MUHAMMAD NAZIR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2004 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1464 (2003)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 59(1), 13(1), 61, & 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑assessment‑‑ Tax Amnesty Scheme, 2000‑‑‑Dairy Farm business‑‑‑80 buffaloes‑‑ Agreement between Income Tax Authorities and Dairy Farmers Association for payment of tax per buffalo‑‑‑Tax was paid according to the agreement‑‑‑Immunity‑‑‑Initiation of proceedings for assessment under normal law in violation of the terms of agreement‑‑‑Detail scrutiny of capital investment‑‑‑Allegation for issuance of repeated frivolous notices to harass‑‑‑Circumstantial evidence‑‑‑Show cause for assessment of daily yield of 80 buffaloes @ 10 K.G. per buffalo and sale of such yield @ Rs.20 per K.G.‑‑‑Validity‑‑‑Maladministration alleged on account of unwarranted denial of immunity from scrutiny of Complainant/assessee's capital investment and that too in the proceedings for assessment year 2001‑2002 was proved‑‑‑Department's action amounted to violation of the terms of agreement ‑‑‑Maladministration on part of Taxation Officer for employing extra‑legal methods for service of notices was also proved‑‑‑Sufficient circumstantial evidence existed against the Assessing Officer in support of the allegation that he harassed the complainant through unwarranted repeated notices and employed a non‑official acquaintance to achieve his ulterior motives‑‑‑Federal Tax Ombudsman recommended that assessment for assessment year 2001‑2002 be finalized in accordance with law and terms of agreement be honoured; proceedings be conducted against Taxation Officer under Civil Servants Conduct Rules on account of the charges of misconduct and appropriate action be taken under the Rules.

Agha Faqir Muhammad for the Complainant.

Sikandar Aslam and Muhammad Ayub for Respondent.

DECISION/FINDINGS

Maladministration is alleged in the instant complaint against Mr. Muhammad Ayub Malik, Taxation Officer, Circle‑13, Zone `C', Karachi for serving frivolous notices through one Mr. Dawood and suggesting through him to the counsel of the complainant, Agha Muhammad Zubair, that favourable assessment of the complainant for assessment year 2001‑2002 could be made for reasonable monitory consideration.

2.The Complainant has, inter alia, alleged in paras. 9 and 10 of the complaint that one Mr. Dawood, pretending to be a clerk, visited the office of the counsel of the complainant, and suggested to the counsel that the case of the complainant can be finalized if the palm of the Income‑tax Officer is greased by the complainant. He informed that assessments of various dairy farmers have been made after paying money to the respondent. Affidavit of the counsel of the complainant has been annexed. It is further stated that on enquiry the counsel of the petitioner came to know that the said Mr. Dawood is not an employee of the income‑tax department, he is either related to or is a personal employee of the respondent for affecting the illegal acts of the respondent.

3. The parawise comments on the complaint as reported by the Commissioner concerned are signed by Mr. S.M. Athar, the RCIT, Southern Region, Karachi. It is stated that Mr. Dawood is not an employee of Income Tax Department and the Taxation Officer has no knowledge about his visit to the office of the complainant. The statement is based on a counter affidavit filed by the respondent Mr. Muhammad Ayub Malik, Taxation Officer Circle‑13, Zone `C'; Karachi. He has stated on solemn affirmation that all the charges levelled against him in Complaint No. 693/3, made by Muhammad Nazir proprietor Nazir Dairy Farm Cattle Colony, Landhi, Karachi are devoid of truth/ not correct. The RCIT, for the reasons given above has prayed in the end that the petition have no merit may be dealt with accordingly.

4. The Taxation Officer, Mr. Sikandar Aslam (BS‑19), who is representing the Income Tax Department accompanied by the respondent Officer Mr. Muhammad Ayub, when required to produce the basis of the reported comments supra submits that these are the comments offered by Mr. Muhammad Ayub, the respondent officer. He submits that the RCIT has merely conveyed the prayer of the respondent officer supra. Both the officers deny knowledge of any enquiry instituted or conducted by the Department with regard to the aforesaid allegation.

5. Agha Faqir Muhammad, the Counsel of the complainant has filed later a rejoinder to the parawise comments offered by the Department. The aforesaid person Mr. Dawood has also been produced by the respondent. The evidence of witness has been recorded on solemn affirmation. Counsel of the complainant as well as the respondent has examined the witness on 25‑7‑2001.

B:

To Mr. Agha Faqir Muhammad Advocate.

It is incorrect that I reside in the area where Mr. Muhammad Ayub Malik resides. It is incorrect that I (go) every day with him to office. It is incorrect that I daily visit his office. I am serving with Abdul Majid Khan, ITP, a retired officer of the Income Tax Department. I have been serving him for the last 20 years. It is incorrect that I had come to the office of Mr. Agha Faqir Muhammad, Advocate to serve on him notice issued by Muhammad Ayub Malik, Taxation Officer. I do not know Mr. Agha Faqir Muhammad nor have I ever met him or visited his office. It is incorrect that I have been meeting Agha Muhammad Zubair in the office of Agha Faqir Muhammad, Advocate and served notice on him. I do not know anybody as Nazir nor have I met Agha Zubair in connection with his case. It is incorrect that I have said that matter can be settled and fair assessment can be made by Mr. Muhammad Ayub Malik. I do not know Nazir. I only casually met Mr. Muhammad Ayub Malik because once or twice he had visited the office of Abdul Majid ITP.

C:

To Mr. Muhammad Ayub Malik, Taxation Officer.

Once a‑notice had been given to me by Mr. Muhammad Ayub Malik for serving on Mr. Agha Faqir Muhammad, Advocate. I went there next day. Door was closed. I knocked on it. One person came out.

He appeared to be a peon. He stated that there was nobody in the office. He received the notice and signed. On the next day I delivered the acknowledgement to Mr. Muhammad Ayub Malik.

D:

To F.T.O.

(i) I have never been in the service of Income Tax Department but I have been visiting the Income Tax Office as I was serving previously with Mr. Suleman, Chartered Accountants and now with Abdul Majid ITP.

(ii) During hearing Mr. Muhammad Ayub Malik has admitted that notice was sent by him through Dawood for service on Mr. Agha Faqir Muhammad. He further stated that he has been utilizing his service for serving other notices as well.

6. Supporting the allegation that repeated frivolous notices were issued to harass and extract money in lieu of a reasonable assessment of income, the complaint has submitted that the return of income for assessment year 2001‑2002 has been filed declaring total income at Rs.100,300 and tax payable amounting to Rs.3,630 has been paid against total income for assessment year 2000‑2001 declared at Rs.95,000 and tax payable/paid amounting to Rs.3050 only.

7. The complainant has further stated regarding the background of the issue, that during the assessment year 2000‑2001, after the complainant has filed his aforesaid return for 2000‑2001, an agreement was reached between the Income Tax Authorities concerned and the Dairy Farmers Association on 14th April, 2001. It was agreed that those Diary Farmers who pay tax on income as Rs.24 per animal per year, and file their returns voluntarily through the Association up to 30‑6‑2001 shall not be subjected to any scrutiny regarding the capital investment on cattle. Neither further queries nor further attendance will be required.

8. According to the complaint a copy of the return of income for 2000‑2001, which had been already filed, was submitted in the concerned circle through the Association, as well, in pursuance of the agreement. There was no communication from the Assessing Officer thereafter regarding assessment year 2000‑2001, till a notice/letter was issued by the respondent on 24‑3‑2003 which was served on 26‑3‑2003 for complianc6 on 28‑3‑2003. It was contended in the said notice that tax for assessment year 2000‑2001 was paid on 30‑10‑2000 whereas according to said agreement tax was payable before 30‑6‑2001, return of the complainant, therefore, was not covered under the said, agreement. It was also alleged that return for assessment year 2000‑2001 was not filed through the Association.

9. The complainant replied the said notice vide letter, dates 31‑3‑2003 and enclosed copy of the certificate issued by the Association on 26‑5‑2001 as well as copy of the ‑ acknowledgement of return for assessment year 2000‑2001. The respondent thereafter called the counsel of the complainant twice to threaten that he is going to finalize the assessment and if palm of the Officer was not greased he would impose heavy tax liability on the petitioner. However, till this date the assessment had not been finalized.

10. Meanwhile, the respondent, according to complainant, issued notice under section 61 of the Repealed Ordinance on 27‑12‑2002 in respect of assessment year 2001‑2002 calling for books of account, supporting vouchers and bills as well as bank passbook. Complainant's counsel complied on 31‑12‑2002 and submitted that books were not maintained. The Assessing Officer, therefore, called for wealth statement, statement of personal expenditure, bank statement and cheque book, conveyance deed and source of investment in properties:

11. The counsel submitted wealth statement alongwith reconciliation and denied maintenance of any bank account vide letter, dated 8th February, 2003. He further submitted that his client's properties bearing numbers D‑22 and C‑87 in sector 32/A Korangi had been declared under Tax Amnesty Scheme, 2000

12. The Assessing Officer thereafter issued notice under section 62 requiring (a) details of much buffaloes/cows held by the complainant during income year ending June 2001, (b) statement of trading, Profit & Loss Account, (c) copies of documents related to Survey of Economy e.g. (i) audit check list (ii) tax profile, (d) names of occupants of the residential properties owned by the complainant and his relationship with them and (e) details of any addition or renovation made thereon after June, 2000, (f) besides explanation on following points was called for:--

(i) As per Wealth Statement for the year ending 30‑6‑2001, a Toyota Corolla Car No. 2D ABX 908 valued at Rs.900,000 had been declared and in the reconciliation statement, it had been claimed that the car was appearing in the Tax Amnesty Declaration 2000. However, perusal of the said declaration revealed that amount of Rs.900,000 was not appearing therein. Notice under section 13(1) was issued to explain the source, failing which the amount of Rs. 900,000 would be deemed to be income under the repealed Ordinance.

(ii) Names, NIC numbers of family members living together in joint family alongwith evidence of the amount of contributions in joint expenses by each person sharing the said expenses.

(iii) Justification with evidence of the adequacy of the amount of declared personal expenses amounting to Rs.99,950 alongwith copy of check‑list duly filled in.

(iv) Full particular of the business premises of dairy farm operated at 96, Machine Tool Factory Road, Cattle Colony No.3, Landhi, Karachi. Ownership of business premises has not been declared in Wealth Statement; is the business premises acquired on rent?

13. The Counsel responded vide letter, dated 25‑2‑2003 that his client owned 80 buffaloes; enclosed an estimated statement of P&L A/c and asked for a copy of blank Audit Check List so that it could be filled in and filed because the complainant had none. A copy of the Declaration under Amnesty Scheme, 2000 was again enclosed to show that Toyota Car was declared therein was submitted that properties bearing numbers D‑22 and C‑8 in Sector 32‑A, Korangi were open plots of land ‑and that the assessee/complainant was living with his son. He has contributed Rs.7,000 per month towards joint familyexpenses besides spending another amount of Rs.15,950 during the year on other personal expenses. Plot No. 96, Cattle Colony is a rented plot.

14. The respondent Officer issued another notice under section 62 on 25‑2‑2003 of the repealed Ordinance seeking explanation for the declared low average yield of milk as low as 202 Kgs. per day from 80 buffaloes calculated @ Rs.20 per Kg. He required the complainant to show cause why the average daily yield should not be estimated at 80 Kgs. @ 10 Kg. per buffalo and why daily sales @ Rs.20 per Kg. Should not be estimated at Rs.16,200 instead of declared average daily sales of Rs.4,041 only. Besides, he called for lease agreement of business premises, conveyed dissatisfaction with the amount of declared personal expenses especially in view of the fact that the complainant was maintaining a Toyota car as well. He questioned the adequacy of declared business capital amounting to Rs.240,000 against holdings of a cattle stock comprising of 80 buffaloes. According to Assessing Officer the capital investment was supposed to be around Rs.1,200,000 @ Rs.15,000 per buffalo.

15. It was submitted on behalf of the complainant that notice, dated 10‑2‑2003 was served after considering evidence and records available on the file, requiring to submit the information and details on the points specified therein which were duly submitted. Instead of completing the assessment a 2nd notice under section 62 was issued denying the complainant the terms of the Agreement ibid and the immunity from scrutiny assured in terms thereof to the members of the Dairy Farmers Association. Simply because the complainant had voluntarily declared income for assessment year 2000‑2001 higher than the income worked out on the basis of agreed formula and paid the tax due prior to the date of agreement provided no excuse to the respondent to subject the complainant with all sorts of queries not only in gross violation of the terms of agreement but in total disregard of the fact that the capital investment on cattle etcetera was made in the years prior to the income year corresponding to assessment year 2001‑2002. Still it was submitted on behalf of the complainant that the presumption regarding the alleged sale is contrary even to the law of nature as all the buffaloes do not produce milk round the year.

16. Facts found on investigation have been considered. Mal administration alleged on account of unwarranted denial of immunity from scrutiny of complainant's capital investment and that too in the proceedings for assessment year 2001‑2002 is proved. Respondent's action amounts to violation of the terms of Agreement. Maladministration on the part of Taxation Officer, Mr. Muhammad Ayub Malik of employing extra‑legal methods of service of notices is also proved. There is sufficient circumstantial evidence against the Assessing Officer in support of the allegation that he harassed the complainant through unwarranted repeated notices and employed a non -official acquaintance to achieve his ulterior motives.

17. It is recommenced that:‑‑

(a) Assessment for assessment year 2001‑2002 is finalized in accordance with law and terms of Agreement ibid are honoured.

(b) Proceedings are conducted against Mr. Muhammad Ayub Malik, Taxation Officer under Civil Servants Conduct Rules on account of the charges of misconduct considered supra and appropriate action is taken under the Rules.

(c) Compliance of recommendation at 17(a) is reported within 30 days and compliance of recommendation at 17(b) is reported within 90 days.

C.M.A./1017/FTO Order accordingly.