(a) Income‑tax‑‑‑

‑‑‑‑Silence maintained by the concerned officer and not replying the letters leads to the presumption, that the allegations made were correct unless rebutted legally.

(b) Income‑tax‑‑‑

‑‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Maladministration‑‑‑Ignoring of direction of senior officials‑‑‑Direction of the Regional Commissioner of Income‑tax to dispose of assessee's representation under intimation to his office was obviously ignored' and not complied with by the Commissioner of Income‑tax‑‑‑Such conduct of the Commissioner of Income‑tax fell under the definition of maladministration as contained S.2(3)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑S. 65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Tax Amnesty Scheme, 2000‑‑‑Show cause notice for initiation of proceedings under S.65 of the Income Tax Ordinance, 1979‑‑‑Filing of declaration of such concealment under Tax Amnesty Scheme‑‑‑Validity‑‑‑Allegation that the Assessing Officer illegally issued notice under S. 65 of the Income Tax Ordinance, 1979 deliberately ignoring the Tax Amnesty Scheme, 2000 did carry weight because declaration was filed on 4‑6‑2000 when no proceedings were pending against the declarant in respect of years to which declaration related‑‑‑Show‑cause notice asking why proceedings should not be initiated under S. 65 issued/served on 31‑5‑2000 had no validity in law‑‑ Notice under S. 65 of the Income Tax Ordinance, 1979 had been served on 24‑6‑2000 after filing of declaration‑‑‑Declaration was validly filed.

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

‑‑‑‑Ss. 65, 59 & 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Tax Amnesty Scheme, 2000‑‑‑C.B.R. Circular No.4 of 2000, dated 1‑3‑2000 para. 10(1)---C.B.R. Circular No.6 of 2000, dated 28‑3‑2000‑‑‑Assessee had not declared income from supplies‑‑‑Show‑cause notice was issued by the Assessing Officer for initiation of proceedings under S.65 of the Income Tax Ordinance, 1979‑‑‑Assessee filed declaration under Tax Amnesty Scheme, 2000‑‑‑Assessing Officer still issued statutory notice under S.6.5 of the Income Tax Ordinance, 1979‑‑‑Assessee reiterated that after filing of declaration under Tax Amnesty Scheme, 2000, the issuance of notice under S.65 of the Income Tax Ordinance, 1979 was illegal ‑‑‑Validity‑‑ Para. 10(1) of Tax Amnesty Scheme, 2000 provide for preliminary examination of all the declaration filed under the Scheme‑‑‑Preliminary examination by no stretch of imagination would include fishing and roving enquiries and scrutiny required while completing an assessment under S.62 of the Income Tax Ordinance, 1979‑‑‑Not to speak of the declaration filed under Tax Amnesty Scheme, 2000 which provided immunity in para. 8 of Circular No.4 of 2000, even a normal assessment made under S.59 or S.62 of the Income Tax Ordinance, 1979 could not be reopened on the basis of mere presumption without having substantial evidence regarding the quantum of income declared‑‑‑Such presumptions would not constitute definite information while issuing notice under S. 65 of the Income Tax Ordinance, 1979 for reopening the assessment‑ Preliminary examination of declaration as provided in para. 10 of C.B.R. Circular No.4 of 2000 was further explained by C.B.R. Circular No.6, dated 28‑3‑2000 by providing examples of mistake/deficiency in the declarations filed under the Amnesty Scheme‑‑‑No such example existed would enable the Assessing Officer to question the quantum of undisclosed income without having positive and definite evidence--Proceedings initiated under S. 65 of the Income Tax Ordinance, 1979 after complainant had filed declaration under the Tax Amnesty Scheme. 2000 were unjust and unlawful‑‑‑Federal Tax, Ombudsman recommended that (i) the Commissioner of Income‑tax by resort to S.138 of the Income Tax Ordinance cancel the Additional Assessments framed under S.65 for the years 1996‑97 to 1998‑99; (ii) the declaration filed under Tax Amnesty Scheme, 2000 be accepted by the Assessing Officer as it had become "final" in terms of C.B.R. Circular No.1 of 2001, dated 29‑1‑2001 and (iii) the Regional Commissioner of Income‑tax call the explanation of the Commissioner for ignoring his directions contained in letter, dated 2‑3‑2001.

Ahmad Shuja Khan for the Complainant.

Mujtaba Bhatti, I.A.C. and Nabeel Rana, A.C.I.T. for Respondent.

DECISION/FINDINGS

The complainant, a manufacturer of sweets, is an existing Income Tax Assessee on National Tax Number 21‑11‑0723338 of Circle -II, Zone‑C, Lahore.

2. It is stated that the assessment for the business income derived from manufacturing and sales of sweets was completed up to the assessment year 1999‑2000. It is further, stated that complainant received a show‑cause notice on 31‑5‑2000 from the ACIT concerned seeking explanation as to why notice under section 65 may not be issued for the assessment years 1996‑97, 1997‑98 and 1998‑99 as the income from supply of milk was not declared in the Income Tax Return.

The facts of the case are briefly stated as under:

3. The department came to have the intelligence that the complainant had not declared income from supplies of fresh milk to Mahar Food Industries (Pvt.) Limited in the period relevant to the years 1996‑97 to 1998‑99 for which assessment had already been finalised under section 59(1) of the Income Tax Ordinance. On receipt of show cause notice referred above, the complainant filed a declaration on 4‑6‑2000 under the Tax Amnesty Scheme (TAS‑2000) showing a sum of Rs.289,511 as undisclosed income for the assessment years 1995‑96 to 1999‑2000. It is alleged that the Assessing Officer was duly informed vide his Letter No. 12/XXV, dated 6‑6‑2000 that since declaration under TAS‑2000 had been filed in this case, notice under section 65 could no longer be issued. The Assessing Officer still issued statutory notice under section 65 on 24‑6‑2000 for the assessment years 1996‑97 to 1998‑99. The complainant again informed the ACIT vide his letter, dated 28‑6‑2000 reiterating that after filing of declaration under the Tax Amnesty Scheme the issuance of notice under section 65 was illegal.

However, the complainant was obliged to file return `under protest' on the insistence of the Assessing Officer.

4. It is further, alleged that on 12‑10‑2000 a letter was addressed to the Commissioner of Income Tax, Zone‑C, Lahore requesting him to issue instructions to the ACIT to stop proceedings in view of the facts of the case as stated above. It is further alleged that no reply to the letter was ever given by the CIT. In the meantime, on 27‑11‑2000, the ACIT wrote a letter to the complainant, conveying:

"If you want to avail the TAS‑2000 ....The entire supplies will be declared in the column of `undisclosed income' and tax @ 10% shall be paid. The tax liable to be paid as indicated above should be deposited within one month of the receipt of this show‑cause, failing which the declaration shall stand rejected. "

5. It is further alleged that the ACIT vide his letter, dated 30‑12‑2000 (served on the complainant on 8‑1‑2001) informed that since taxpayer has failed to remove the deficiency as pointed out in the letter, dated 27‑11‑2000, declaration has been cancelled with‑the prior approval of the Competent Authority. The complainant then made a representation to the RCIT on 24‑2‑2001 protesting that the declaration was wrongly rejected. The RCIT forwarded it to the CIT, Zone‑C, on 2‑3‑2001 with the directions:

"You are requested to please dispose of assessee's representation at your end under intimation to this office."

6. No reply to this communication was given to the complainant nor any instruction issued to the ACIT. Additional assessments were in the meantime framed on 28‑6‑2001 under sections 62/65 for the assessment years 1996‑97 to 1998‑99, appeals against which were filed to the AAC but later withdrawn to approach this office. The learned counsel of the complainant relied on a decision by the Income Tax Appellate Tribunal reported as 1979 PTD (Trio.) 39 wherein it was held that a deficiency, if cured before the hearing of an appeal, makes the appeal competent for hearing and hence the present complaint has become competent for adjudication as the original deficiency of the .matter being sub judice has since been removed by withdrawal of the appeal which had been: filed before the AAC against the additional assessments framed under sections 62/65.

7. The respondents have filed parawise comments vide Letter No. 1913, dated 6‑10‑2001. It is contended therein that the complaint relates to assessment of income and interpretation of law and hence falls outside the jurisdiction of the Federal Tax Ombudsman under section 9(2)(6) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

8. The arguments of the two sides having been heard, it needs not long to overrule the Department objection as regards bar on jurisdiction. This issue has been resolved in Complaint No. 1433 of 2001 by decision, dated 15-12‑2001 wherein it has been held that:‑‑

"It is clear that present complaint does not focus on the validity of the assessment or on the quantum of assessed income but primarily relates to the acceptance/rejection of a declaration filed under TAS‑2000 and this substantially distinguishes it from such cases as have been excluded from the jurisdiction of the FTO as per subsection (2) of section 9. The thin line that identifies 'maladministration' as respects, arbitrary rejection of a. declaration is to be focused upon when appraising whether rejection of. the claimants ,declaration under the Amnesty Scheme against which no appeal is provided either in the Income Tax Ordinance of the TAS‑2000, is illegal arbitrary and unjust , as distinct from a dispute concerning the determination of income and the process of assessment. Such a case falls in the domain of Federal Tax Ombudsman. In this view of the matter, the objection by the Department is overruled."

9. Taking up the complainant's grievance against the Commissioner's neglect to respond to his letters, dated 12‑10‑2000 and 4‑6‑2001, the Department has not furnished any evidence except a general denial which does not hold water. If the Commissioner had replied the letters the same should have been produced. This clearly proves that the Commissioner has neglected in the discharge of his duties particularly as the C.B.R. in implementation of recommendation of the Federal Tax Ombudsman had issued instruction to reply all letters and communications received by them within a fixed time. The Commissioner has ignored it. The silence maintained by the A Commissioner and not replying the above letters leads to the presumption that the allegations made by the complainant are correct unless rebutted legally.

10. The other allegation about dereliction of duty by ignoring the direction of the RCIT to dispose of assessee's representation under intimation to his office was obviously ignored and not complied with. No B evidence to the contrary was tendered by the Representative of the respondent who admitted that neither the CIT's office nor RCIT have on record a response from the CIT to the direction by his superior authority. Obviously the conduct of the Commissioner falls under the definition of 'maladministration' as contained in clause (ii) of subsection (3) of p section 2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

11. Coming to the allegation against the ACIT of illegally issuing notice under section 65 deliberately ignoring the TAS‑2000 Declaration does carry weight because declaration was filed on 4‑6‑2000 when no proceedings were pending against the declarant in respect of years to which declaration related. The so‑called show‑cause notice asking why proceedings should not be initiated under section 65 issued/served on 31‑5‑2000 has no validity in law. Notice under section 65 had been served on 24‑6‑2000 after filing of declaration. The declaration was, therefore, validly filed.

12. The next grievance about framing additional assessment without waiting for instructions from CIT, despite having knowledge, is all the more glaring because the Assessing Officer had himself addressed a letter to the IAC on 21‑4‑2001 expressly suggesting that the declaration merited acceptance thus rendering action under section 65 redundant. Despite this conviction he issued notices under section 61 and finalized the additional assessment under section 65.

13. The objection to application of an excessive G.P. rate, not supported by parallel cases, is not a matter fit for consideration as the very action under section 65 of the Ordinance is not being approved. Similar situation exists with respect to estimate of sales. Furthermore, the Assessing Officer had no substantial evidence regarding quantum of concealed income.

14. Coming to the rejection of the declaration, reference may be made to the judgment by the High Court of Sindh in Constitutional Petitions Nos.S‑636 and 640 of 2001, decided on 30‑8‑2001 where after an exhaustive discussion it has been held that:

"After receiving of a declaration under the Amnesty Scheme, the Assessing Officer, was merely empowered to subject the declaration to preliminary examination" (Para. 26), and further: `The preliminary examination of the declaration shall be confined to the contents of declaration only and the Assessing Officer has not been empowered to initiate fishing and roving inquiry or order to start full‑fledged assessment proceedings, as in the case of normal assessment' (Para. 27). "

15. It may be worthwhile to mention here that para. 10(1) of Circular No.4 of 2000 provides for preliminary examination of all the declarations filed under the Scheme. This preliminary examination by no stretch of imagination would include fishing. and roving enquiries and scrutiny required while‑completing an assessment under section 62 of the Income Tax Ordinance. Not to speak of the declaration filed under Tax Amnesty Scheme, 12000 which is provided immunity in para. 8 of Circular No.4 of 2000 even a normal assessment made under sections 59 or 62 of the Ordinance cannot be reopened on the basis of mere presumption without having substantial evidence regarding the quantum of income declared. Such presumptions would not constitute definite information while issuing notice under section 65 for reopening the assessment.

16. The preliminary examination of declaration as provided in para. 10 of Circular No.4 of 2000 has been further explained by Circular No.6, dated 28‑3‑2000 by providing examples of mistake/ deficiency in the declarations filed under the Amnesty Scheme. There is no such example as would enable the Assessing Officer to question the quantum of undisclosed income without having positive and definite evidence.

17. In. view of the above discussions it is established that the proceedings initiated under section 65 after complainant had filed declaration under the Tax Amnesty Scheme, 2000 were unjust and unlawful. It is, therefore, recommended as under:

(1)The CIT by resort to section 138 of the Income Tax Ordinance, cancel the Additional Assessments framed under section 65 for the years 1996‑97 to 1998‑99.

(2)The Declaration filed under TAS‑2000 be accepted by the Assessing Officer as it has become `final' in terms of C.B.R. Circular No. 1 of 2001.

(3)The RCIT calls the explanation of the Commissioner, (Mr. Anwar Ahmed), for ignoring his directions contained in letter, dated 2‑3‑2001.

(4)Compliance report be submitted within 30 days of the receipt of this order.

C.M.A./463/FTOOrder accordingly.