Income Tax Ordinance (XXXI of 1979)---

----S.63---Income Tax Ordinance (XLIX of 2001), S.116--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Assessment in the name of successors of business for the subsequent period---Validity---Assessment order gave no basis whatsoever for the income determined and was definitely the result of maladministration ---Action would be fair if a fresh inquiry was made and the facts clearly determined---Federal Tax Ombudsman recommended that a fresh enquiry be made regarding the ownership of the business during the assessment years 1999-2000 to 2001-2002 and if the contention of the complainant/assessee was found to be correct the assessment for the relevant years be amended under S.122 of the Income Tax Ordinance, 2001 to frame these at `Nil" income.

Nemo for the Complainant

Dr. Bashirullah Khan, DICT and Hussain Shahzad Raja, Income Tax Officer, for Respondent.

FINDINGS/DECISION

This is a complaint in which it is stated that the complainant was running a barber shop, which was closed in 1998 and since then the business is being run by two other persons, namely Mr. Masud and Mr. Nadeem in the same shop. It has been stated that despite this fact income tax has been levied on the complainant (for subsequent period), which may be ordered to be deleted.

2. In the respondent's reply a preliminary objection has been raised in the light of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. It is further stated that the complainant had failed to file returns for the years 1999-2000 to 2001-2002 in response to statutory notices issued under section 56 of the Income Tax Ordinance, 1979. Subsequent statutory notices were also statedly not complied with and the complainant's income was therefore assessed under section 63 at Rs.60,000, Rs.70,000 and Rs.8C,000 for the three years respectively. It is further stated that the complainant's contention that no business was done during these years is also not correct because no intimation regarding discontinuation of business was filed by him.

3. On the date of hearing no one attended on behalf of the complainant and the respondent's representatives were heard and the records examined. It was seen that no formal intimation of discontinuation of business was filed by the complainant but there is an order sheet entry, dated 7-6-1999 in the context of proceedings under section 116 of the Income Tax Ordinance initiated for earlier years due to alleged failure to file suo motu returns. In the order sheet entry it is noted that according to the complainant he could not file the returns due to illness and his father's death and that it was further stated that the complainant had left the business about 6 months ago. Inspector's report, dated 25-9-2002 (which date is prior to the finalisation of assessments for the three years) is also available on record in which it is, however, reported that the complainant is still the owner of the business but he -was not present in the shop at the time of the Inspector's visit. It was further reported that the person present in the shop stated that the owner, Shahdat Khan was at home and that the person was an employee and was getting a salary. Inquiries made in the locality were also stated to have confirmed this fact. The inspector's report is, however, inadequate and does not even mention the name of the so-called employee, when in view of the order sheet entry, dated 7-6-1999 the Inspector should have furnished a more thorough and specific report. In fact, however, the combined assessment order for the three years does not even mention the Inspector's report let alone the complainant's claim regarding discontinuation of business recorded vide order sheet entry, dated 7-6-1999. In fact the assessment order gives no basis whatsoever of the incomes determined and is definitely the result of maladministration. In the complaint and the accompanying affidavit it is categorically stated that since 1998 the business was being run by two other persons named Masud and Nadeem. Under the circumstances it would only be fair if a fresh inquiry is made and the facts clearly determined.

4. In the light of the above it is recommended that:--

(i)A fresh enquiry be made regarding the ownership of the business during the assessment years 1999-2000 to 2001-2002 and if the contention of the complainant is found to be correct the assessments for the relevant years be amended under section 122 of the Income Tax Ordinance, 2001 to frame these at `Nil' income.

(ii)A report on the action taken be furnished within 30 days.

C.M.A./838/FTOOrder accordingly.