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

----Ss. 5(1)(d) & 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Jurisdiction of income tax authorities---Self assessment---Transfer of case by Commissioner of Income Tax ---Assessee contended that Commissioner of Income Tax had no power to assign jurisdiction over cases where returns had been filed under Self-Assessment Scheme but the same related to normal cases---Validity---Law did not distinguish between a Self-Assessment Scheme case and other case ,for the purpose of assigning jurisdiction and the Commissioner of Income Tax was competent to assign/transfer jurisdiction to any officer subordinate to him including a Special Officer.

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

----Ss. 146, 148 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. letters, dated 11-12-1993 and 19-6-1994---Power to enter and search business premises---Power to take evidence on oath, etc.---Visit of premises by the Inspector and report ---Assessee contended that Inspector could not visit the premises unless accompanied by his Assessing Officer and under S. 146 and 148 of the Income Tax Ordinance, 1979, he was also not authorized to record the statement of assessee on oath or otherwise without the permission of Central Board of Revenue---Validity---Under 5.146 of the Income Tax Ordinance, 1979, Inspector could make enquiry if so authorized---Inspector was duly authorized by the Inspecting Addition Commissioner to conduct spot and local enquiries and recording of statement of assessee on the spot was a simple statement in. which Inspector could record the facts about capital investment, quantum of sales, stock and expenses---Such statement could not be equated with a statement on oath because the Inspector did not give a formal oath to the assessee before recording the statement and in case of no account cases the information recorded in the statement was generally on estimate basis---Tampering or manipulation of statement by adding zeros to enhance the figures of sales or stock, as alleged, was not established-- Complaint was found without merit on the point of transfer of jurisdiction and conducting of enquiry by the Inspector.

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

----S. 63---Income Tax Ordinance (XLIX of 2001), S. 122-- Establishment of Office bf Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Best judgment assessment---Lease of tractor---Income was declared as agricultural---Separate, addition was made on account of income from tractor by the Assessing Officer---Allegation -of tampering/manipulation of statement of assessee by adding zeros to enhance the figures or sales and stock---Validity---Although allegations had not been established but assessee pointed out certain areas of maladministration and its modus operandi---To check such malpractice, it was necessary to take effective steps by the Revenue Division-- Federal Tax Ombudsman recommended that necessary verification be made and if it is proved that the assessee does not own agricultural land, the assessment order be modified by the competent authority under S.122A of the Income Tax Ordinance, 2001 so that the assessee was not charged to tax on income which he did not earn; Central Board of Revenue to issue instructions to the effect that a carbon copy of the statement recorded during inquiry by the Inspector or any authorized/competent authority should be supplied by him to the person whole statement has been recorded, immediately after recording the statement and wherever the amount is mentioned it should be written both in figures and words.

Abdul Malik Khan, I.T.P. for the Complainant.

Ashraf Ali Marwat, T.O. for Respondent.

DECISION/FINDINGS

Brief facts of the case are that the complainant filed his return of income for the assessment year 2001-2002 under Self-Assessment Scheme in Circle-15 Charsadda declaring income of Rs.45,000. The case was selected for total audit through computer balloting and the jurisdiction of the case was transferred to Special Officer, Circle-12, Mardan by name by the CIT Zone-A, Peshawar. The Special Officer finalized the assessment art an income of Rs.200,000.

(i)The order passed by the Special Officer is without jurisdiction as the Commissioner of Income Tax has no powers to assign jurisdiction over cases where returns have been filed under the Self-Assessment Scheme. These powers vest with C.B.R. only while promulgating the scheme of Self-Assessment. No doubt the CIT is empowered to transfer cases from one Assessing Officer to another vide explanation under section 5(1)(d) but the same relates to normal cases and not to the Self-Assessment cases.

(ii)In this case the Inspector has conducted inquiry and had recorded the statement of the complainant whereas under the law i.e. under sections 146 and 148 of the Income Tax Ordinance, 1979 the Inspector is not authorized under the law to record the statement of the assessee on oath or otherwise without the permission of C.B.R.

(iii)According, to the standing instructions of the C.B.R. in letters, dated 11-12-1993 and 19-6-1994 the Inspector cannot visit the premises of the tax payers unless accompanied by his ITO, AC, DC of the Income Tax or other Senior Officer and without the permission of Commissioner of Income Tax. In this case under reference inquiry has been conducted by the Inspector independently in violation of the above instructions.

(iv)A very short statement before the assessee is written on a paper and then the, assessee is asked to sign the same. When the paper is signed and the hands of the Inspector are greased, then a favourable report is submitted otherwise exaggerated figures are inserted in his statement and the daily sales and stock is also reported at higher figures. It may be noted that no Inventory is prepared nor he gets any evidence of sales. If an assessee admits daily average sales at Rs.500/600 then he adds ZERO to each figure and the assessee receives notice from the Assessing Officer that you have admitted Rs.5,000/6,000 daily sales before the Inspector.

(b)No copy of the inquiry conducted by the Inspector is handed over to the assessee on the spot nor later on is accompanied by the notice under section 61 or 62.

(c)Qanoon-e-Shahadat, 1984 (Law of Evidence) is applicable to the income-tax proceedings and without any evidence or material no addition could be made to the income in the Income Tax Return.

In the present case the Inspector has reported stock at Rs.300,000 without inventory and the Assessing Officer has reduced the same to Rs.180,000 without any material evidence and has multiplied by 5 times to work out the annual sales at Rs.900,000 ignoring the fact that this was the first year of business,. Multiplication of stock by 5 times to work out annual sales has no legal sanctity.

(v)The complainant had already declared income from his tractor as agricultural income at Rs.45,000 as the tractor is involved in agriculture activities and the complainant possess no agricultural land of his own. The inclusion of income at Rs.45,000 is unwarranted. The complainant therefore prays:

(i)That the assessment being 'harsh and framed in violation of the C.B.R. standing instructions and recording the statement of the complainant in violation of sections 146 and 148 of the Income Tax Ordinance, 1979 be declared unlawful and of no legal effect. Inquiry conducted in the month of October, 2002 is not relevant to the assessment year involved.

(ii)Recommendations be made to the C.B.R. to stop the Inspectors from carrying out any inquiry in violation of the C.B.R.'s instruction and one who violate the same must be punished.

3. In reply the respondent has stated that assignment of jurisdiction of the case for the assessment year 2001-2002 was in accordance with the provisions of section 5(1)(c) of the repealed Income Tax Ordinance, 1979 and instructions of the C.B.R. The Inspector was duly authorized by the IAC to conduct local and spot inquires, hence there is no violation of law/instructions of the C.B.R. As regards manipulation of assessee's statement complainant's observation is based on presumptions and has no relevance to the case under reference. The contents of the Inspector's report were duly confronted to complainant's AR at the time of hearing. Considering the fact that the stock of Rs.3,00,000 reported by the Inspector related to the assessment year 2003-2004, a lenient view was taken by the Assessing Officer by adopting the value of stock at Rs.1,80,000 and multiplied by 5 times for arriving at the sales of the year. This practice has generally been 'confirmed at the appellate stages in various cases. In his wealth statement, the complainant admitted the plying of a tractor on hire. Therefore, a sum of Rs.35,000 has been added to the complainant's income on this account. As regard the agricultural income the same has been include in income for rate purpose only.

4. The representatives of the both sides were heard and relevant record was examined. The contention of the complainant's AR that in SAS case jurisdiction cannot be transferred/assigned by the CIT is not tenable because the law does not distinguish between an SAS case and A other case for the purpose of assigning the jurisdiction and the CIT is competent to assign/transfer jurisdiction to any officer subordinate to him including a Special Officer. The AR's plea that an Inspector cannot visit the business premises or record the statement of an assessee is also without merit because as provided in section 146 of the repealed Income B Tax Ordinance, 1979 an Inspector can make enquiry if so authorized. In this case, as stated by the respondent the Inspector was duly authorized by the IAC to conduct spot and local enquiries. Regarding the recording of statement of an assessee on the spot, it is a simple statement in which an Inspector records the facts of the case as told by the assessee about capital investment, quantum of sales, stock and expenses. Such statement cannot be equated with a statement on oath because. the Inspector does not give a formal oath to the assessee before recording the statement and in case of no account cases the information recorded in the statement is generally on estimate basis. Further, AR of the complainant could not establish that the Inspector in this case tampered with or manipulated the statement of the complainant by adding zeros to enhance the figures of sales or stock. The complaint is found without merit on the point of transfer of jurisdiction and conducting of enquiry by the Inspector.

5. Regarding addition of Rs.35,000 on account of income from tractor, besides agricultural income declared at Rs.45,000, the complainant's AR 'stressed that the complainant did not own any agricultural land and earned income from leasing of tractor to others and the income derived from this source was declared at Rs.45,000 under the head `agriculture income', hence the addition of Rs.35,000 was unwarranted. The respondent's representative could not controvert the AR's contention. This issue requires verification.

6. The complainant has alleged that the Inspector after recording a short statement obtains the signature of the deponent and if his palm is not greased he adds adverse and damaging statement in it. It has further been alleged that zero has been added in the figure after words. Although these allegations have not been established in this case, they point out certain areas, of maladministration and its modus operandi. In order to check such malpractices it is necessary to take effective steps by the Revenue Division.

7. It is recommended:--

(i)Necessary verification be made and if it is proved that the complainant does not own agricultural land, the assessment order be modified by the Competent Authority under section 122A of the Income Tax Ordinance, 2001 so that the complainant is not charged to tax on income which he did not earn.

(ii)C.B.R. to issue instructions that:--

(a)A carbon copy of the statement recorded during inquiry by the Inspector or any authorized/Competent Authority should be supplied by him to the person whose statement has been recorded, immediately after recording the statement.

(b)Wherever the amount. is mentioned it should be written both in figures and words.

(iii)Compliance be reported within 30 days.

C.M.A./1057/FTOOrder accordingly.