parte assessment for 1994-95 framed on 4-6-1997 under section 63 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) determining income at Rs.201,000 when challenged was set aside by the CIT (Appeals) on 24-7-1997. During the re-assessment proceedings for the year 1994-95 it was discovered that return for the year 1995-96 also had not been filed. Therefore, notice under section 56 for the year 1995-96 were issued on 1-11-1997,in response to which Complainant's A.R.M. Afzal and Company informed on 19-11-1997 that returns for the assessment years 1994-95 and 1995-96 were filed within due date and requested the A-CIT to "verify the entitlement of the assessee under SAS and in case the return does not qualify under SAS reasons thereof may kindly be communicated to the 'assessee to enable him to attend the assessment proceedings before your good-self to finalise the assessment under normal law." The A-CIT then required the complainant to furnish the following documents:--

(i) Duplicate returns for 1994-95 and 1995-96.

(ii) Proof of filing return with due date.

(iii) Proof of payment regarding discharge of tax liability.

(iv) The copies of Trading and P&L Account filed with the returns.

Alleging non-compliance re-assessment for the year 1994-95 was made ex parte on 18-2-1999 repeating the same figures of income as originally determined on 4-6-1997.

3. The respondent's reply, dated 8-7-2002 denies "maladministra tion" and points out that the complainant has withdrawn the appeal filed with the Appellate Tribunal and the rectification application filed with the CIT(A) in respect of orders, dated 26-6-2002 and 21-6-2002 by the two authorities.

4. None was present for the complainant when called out, as also on 12-8-2002, when the complainant had absented whereas the Department's representative was present. However, in the hearing held on 26-12-2002, Mr. Ashraf had attended and submitted his arguments. Therefore, the complaint is taken up for decision on merits with the help of representative of the respondent who is present and has brought the record.

5. It was admitted by the DR that due to inadvertence the order passed under section 63/132 for 1994-95 and 1995-96 wrongly included assessments for 1996-97. Income for these three years was estimated as under:--

1994-95Rs. 201,000

1995-96Rs. 205,000

1996-97Rs. 210.000

Since assessment for 1996-97 had already been made on 24-6-1997 under SAS, this has to be cancelled, being a duplicated assessment; when revision petition was filed under section 138 to Zonal Commissioner. As respects assessment for 1994-95 and 1995-96, appeals were preferred to CIT(A) who dismissed, these on 11-9-2000 as `barred by time .and the second appeals before the Appellate Tribunal, though filed, were withdrawn on 26-6-2002. It was asserted that the assessments for these years, as framed on 18-2-1999 stand good, hence steps for 'recovery of tax arrears in respect of these were validly initiated. The DR emphasised the disinterestedness of the complainant about the fate of his complaint, a casual attitude which twice resulted in ex parte assessments. Attempt was made to make out a case for dismissal of the complaint contending that no 'maladministration' was caused hence there was no merit.

6. A scrutiny of record clearly falsifies the claim that no 'maladministration' was caused because it transpired that:--

(i)none of the notices under section 61 mentioned in the assessment framed on 18-2-1999, on which action under section 63 was based, were properly served:

(ii)the signatures of Muhammad Ashraf obtaining on these notices, when compared with those available on the returns of income obtaining on record and the I.D. Card, reveal discernible dissimilarity which arouse suspicion about these, having beer forged;

(iii)assessment for the year 1995-96 was included in the consolidated order, dated 18-2-1999 under section 62/132 without realizing that assessment order for that year was never the subject-matter of appeal before the CIT(A);

(iv)assessment for the year 1996-97 was framed on 18-2-1999 in complete disregard of the fact that, the return stood accepted under SAS with the result that this duplicate assessment had to be cancelled by the Commissioner; and

(v)the service of notices under section 56 and 61 for the years 1994-95 and 1995-96 were not legal inasmuch as these were not served on Mr. Muhammad Ashraf, the Assessee/Complainant or any authorised person.

All these irregularities/illegalities rendered the assessments for the years 1994-95/1995-96 void ab initio.

7. It is pertinent that the complainant all along claimed to have filed the return for the years 1994-95 under SAS at an income of Rs.31,250 on which tax amounting to Rs.425 was paid whereas the return for the year 1995-96 was filed to declare income falling "below the taxable limit" as, due to illness the business had suffered. The record of Circle-16 is silent about the receipt of these returns. Scrutiny of documents filed alongwith the complaint reveals that the return for the year 1994-95 was filed in Circle-3, Zone-A; Lahore and the tax of Rs.425 was paid through Pay Order, dated 31-8-1994 on Allied Bank Ltd. In support of this contention photocopies of the Peon Book and of Pay Order were attached. It was the duty of the Assessing Officer, Circler-3 which he failed to do; and thus the complainant had, to suffer as his income for the year 1994-95 was assessed under section 63 at Rs.201,000 as against an income of Rs.31,250 declared under the Self Assessment Scheme. Such negligence deprives a taxpayer of his vested legal right to be judged fairly and, at the same time betrays unjust conduct of tax functionaries.

8. The record further confirms that the complainant is an assessee since the assessment year 1981-82 and has been filing his returns regularly showing gradual increase over the years. Starting, from Rs.15,000 in 1981-82 came to be assessed-at Rs.50,900 and Rs.72,400 in 1999-2000 and 2000-2001 respectively. The complainant has claimed to have fired returns declaring income at Rs.31,250 in 1994-95 and as "below taxable limited", due to his illness, in 1995-96 but was assessed at Rs.201,000 and Rs.205,000 respectively. In the succeeding years of 1997-98 and 1998-99 income was assessed at Rs.40,000 and Rs.50,800 respectively. No detailed discussion is needed to infer that the treatment meted out by the Department in 1994-95 and 1995-96 was a marked departure, which distorted the gradually rising graph of declared/ assessed income over the years. The income determined in these years is much too exorbitant compared to the quantum in the preceding and succeeding years. Even the reality that these assessments were ex parte, due to whatever reason, did not vest the Assessing Officer with the authority to be arbitrary or vindictive. It is well settled that an ex parte assessment has to be a "best judgment assessment" having and imprint that effort was made to determine the income as nearly as possible to the correct figure. The assessment, as made originally in June, 1997 and re assessment, dated 18-2-1999, hopelessly fall to measure up to these standards. None of these discuss (a) the past treatment, nor(b) an enquiry was conducted to determine (c) the extent and volume of business, (d) the GP rate generally obtaining in the complainant's line of business and (e) the overhead expenses necessary to run the business etc. On the contrary, income has been determined by a `rule of thumb' at net figures, without any computation or working. Original assessment under section 63 for 1994-95 is a cyclostyled order in which blanks have been blindly filled in. It is hard to accept the Department's plea that these order not `perverse, arbitrary or unreasonable' or that these were not "contrary to law" and a "departure from established practice or procedure". All these deficiencies fall in the definition of "maladministration" as per subsection (3) of section 2 of the Establishment of the Office of Federal Tax. Ombudsman Ordinance 2000. It is consequently recommended that:--

(i)Commissioner of Income-tax by suo motu resort to section 122 of Income Tax Ordinance amend the impugned assessments for the years 1994-95 and 1995-96, so as to levy "the correct amount of tax for the tax year-

(ii)Mr. Shahbaz Khan, and Mr. Muhammad Imran Mirza, the then A-CITs. (wherever posted now) be given a warning, placing a copy thereof on their character rolls, for being arbitrary and neglectful in the discharge of their duties.

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

C.M.A./796/FTOOrder accordingly.