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

----S. 2 (3)---Maladministration---Arbitrariness or highhandedness-- Although the determination/assessment of income was nest within the jurisdiction of the Federal Tax Ombudsman, yet the arbitrariness or highhandedness, constituting "maladministration", was within the scope of subsection (3) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

----Ss. 62, 61 & 56---Income Tax Ordinance (XLIX of 2001), S.122-- Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment without bringing on record any evidence about the extent and volume of business by conducting spot enquiry-- Demand of illegal gratification---Assessment with remarks as "business was flourishing one", "assessee had good business experience" etc. without any basis available on record---Validity---With a capital of Rs.75,000 it was hardly possible to earn an annual income of over Rs.2,00,000---Arbitrariness with which assessments had, been completed smacked of mala fides lending credibility to the allegation that the unreasonable dispensation was at the behest -of official who failed to secure financial benefit from the taxpayer--Federal Tax Ombudsman recommended that both the assessments may be amended under S.122 of the Income Tax Ordinance,. 2001 so as to subject the taxpayer to "the correct amount of tax" as envisaged by law.

Kanwar Jamal Akhtar for the Complainant

Muhammad Naeem, D-CIT for Respondent

DECISION/FINDINGS

This complaint has been filed by an `individual' who is retail vendor of Karyana. It alleges (i) arbitrary and harsh assessment for the years 2000-2001 and 2001-2002, and (ii) demand of illegal gratification with threat for harsh assessment by Mr. Muhammad Zafar (UDC) of Circle 12, Rajanpur:

2. The background of the complaint is that in response to notices under sections 56 and 61 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) return for the year 2000-2001 was filed, declaring "NIL" income and for the year 2001-2002 at Rs.32,000. The Assessing Officer finally completed the assessment by estimating Sales at Rs.1.4(M) in 2000-2001 and Rs.1.7(M) in 2001-2002 to which GP was applied at 10% and Overhead Expenses at Rs.50,000 and Rs.55,000 respectively thus determining Total respectively thus determining Total Income at Rs.160,000 and Rs.200,000 respectively in the two years (ibid).

3. Respondent has forwarded R-CIT, Multan para-wise comments, dated 19-9-2002 which assert that "sales have been framed by the Assessing Officer in exercise of the discretion". It further states that the allegations levelled against the official are "without evidence so no comments offered."

4. The learned counsel for the complainant submitted that business was started towards the end of December 2001. Therefore, in the income year relevant to the assessment was 2001-2002, business was run for six months only for which return was filed declaring income at Rs.32,000. However, since notice under section 56 had been issued in respect of an earlier year also return for 2000-2001 was filed declaring "NIL" income. As per Wealth Statement, the capital in business was disclosed at Rs.75,000. No enquiries were made nor any evidence called 'for and income was arbitrarily determined at exorbitant figures to 'punish' the complainant for not favourably responding to the demand for illegal gratification by concerned Clerk (Mr. Muhammad Zafar) who made several visits to the complainant promising help by way of a lenient assessment. The AR for the complainant recalled that this very Clerk was complained against by other taxpayers also as he is in the habit of extorting money by harassing taxpayers.

5. The DR promptly informed that the concerned official has since been suspended under disciplinary rules because of persistent complaints, the statement of allegation has been served and enquiries are in hand. As respects, assessments it was argued that the same should have been contested in appeal as the determination of the quantum for assessment, is beyond the jurisdiction of the Hon'ble FTO.

6. After hearing the arguments from both the sides it is clear that the concerned official definitely acted in a manner `contrary to Government Servant Conduct Rules for which proceedings are reported to be, in hand. It has already been ruled in several decision/findings that although the determination/assessment of income is not within the jurisdiction of the 'FTO, yet the arbitrariness or high-handedness, constituting "maladministration", is within the scope of subsection (3) or section 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance. In the present case the arbitrariness is evident from the fact that without bringing on record any evidence about the extent and volume of business by conducting spot enquiry, which was all the more necessary in the case of a new assessee, the Assessing Officer made such remarks as "business is flourishing one", "assessee has goods business experience" etc. There is no basis available oil record for such observations. The Assessing Officer has nowhere disputed the declared quantum of capital hence it also stands to reason that with a capital of Rs.75,000 it is hardly possible to earn an annual income of over Rs.200,000. The arbitrariness with which assessments have been completed smacks of mala fide lending credibility to the allegation that the unreasonable dispensation was at the behest of official who failed to secure financial benefit from the taxpayer. On this view of the matter but considering that the official is already being proceeded against, it is recommended that both the assessments may be amended under section 122 of the Income Tax Ordinance, 2001 so as to subject the taxpayer to "the correct amount of tax" as envisaged by law.

7. Compliance be reported within 30 days of the receipt of this Order.

C.M.A./794/FTOOrder accordingly.