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

---S. 63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Best judgment assessment-- Estimate of income---Non-service of notice upon assessee---Finalization of assessment without placing any material on record to justify the estimate of income ---Validity---Maladministration committed by the Assessing Officer was established from the facts that assessments were not made properly and estimates of income made by the Assessing Officer were excessive and harsh---Federal Tax Ombudsman recommended that the Zonal Commissioner be asked to set aside the assessments under S.122 of the Income Tax Ordinance, 2001 and direct the concerned Assessment Officer to complete the same de novo after making proper inquiries and providing reasonable opportunity of being heard to the assessee.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----S. 9---Jurisdiction, functions and powers of the Federal Tax Ombudsman ---Maladministration---Where maladministration is estab lished, the Federal Tax Ombudsman had jurisdiction to investigate the allegations of the complainant.

Complaint No. 1438 of 2002 rel.

Complainant in person with his brother Muhammad Hayat.

Raza Muhammad, IAC Jhelum Range and Muhammad Aslam for Respondent.

FINDINGS/DECISION

The complainant an individual derives income from operating a Saw machine in Talangang and is being assessed in income tax Circle 25, Talagang on TR No.18-25-TR34883.

2. The complainant is aggrieved by the arbitrary assessments made by the Taxation Officer Talagang, which have resulted in unjustified tax demand of Rs.45,000 against him. It is stated that he purchased an old Saw machine and installed it on a rented premises outside the town of Talagang. There is no electricity connection and this machine is operated by diesel. It is further stated that he has employed only one helper and his daily receipts do not exceed Rs.100/150. It is alleged that most of the notices available in the file of Income Tax Department have never been served upon him. He has further alleged that the demand of tax at Rs.45,000 is absolutely unjustified and he is not in a position to pay the same. He does not own any property which could be sold for payment of taxes. The circumstances stated above have compelled him to wind up the business.

3. The facts of the case on the basis of income tax record produced by the DR are briefly stated as under. The original assessment for the assessment years 1997-98 and 1998-99 were completed ex parte under section 63 of the repealed Income Tax Ordinance, 1979 on 12-11-1999 by estimating the total income of Rs.241,000 for the year 1997-98 and Rs.110,000 for the year 1998-99. The complainant filed an appeal and the Commissioner of Income Tax (Appeals) Zone 2, Islamabad vide his order, dated 15-12-1999 set aside both the assessments for completing the same de novo after proper service of statutory notices on the complainant and on some reasonable basis. The reassessments have been completed under section. 62/132 of the repealed Ordinance on the income of Rs.227,500 for the year 1997-98 and Rs.84,500 for the assessment year 1998-99. The assessments for the years 2000-2001 and 2001-2002 have been made ex parte under section 63 of the repealed Ordinance and net income has been estimated at Rs.90,000 and Rs.95,000 respectively for these years. The total demand for the aforesaid four years has been created at Rs.45,797.

4. The respondents have filed para. wise comments .raising therein the preliminary objection regarding jurisdiction, in terms of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. It is states that assessments completed under sections 62/132 of the repealed Income Tax Ordinance, 1979 for the years 1997-98 and 1998-99 still stand as the same have not been vacated by any Appellate Authority. Similarly the assessment for the year 2000-2001 and 2001-2002 were also finalized under section 63 of the said Ordinance and the same have not been contested in appeal. It is pleaded that the assessments were completed after providing proper opportunity to the complainant to present his case before the Assessing Officer. It is stated that there is no merit in the complaint and the same may kindly be rejected.

5. The case has been discussed with the complainant and the departmental representative. The records produced by the D.R. have also been examined. The complainant has contended that most of the notices available on record were never served upon him. His contention has been found correct, as entries regarding issuance of statutory notices in the year 1998-99 are not available on the relevant order-sheet. The D.R. has, however, produced copy of ITI's report, dated 21-7-1999 stating therein that notices under section 61 for the year 1997-98 and 1998-99 were served by fixture on the business premises of the complainant. The service was not in accordance with the prescribed procedure. The ITI was neither examined on oath nor the identifiable addresses of the witnesses were recorded. The records do not indicate as to whether the compliance was tirade by the assessee or not. The entry regarding the completion of assessment under section 63 on 12-11-1999 has also not been made on the order-sheet.

6. It is distressing to note that the assessment records have been maintained in a very careless, haphazard and irresponsible manner. It is not possible to ascertain the date on which the reassessments for the years 1997-98 and 1998-99 were completed under section 62/132 of the repealed Ordinance. There is no entry on the order-sheet regarding completion of the said assessments. Similarly the assessment order for the years 2000-2001 and 2001-2002 also does not bear the date of order. The order-sheet, however, shows that the said assessments were made under section 63 on 11-6-2002.

7. It is also apparent from record that all the four assessments referred above have been completed arbitrarily without placing any material on record to justify the estimate of income. The copy of a brief report of the income-tax Inspector, dated 21-7-1999 has been furnished. He has pointed out therein that the Say' machine of complainant was operated by diesel and his daily receipts were about Rs.200 to Rs.250.

The business of timber was not reported therein. This fact was also stated by the complainant before the CIT(Appeals) and it has been discussed in the appellate order, dated 15-12-1999.

8. The facts stated above clearly establish. maladministration committed by .the Assessing Officer. It is, however, appreciated that Mr. Raza Munawwar, IAC Jhelum who representated the Department had conceded that the assessments were not made properly and the estimates of income made by the Assessing Officer were excessive and harsh.

9. As regards the objection regarding jurisdiction in terms of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance; 2000, it has been held by this forum time and again in a number of complaints that where maladministration is established, the Federal Tax Ombudsman has jurisdiction to investigate the allegations of the complaint. This issue has been elaborately discussed in Complaint No. 1438 of 2002. In view of the above it is recommended as under:--

(i)The Zonal Commissioner be asked to set aside the assessments for the years 1997-98, 1998-99, 2000-2001 and 2001-2002 under section 122 of the Income Tax Ordinance, 2001 and direct the concerned Taxation Officer to complete the same de novo after making proper inquiries and providing reasonable opportunity or being heard to the complainant.

(ii)Compliance be made within 30 days of the receipt of this order and reported within a week thereafter.

C.M.A./1-38/FTOOrder accordingly.