Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 93 & 63‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Recovery of tax‑‑‑Best judgment assessment‑‑‑Illegalities and irregularities in the assessment‑‑ Undue pressure for recovery of tax from successor of business created against the predecessor in spite of there being no nexus between the two‑‑‑Validity‑‑‑Department neither had any plausible explanation for these irregularities nor could justify pressure on the complainant for the payment of demand without establishing any link or relationship of the business conducted in two different names‑‑‑Assessment proceedings right from issuance of notice under S.56 of the Income Tax Ordinance, 1979 up to the service of Demand Notice had been conducted in an extremely irresponsible and casual manner which betrayed "neglect, inattention, incompetence, inefficiency" in the discharge of duties and responsibilities‑‑‑As no legal basis existed to pressurize the complainant for the recovery of the demand the assessment as well as recovery proceedings were totally unreasonable, unjust and arbitrary falling within the definition of "maladministration" as provided in the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income Tax, be directed to set aside the consolidated assessments framed under S.63 for the years 1997‑98 to 2000‑2001 by invoking the provisions of S.138 of the Income Tax Ordinance, 1979 the recovery proceedings be immediately stopped and the Officers and the Inspector involved in the assessment proceedings be put under "counselling" and be directed to improve their performance.  

Syed Sajid Ali, I.T.P. for the Complainant.

Mrs. Nabeela Iqbal, D.C.I.T. for Respondent.

DECISION/FINDINGS

The complainant is aggrieved by the allegedly illegal pressure being exerted on him by the A‑CIT, Circle‑II, Zone‑C, Lahore for the recovery of Income‑tax demand created against Messer Shan Motor Pumps for the assessment years 1997‑98 to 2000‑2001 aggregating to Rs.9,300.

2. The Respondent has reported vide Letter No.RCIT/J -85/FTO/S.O.I, dated 28‑3‑2002 that the assessments for the years 1997‑98 to 2000‑2001 were framed exparte under section 63 of the Income Tax Ordinance, due to deliberate non‑compliance of notices issued under sections 56 and 61. The income was assessed on the basis of the extent of business reported by the Circle Inspector.

3. The Complainant's AR stressed on the point that previously business was being run by one Arshad Kumhar under the business name "Shan Motor Pumps" as a vendor of motor pumps. After the cessation of that business, the premises was occupied by the complainant on 20‑8‑2000 for the specialized services of boring the Water Pumps under the name and style "Arshad Boring Works". It was stated that the Complainant, Mr. Muhammad Arshad son of Jalal‑ud‑Din, had no concern, whatsoever, with the previous occupant of the shop i.e. Mr. Muhammad Arshad Kumhar. There was, therefore, no justification for demanding from him payment of tax imposed on Shan Motor Pumps.

4. The Respondent's representative presented the assessment records of Shan Motor Pump, Multan Road, Lahore bearing National Tax Number 21‑11‑32382. Perusal of record, consisting of one cover only, showed that there was no basis for the start of Income‑tax proceedings against Shan Motor Pump, Hanjerwal, Multan Road, Lahore. The first entry on the Order Sheet is dated 15‑5‑2001 with regard to issuance of notice under section 56. The scrutiny of the assessment record showed that it is a typical example of how record should not be kept, because of irregularities such as:‑‑‑

(i) The Respondent's representative stated that proceedings under the Income Tax Ordinance, were initiated on the basis of Inspector's survey but no survey extract is available on the file.

(ii) One combined notice was issued under section 56 for all the tour years i.e. the assessment years 1997‑98 to 2000‑2001 for filing the returns of income regarding said years.

(iii) The service of notice under section 56 was not on the proprietor of the business or on any authorized person.

(iv) Notices under section 61 were issued for 8‑9‑2001. 23‑10‑2001 and 14‑01‑2002 but none of them fulfills the requirements of proper legal service.

(v) Inspector's report, dated 16‑1‑2002 appears to be a `table enquiry' as it is not supported by any statement recorded on the spot or any facts discovered by the visit.

(vi) The assessment order passed under section 63 is absolutely sketchy and does not even mention the date of issuance of notices under sections 56 and 61.

(vii) There is nothing in the assessment order to establish that Mr. Muhammad Arshad son of Jalal‑ud‑Din, the Complainant, was proprietor or a partner of Shan Motor Pump, or he was successor‑in‑business of Mr. Muhammad Arshad Kumhar, for the business conducted under the name and style of Shan Motor Pump.

5. The Order Sheet entry is incomplete in many respects. For instance (a) notice under section 61 was issued for 23‑10‑2001 but the Order Sheet is silent about proceedings on that date; (b) last notice under section 61 was issued for 14‑01‑2002 but there is no entry for this date in the Order Sheet and (c) the Order Sheet does not disclose on which date the Assessing Officer made up his mind to frame the assessment exparte under section 63. The Assessing Officer proclaims to have made the assessment on the basis of Inspector's report dated 16‑1‑2002 which as discussed above, was an effortless and unreliable piece of evidence. It is amazing that the combined ex part‑‑ assessment under section 63 for the years 1997‑98 to 2000‑2001 passed on 17‑1‑2002 bears NTN 21‑11‑32378 whereas the Demand Notice issued alongwith the assessment order bears a different NTN 21‑11‑TR‑32382.

6. The Representative of the Department neither had any plausible explanation for these irregularities nor she could justify pressure on the complainant for the payment of the above mentioned demand of Rs.9,300 without establishing any link or relationship of the business conducted in the name of Shan Motor Pump With Arshad Boring Works. The assessment proceedings right from issuance of notice under section 56 upto the service of Demand Notice have been conducted in an extremely irresponsible and casual manner which betrays "neglect, inattention,... incompetence, inefficiency" in the discharge of duties and responsibilities. As no legal basis exists to pressurize the complainant for the recovery of the demand of Rs.9,300, detailed above, the assessment as well as recovery proceedings are totally unreasonable, unjust and arbitrary falling within the definition of "maladministration" as provided in the Establishment of the Office of Federal Tax Ombudsman Ordinance. It is, therefore, Recommended that:‑‑‑

(i) The CIT, Zone‑C, Lahore be directed to set aside the consolidated assessment framed under section 63 for the years 1997‑98 to 2000‑2001 by invoking the provisions of section 138 of the Income Tax Ordinance, 1979.

(ii) The recovery proceedings be immediately stopped.

(iii) The Officers and the Inspector involved in the assessment proceedings lie put under "counselling" and be directed to improve their performance.

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

C.M.A./533/FTO Order accordingly.