Income Tax Ordinance (XXXI of 1979)---

----Ss.61 & 62(1)---C. B. R. Circular No. 13 ITP/1951, dated 28-5-1951-- C.B.R. Circular No.10 of 1975, dated 14-7-1975---C.B.R. Letter C. No.1(3)IT-9/82(3), dated 6-4-1983---C.B.R. Circular No.4(6)IT-3/88, dated 17-2-1991---C.B.R. Circular No.7(2)DT.14/94, dated 3-7-1994---C.B.R. Circular No.7(2)DT.14/94, dated 24-1-1984---C.B.R. Letter No.SO.1/1(6)/P-2001-2002/6078, dated 29-4-2002---Income Tax Rules, 1982, Rr.28 & 29---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Issuance of notices allowing unreasonable short time for compliance---Submission of books of accounts and all details ---Non-finalization of assessments---Non-transfer of books of accounts to successor---Lame excuses---Estimation of receipts without evidence ---Validity---Maladministration on account of causing undue delay in passing assessment order was proved-- Maladministration in the decisions to estimate receipts of the complainant and disallowing the claims of expenditure as baseless and arbitrarily oppressive and excessive figures in total disregard to the established practice in complainant's own case was also proved---Federal Tax Ombudsman recommended that the Commissioner to proceed in accordance with the relevant Rules against the DCIT, who retained the books of account and did neither hand over the same to his successor while making over the charge nor to his successor's successor, who took over charge; the Commissioner proceeds in accordance with the relevant Rules against the Assessing Officer who did not take due note of the written submission that assessee's books of accounts were in the custody of Assessing Officer and took almost four months to write to his predecessor that he did not hand over assessee's books of account while making over the charge; the Commissioner to note that it was his legal obligation to take suo motu cognizance of carelessness and negligence of the concerned officers and he needs to be more vigilant in monitoring the performance of Officers working under him and the Commissioner to take suo motu cognizance of the effect of maladministration found in the decisions leading to assessments of income for assessment years 2001-2002 and 2002-2003 on the respective assessment orders in order to provide relief due to the complainant in, exercise of powers vested in him by the law.

Haider Naqi for the Complainant.

M. Azhar Ansari, DCIT, Circle-07, Cos-V for Respondents.

DECISION/FINDINGS

These complaints are lodged on behalf of a company assessed in Circle-07, Companies-V, Karachi vide NTN: 28-10-0984556.

2. Maladministration is alleged in complaints bearing numbers 730 and 731 for alleged harassment caused through issuance of repeated notices under section 61 of the Income Tax Ordinance, 1979 (Repealed Ordinance) for hearings in the assessment proceedings for assessment years (AY) 2001-2002 and 2002-2003.

3. It is alleged that proceedings for A.Y. 2001-2002 have been dragging since 15^th April, 2002. Following notices have been issued allowing unreasonably short time for compliance:--

4. Hearing has been allegedly conducted at length on farther dates viz. April 25, 27 and 29, May 7 and 27, August 17 and 29, September, 23, December 24, 2002, March 10, 18 and 26, April 4 and May 5, 2003. Complete books of account alongwith supporting bills vouchers and other supporting evidence have been called for and produced on April 27 and May 7, 2002, March 18 and 26, April 24 and 30, 2003 complete books and all supporting evidence have been retained by the Assessing officer from May 7, 2002 to January 4, 2003.

5. It is alleged that at least on seven occasions the DCIT did not conduct the hearing and instead; directed to submit details with coverings letter through diary clerk or just acknowledge the receipt under his own signature. It is alleged on behalf of the complainant that the mode and manner of foregoing proceedings is contrary to the binding instructions of the C.B.R. contained in following circulars:--

(a) Circular No. 13 ITP/1951 dated 28-5-1951.

(b) Circular No. 10 of 1975 dated 14-7-1975.

(c) C.No.1(3)IT-9/82(3) dated 6-4-1983.

(d) Circular No.4(6)IT-3/88 dated 17-2-1991.

(e) Circular No.7(2) DT.14/94 dated 3-7-1994.

(f) Circular No.7(2) DT.14/94 dated 24-1-1984.

(g) No.SO.I/1(6)/P.2001-2002/6078 dated 29-4-2002 Para 2 (g)

6. Similarly, the proceedings, in assessment year 2002-2003 are dragging since February 7, 2003 despite the fact that every detail, documentary evidence in support of books of account and necessary explanations have been submitted during the course of proceedings conducted on 7^th and 28^th February, 8^th, 18^th and 26^th March, 8^th, 22^nd, 24^th and 30^th April and 8^th May, 2003. Now following common prayers are made in the two aforesaid complaints:--

(i)It is prayed that the Honourable Federal Tax Ombudsman would be pleased to direct the respondents to finalize the assessment proceedings and subsequently issue the order by accepting the declared income.

(ii)It is also further prayed that Honourable Federal Tax Ombudsman would be pleased to direct the respondents not to take any vindictive, coercive or retaliatory action in response to filing this complaint before this august forum.

(iii)It is also prayed that Honourable Federal Tax Ombudsman may grant any other relief may deem fit and proper in the facts and circumstances of the case.

7. Responding to the notice under section 10(4) of Ordinance XXXV of 2000 the CIT, Companies-V, Karachi has submitted that the correct Zone and Circle codes of the complainant are 33 and 7 respectively instead of 28 and 10 intimated in the complaint. One of the reasons for non-conclusion of proceedings for 2001-2002 for such along time is stated to be transfer of Officers Incharge on May 10, 2002. August, 12, 2002 and April 7, 2003. Comments of the responder indicate that details, facts and explanations already- submitted by the complainant and available on record have not been carefully examined and that unwarranted notices have been issued asking for further details after May 7, 2002 despite the fact that all books of account and supporting vouchers had been retained by the DCIT.

8. Further, the respondent persists in shifting the onus for delay to the complainant despite admitting that the DCIT, who retained the books of account on 7^th May, 2002 did neither hand over the same to his successor while making over the charge on May 10, 2002 nor to his successor's successor, who took over charge on 19th August, 2002. It is unfortunate that the Assessing Officer did not take due note of the written submissions on 29-8-2002 that assessee's books of account were in the custody of Assessing Officer since 7^th May. The Assessing Officer took almost four moths to write to his predecessor on 21-12-2002 that he did not hand over assessee's books of account while making over the charge. The immediate predecessor responded that books were retained on 7^th May by his predecessor but he did not hand over the same to him on 10^th May while handing over the charge. Ultimately the books were handed over to the complainant on 4^th January, 2003 by the same officer who had retained the books.

9. The respondent CIT has not offered any comment on the blatant maladministration supra. He should have taken suo motu cognizance to proceed against the concerned officers for their carelessness and negligence. Lame excuses have been offered on behalf of the Officer who has been holding the charge from August 19, 2002 to April 7, 2003 for non-finalization of the assessments. Assessments could have been made taking adverse view if he had evidence of deliberate non submission of any specific evidence. The negligence and indecision on the part of the said Officer amounts to maladministration.

10. The instant complaints have been filed on 17-5-2003. Notice under section 10(4) of Ordinance XXXV of 2000 was issued on 23-5-2003 for comments on the complaints to be filed by June 9, 2003. The orders have been passed on 29-5-2003, assessing total incomes at Rs.1,858,791 for 2001-2002 and Rs.3,152,938 for 2002-2003 against declared loss of (Rs.14,103) and profit of (Rs.155,801) for the two years respectively.

11. The counsel of the complainant submits that the apprehended mala fide intentions of the respondents to make highly excessive, arbitrary and capricious assessments of income have come true. He submits a statement of receipts declared and estimated as well as expenditure claimed and allowed in assessment year 2000-2001 as compared to the figures in the same heads in assessment years 2001-2002 and 2002-2003.

12. Admittedly declared receipts include only 1/3^rd receipts through banking channel from panel companies and 2/3^rd cash receipts from casual patients. Further the Taxation Officer, has admitted that computerized details of receipts indicating bill No. and package offered to the patients have been filed. The only discrepancies recorded in the orders are that the bills do not carry complete addresses and NIC numbers of patients and that the books of account are not kept as per rules 28 and 29 of Income Tax Rules, 1982. According to Taxation Officer the declared receipts "appear to be quite low in view of the fact that hospital is situated in a congested area of the city and provides all the facilities to the patients including X-ray, I.C.U., N.I.C.U., Laboratory test, ultrasound, physiotherapy, E.C.G., operation theater, labour room apart from private rooms and V.I.P. rooms as well as medical store."

13. The counsel of the complainant submits that it is evident from the records of assessment proceedings that no effort was made by the Assessing Officer to verify the amount of any bill from any patient. The specimen of the entries in the bills reproduced on page-4 of the assessment order for 2001-2002 proves that mostly addresses were available on the bills and further details e.g. telephone numbers etc. were available in Patient/Case Register. Further, there was no truth in the allegation that books as prescribed under the Rules were not maintained. There was no requirement of recording NIC number of patients in the prescribed forms.

14. The fact that the complainant has faithfully recorded all transactions in the books of account is proved by the fact that recorded cash receipts are almost double the cash receipts. Moreover, the Taxation Officer has not placed a single instance of patient who was treated at the hospital and charged for the treatment but the amount collected from him was either not recorded in the books or was short recorded. This could have been found by spot enquires.

15. The counsel, submits that it is evident from the foregoing comparison that the decisions made by the Taxation Officer to estimate receipts for 2001-2002 at Rs.4,500,000 and for 2002-2003 at Rs.6,000,000 in total disregard to the history of the case settled by the Tribunal despite absence of any reason/evidence placed on record or recorded in the orders are mala fide, without valid reasons, perverse, arbitrary, unreasonable, unjust, biased and oppressive. The respondent has become biased and oppressive due to instant complaints lodged by the assessee. The disallowances made out of expenses claimed in each of the two years are equally arbitrary, excessive and oppressive. It a blatant departure from established practice. The respondent has raised highly excessive tax demands amounting to Rs.1,126,075 for assessment year 2001-2002 and Rs.1,323,680 for assessment year 2002-2003 to harass the complainant.

16. Maladministration alleged on account of causing undue delay in passing the assessment order for 2001-2002 is proved. Maladministration in the decisions to estimate receipts of the complainant and disallowing the claims of expenditure at baseless and arbitrarily oppressive and excessive figures in total disregard to the established practice an complainant's own case is also proved.

17. It is recommended that:--

(i)The Commissioner to proceed in accordance with the relevant Rules against the DCIT, who retained the books of account on 7th May, 2002 and did neither hand over the same to his successor while, making over the charge on May 10, 2002 nor to his successor's successor, who took over charge on 19th August, 2002.

(ii)The Commissioner to proceed in accordance with the relevant Rules against the Assessing Officer who did not take due note of the written submissions on 29-8-2002 that assessee's books of account were in the custody of Assessing Officer since 7th May, 2002 and took almost four months to write to his predecessor on 21-12-2002 that he did not handover assessee's books or account while making over the charge.

(iii)The Commissioner to note that it is his legal obligation to take suo motu cognizance of carelessness and negligence of the concerned officers and he needs to be more vigilant in monitoring the performance of officer's working under him.

(iv)The Commissioner takes suo motu cognizance of the effect or maladministration found in the decisions leading to assessments of income for assessment years 2001-2002 and 2002-2003 on the respective assessment orders in order to provide relief due to the complainant in exercise of powers vested in him by the law.

(v)Compliance be reported within 45 days.

C.M.A./891/FTOOrder accordingly.