Income Tax Ordinance (XXXI of 1979)---

----S. 66-A & 63 Establishment of office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)---powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Best judgment assessment---Ice factory---Assessment of. income without applying a formula based upon the consumption of electricity units, capacity of the plant and number of working days---Rejection' of payment of interest on loan without verification---Ignoring of lease period- of the factory-- Validity ---Re-assessments had not been made in a proper way and according to law and earlier figures of assessed income had simply been repeated---Assessment had also been made ex parte without .obtaining information from WAPDA regarding electricity consumption and without verifying the position of bank loan and interest---Re-assessment and assessment orders had been made in haphazard and slipshod manner-- All such action amounted to maladministration--Federal Tax Ombudsman recommended that the Commissioner should amend the assessment orders for the assessment year 1989-90 to 1998-99 making such alterations to ensure that the-petitioner was liable to correct amount of tax and the assessment order be amended, after giving a reasonable opportunity of hearing to the petitioner and examining the documents evidence furnished by him.

Aslam Khan Marwat for Complainant.

M. Usman Khan, ACIT for Respondent.

FINDINGS/DECISION

Brief facts of the case are that the petitioner runs an ice factory. The original assessments for the years 1989-90 to 1996-97 were set side by the AAC vide order, dated 29-11-2000 for making re-assessments with the specific directions that detailed local and spot enquiries should be made to ascertain the capacity of the factory, yearly connection and disconnection certificates for all the years under appeals should be obtained from WAPDA authorities to verify the working days and block rates of ice should also be obtained from District Administration Bannu. It was also observed by the AAC that the combined assessment order has been passed in this case adopting bald estimates of income and carries tampering/cutting in the figures of net income.

2. The petitioner further submitted that re-assessments for the said years were finalised ex parte on 29-6-2002 for default of notices under section 61, as alleged by the department, and the originally assessed incomes were repeated and the income tax previously imposed at Rs.3,62,371 was raised without any reason to Rs.4,16,179.

3. It is further submitted that reply furnished by the petitioner in response to notice under section 62 on 8-6-2002 was totally ignored wherein the Assessing Officer was requested to verify claim pit bank loan and interest paid, from the Bank concerned under

section 144. It was also submitted before the Assessing Officer that against the accumulated loan and interest, an amount of Rs.15,29,810 was adjusted according to and out of Court settlement on 2-1-1997 and the .Ice Factory was taken over by United Bank Ltd. Peshawar. But the claim of the petitioner was allegedly rejected without verification.

4. The complainant further pleaded that all the evidence furnished by him and instructions issued by the AAC were totally ignored and previous assessments were. repeated without any DCR No. and date on 29-6-2002. Even notice for recovery is without any number and section of law/rule of Income Tax. Assessments for the years 1997-98 and 1998-99 have also been framed fictitiously under section, 63 without service of statutory notices no the petitioner, and the penalty/recovery, notices were allegedly issued on the same day with mats fide intention to harass the petitioner.

5. In reply the respondent has submitted that re-assessment for the assessment years 1989-90 to 1996-97 were finalised ex parte under section 63 of the repealed Income 'Tax Ordinance, 1979 for default of notices under section 61 of the said Ordinance. For the assessment years 1997-98 and 1998-99 original assessments were, however, also made ex parte under section 63 for default of statutory; notices crating the demand of Rs.11,677 and Rs.23,038 for the respective years.

6. It is further submitted by the respondent that while proceeding afresh for re-assessment under the directions of the learned AAC, information was obtained from WAPDA and complainant's reply regarding claim of interest of Rs. 4,00,000 on ADBP's loan was duly considered and rejected for want of proper evidence. The re-assessment order reportedly does not contain any tampering/cutting and proper entries were made in DCR vide No.8167 to 8174, dated 29-6-2002. the recovery notice intimating outstanding arrears for the assessments years 1986-87 to 1996-97 were statedly issued on 15-10-2002 and served on 16-10-2002 requesting the complainant to clear the Government dues. Further, as the petitioner had not attended the assessment proceedings in response to notice under section 61, a penalty notice under section 116 for default of notice under section 61 was issued alongwith demand notice and assessment order on 9-8-2002 while the recovery notice was issued on 15-10-2002 with no malice or mala fide intentions.

7. The representatives of the petitioner and the respondent appeared who were heard and their contentions have been considered. It is noticed that while making the re-assessments for the years 1989-90 to 1996-97 the directions of the , Appellate Authority have not been followed. It is a well settled practice that in case of the assessment of income of an ice factory production of ice blocks is worked out by applying a formula based upon the consumption of electricity units, capacity of the plant and number of working days. The Assessing Officer has not followed the formula to work out the annual production of ice for any of these assessment years. The petitioner's claim for payment of loan and interest thereon has been rejected without proper verification. The record also shows that the factory remained on lease for various periods during some of the assessment years. This fact has also been ignored. The petitioner's contention that the factory had been taken over by the bank also needs verification.

8. In view of the facts mentioned above, it is quite evident-that the re-assessments have not been made in a proper way or according to law and earlier figures of assessed income have simply been repeated. The assessment for the years 1997-98 and 1998-99 have also been made ex parte without obtaining information from Wapda regarding electricity consumption and without verifying the position of bank loan and interest during these years. The re-assessment and assessment orders have been made in haphazard and slipshod manner. All this amounts to maladministration.

9. In view of the facts and circumstances of the case as discussed above, it is recommended that:--

(i)The Commissioner amend the assessment orders for the assessment years 1989-90 to 1998-99 making such alternations to ensure that the petitioner is liable to correct amount of tax.

(ii)The assessment order be amended after giving a reasonable opportunity of hearing to the petitioner and examining the documents/evidence furnished by him.

(iii)Compliance be made within 30 days of the receipt of the order.

C.M.A./842/FTOOrder accordingly.