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

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002, dated 18‑6‑2002, para. 9(a)(ii) (Self‑Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)(b)‑‑ Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Self assessment‑‑Assessment year 2002‑2003‑‑‑Setting apart‑‑‑Objection that Federal Tax Ombudsman has no jurisdiction as the matter related to assessment and the assessee had remedy to file appeal /revision/review‑‑ Validity‑‑‑Section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 places bar on matters relating to assessment of income where legal remedies of appeal/review/revision are provided under the law to contest the set‑apart of a return for the Total Audit by resort to para. 9(a) of the Self‑Assessment Scheme‑‑‑Matter clearly fell within the jurisdiction of Federal Tax Ombudsman as allegation about "maladministration" in the process of selection was to be investigated‑‑‑Objection was overruled by the Federal Tax Ombudsman.

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

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.7 of 2002, dated 18‑6‑2002, para.9(a)(ii) (Self‑Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self assessment‑‑‑Setting apart‑‑‑Assessment year 2002‑2003‑‑‑No account case‑‑‑Capital‑‑‑Cash in hand/prize bonds‑‑‑Reasons to believe‑‑‑Setting apart of case for Total Audit on the ground that cash and capital was available for conducting business and by rotating such capital 6 times the sales should have been higher than the declared‑‑‑Reason existed to believe that sales were suppressed‑‑‑Validity‑‑‑Nature of business was the manufacturer cum‑sale‑‑‑Non‑maintenance of books of accounts and admitted availability of foreign remittances were declared as cash in hand, were sufficient indicators promoting a "reason to believe" that true particulars of income may have been suppressed‑‑‑Complaint was considered to be without merit and the same was closed by the Federal Tax Ombudsman.

Muhammad Siddique Ch. for the Complainant.

Anwar‑ul‑Haq Jillani, D‑CIT for Respondent.

DECISION/FINDINGS

This complaint has been filed by an `individual' protesting against `set apart' of Return for the assessment year 2002‑2003 for `Total Audit' by resort to para 9(a) of the Self‑Assessment Scheme.

2. The facts, in brief, are that the complainant `individual' is a goldsmith. No books of accounts were maintained. Return for the assessment year 2002‑2003 was filed disclosing income at Rs.2,68,000 against Rs. 175,000 in the preceding year of 2001‑2002. The sales in the year‑under‑consideration were said to be Rs.2,180,000 compared to sales of Rs.2,000,000 in the preceding year. The return fulfilled requirements for SAS and was not picked up in the computer ballot for Total Audit. However, R‑CIT served a show-cause notice, dated 15‑1‑2003 expressing intention to set apart the Return for Total Audit for the following reasons:‑‑

"That you had shown Capital and Cash as on 30‑6‑2002 at Rs.500,000 and Rs.755,348 respectively, total of which comes to Rs.1,255,348. The said amount was available with you for conducting business and for rotation of stocks during the year. Since you are engaged in the business of Trading of Jewellery on retail basis therefore, by rotating 6 times Capital/Stocks available at Rs.1,145,000 your annual sales should have been declared at Rs.7,532,088 instead of declared at Rs.2,180,000. The declared sales appear extremely on the lower side when converted into weight (totals) of jewellry.

In view of the above there is sound reason to believe that actual income has been suppressed".

In reply, dated 30‑1‑2003 the complainant explained that (i) capital and cash were separately shown could not be clubbed; (ii) cash‑in‑hand represented foreign remittance, and (iii) that 6 times rotation of capital does not get support from law or any rule. This failed to convince the R‑CIT who finally `set apart' the Return for Total Audit vide order, dated 28‑3‑2003 for the same reason as conveyed in the show‑cause notice. It was observed by the R‑CIT that prima facie it was a `revenue potential' case. This is the cause of grievances.

3. Para‑wise comments by R‑CIT, Eastern Region, Lahore initially question the competence of the complaint for admission in view of the bar contained in clause (b) of subsection (2) of section 9 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance). It is further submitted that no "maladministration" was occasioned and the `set‑apart' was justified on the grounds that turnover‑to‑capital ratio, is a valid parameter to judge the quantum of business in those cases where no books of accounts are maintained. Thus complainant's. Return fell in the category where prima facie suppression of true particulars of income were evident because in retail business of jewellery 6‑times rotation on capital/stock of Rs.1,145,000 come to a turnover of Rs.2,180,000 which is meagre against the expected Rs.7,532,088‑ hence "reason to believe" that true ,particulars of income were suppressed.

4. The learned counsel for the complainant. Mr. M. Siddique Ch. (Advocate), admitted the availability of prize bonds, cash and US $ Bonds at Rs.500,000 and Rs.755,348 respectively but insisted that cash- in‑hand represented foreign remittances which were received at various times during the year and could not be rotated for full year. He relied on two decisions by the Appellate Tribunal, both, dated 16‑11‑2002, on I. T. A. No. 787/LB of 2002 and I. T. A. No. 2047/LB of 2002 where it has been held "the business capital cannot be enhanced summarily by estimating the cash/prize bonds as the available capital and both these items are declared under different heads...". It was pleaded that no evidence was brought on record to show that the liquid sources were converted into stock and utilized in the business.

4. Mr. Anwar‑ul‑Haq Jillani (D‑CIT) appearing for the Revenue submitted that it was important to keep in mind that the complainant had not maintained any books of accounts and that he was carrying on retail business as manufacturer‑cum‑vendor of jewellery where turnover normally goes up at 6 times of capital employed. Since no books of accounts were maintained it was convenient to camouflage the stock by declaring cash‑in‑hand. It also was pleaded that proof about conversion of liquid resources into stock was to be gathered at the tune of assessment. At present what was to be seen was a prima facie position prompting a `reason to believe' that particulars of income were suppressed.

5. After considering arguments from both the sides it is observed that the objection by the R‑CIT about competence of the complaint for admission is not well‑founded. Section 9(2)(b) of FTO Ordinance places bar on tatters relating to assessment of income where legal remedies of appeal/review/revision are available. It is undisputed that no appeal/ review/revision is provided under the law to contest the set apart of a Return for the Total Audit by resort to Para 9(a) of the Self‑Assessment Scheme. Therefore, the matter clearly falls within the jurisdiction of office of FTO as allegation about "maladministration" in the process of selection is to be investigated. It is, therefore, overruled:

7. As respects cases on which the learned counsel has placed reliance, these do not appear to be relevant because in I.T.A. No. 787 (ibid) the treatment of cash and prize bond as liquid assets for utilization in business was finally set and the case "remanded to the Assessing Officer for de novo decision after conducting enquiry with regard to availability of stock vis‑a‑vis capital". In I.T.A. No. 2407 (ibid) the issue related to the cash available with the wife of the taxpayer which was treated as available for the purpose of business, hence the finding that business capital cannot be enhanced summarily by estimating the cash available with the wife as available for business. Here also the assessment was set aside for de novo dispensation "after conducting inquiries with regard to the availability of stock vis‑a‑vis capital". As it is: (a) the nature of business being manufacturer‑cum‑sale, (b) the non maintenance of books of accounts, and (c) the admitted availability of foreign remittances which were declared as cash‑in‑hand, are sufficient' indicators promoting 'a "reason to believe" that true particulars of income B may have been suppressed. On this visualization the complaint is considered to be without merit. It is, therefore, FILED and the case is CLOSED.

C.M.A./895/FTO Complaint dismissed.