Messrs INDUS FOOD, KARACHI VS SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD, 2004 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1475 (2003)

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

‑‑‑‑Ss. 59(1) & 61‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑C.B.R. Circular No.7 of 2002, dated 15‑6‑2002, para. 8 (Self‑Assessment Scheme)‑‑Self‑assessment‑‑ Wealth statement‑‑‑Initiation of proceedings under normal law on the ground that wealth statement was not filed alongwith the return of income, the return was invalid and not acceptable under Self‑Assessment Scheme‑‑‑Validity‑‑‑Complainant/3ssessee filed return of income within, the stipulated time alongwith statements of account, evidence of tax deduction, tax paid and statement under S. 143B of the Income Tax Ordinance, 1979 supported with evidence of tax deduction‑‑‑Views of the Department that wealth statement , was not filed alongwith such documents particularly in the presence of affidavit of the Authorized representative of the Complainant/assessee wherein he had confirmed filing of relevant wealth statement was difficult to reconcile‑‑‑Possibility of misplacing the wealth statement of the official of the department could not be ruled out‑‑‑Observation of the Department that non‑filing of wealth statement alongwith return of income made the return invalid were not well founded by the Federal Tax Ombudsman.

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

‑‑‑‑Ss. 59(1), 61, 58(1) & 55(1)‑‑‑Income Tax Rules, 1982, R. 190‑‑ C.B.R. Circular No.7 of 2002, dated 15‑6‑2002, para. 8 (Self -Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self‑assessment‑‑ Initiation of proceedings under normal law due to non‑filing of wealth statement treating the return as invalid ‑‑‑Assessee contended that issuance of notice under section 61 of the Income Tax Ordinance, 1979 was ab initio void as none of the conditions of para. 8 of the Self Assessment Scheme was followed nor any letter was issued to the complainant to make up the deficiency within the stipulated period and also filed wealth statement alongwith affidavit that the sane was filed with the return of income‑‑‑Validity‑‑‑Short documents including wealth statement could be requisitioned by the Assessing Officer before accepting the return under Self‑Assessment Scheme as always provided in Central Board of Revenue Circulars on Self‑Assessment Scheme‑‑ Department's contention that Complainant/assessee's letter was not received in the office was, not substantiated by conclusive evidence‑‑ Copy of relevant order sheet filed showed that the same had been prepared in a very careless and causal manner and appeared td‑have been prepared in one sitting by one person‑‑‑Most of the entries were neither signed nor initialed by Assessing Officer‑‑‑Order sheet, which was the most important record of assessment proceedings, was not maintained properly‑‑‑No reason a existed to doubt the veracity of the contents of the affidavit‑‑‑Maladministration was committed by the functionaries of the department‑‑Federal Tax Ombudsman recommended that Central Board of Revenue direct the Taxation Officer concerned to accept the return of the Complainant for the year 2002‑2003 under the Self‑Assessment Scheme.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 9(2)‑‑‑Jurisdiction, functions 'and powers of the Federal Tax Ombudsman‑‑‑Where maladministration is established the Federal Tax Ombudsman has jurisdiction to investigate the allegation of Complainant.

Khaliqur Rehman, F.C.A. and Shabbir Hashmi, I.T.P. for the Complainant.

Sikandar Aslam, I.A.C. and Attique Rehman, T.O. for Respondent.

FINDINGS/DECISOIN

The complainant an individual derives income from the business of milk processing. He is aggrieved by non‑acceptance of his return of income for the assessment year 2002‑2003 under the Self‑Assessment Scheme. The facts of the case are briefly stated as under:‑‑

2. The return for the assessment year 2002‑2003 was filed under the Self‑Assessment Scheme declaring income of Rs.3,60,000. It is stated that the return was accompanied by the following documents and statements:‑‑

(i) Copies of trading accounts, evidence of tax deduction and tax paid.

(ii) Statement under section 143‑B supported with evidence of tax deduction.

(iii) Wealth statement under section 58 of the repealed Income Tax Ordinance. 1979

3. It is also stated that no deficiency of documents was pointed out at the time of receipt of return of income. The return was not excluded from the Self‑Assessment Scheme after initial scrutiny till the balloting took place. The complainant's return was not selected for total audit in random balloting.

4. It is further stated that the return fully qualified for acceptance under the Self‑Assessment Scheme but the Assessing Officer vide his letter, dated January 13, 2003 issued after a lapse of more than there months from the date of filing of return on 30‑9‑2002 intimated that the wealth statement and its reconciliation for the year ended 30th June, 2002 was not filed alongwith the return and therefore, the assessment was to be made under the normal Law. The complainant was required to furnish his explanation in this behalf by the 23‑1‑2003. The complainant vide his letter No. T‑0820 of 2003, dated 20‑1‑2003 informed the taxation officer that the wealth statement had already been filed alongwith the return. However, a copy of the same was submitted with the aforesaid letter, dated 20‑1‑2003. It is alleged that in violation of the directions of the C.B.R. issued through Circular No.7, dated 15th June, 2002 the Assessing Officer did not accept his explanation and issued notices under section 61 of the repealed Income Tax Ordinance on 15‑2‑2003 and 17‑3‑2003. It is reiterated that the return squarely fell in the Self‑Assessment Scheme as all the requisite conditions laid down by the aforesaid Board's Circular were fulfilled. Had the complainant not filed any necessary document it was incumbent upon the Assessing Officer to intimate the shortcoming if any after initial scrutiny of the return. The Assessing Officer has blatantly ignored the conditions laid down in para. 8 of the Self‑Assessment Scheme for the assessment year 2002‑2003 announced through Circular No.7 referred above. The contents of para. 8 are reproduced as under:‑‑

`8 PROCESSING OF RETURNS FILED UNDER THE SCHEME:

(a) The Assessing Officer, will make initial scrutiny of the returns with respect to the provisions of Scheme to determine the acceptability thereof.

(b) In case of non‑filing of documents as required by this Scheme, a notice shall be issued to the person indicating the deficiency to be made up within 15 days of the receipt of such notice.

(c) In case of non‑compliance within the time so allowed, the DCIT shall exclude the case from the SAS by passing a speaking order immediately but not later than fifteen days from the expiry of prescribed time."

5. It is alleged that the issuance of notice under section 61 by the Assessing Officer was ab initio void as none of the conditions of the above para. was followed nor any letter was issued to the complainant to make up the deficiency within the stipulated period.

6. The complainant has prayed for issuance of directions to the Commissioner concerned to instruct the taxation officer to accept the return under Self‑Assessment Scheme.

7. The respondents have filed parawise comments raising therein preliminary objection regarding jurisdiction in terms of section 9(2) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000. It is stated that the return of income for the assessment year 2002‑2003 was filed without Wealth Statement which was statutory requirement under the proviso to Clause (c) of Sub section (1) of section 55 and proviso of subsection (1) of section 58 of the repealed Income Tax Ordinance, 1979 read with Rule, 190 of the Income Tax Rules, 1982. Since the return was invalid therefore, it did not qualify under the Self‑Assessment Scheme in terms of para. 3 of C.B.R. Circular No.7 of 2002. It is further added that as the return did not qualify under the Self‑Assessment Scheme, it was not required to point out any deficiency of documents before the assessment proceedings under the normal Law. The letter, dated 13‑1‑2003 was an intimation for initiation of proceedings under the normal Law and for filing objection (if any) by 23‑1‑2003 against the intended action. It is further, stated that the complainant's reply bearing No. T‑0820 of 2003, dated 20‑1‑2003 was not received in the Office of the concerned taxation officer until 12‑4‑2003 vide receipt No. 335. During the period from 20‑1‑2003 to 12‑4‑2003, the notices under sections 61, 58 and 116 of the repealed Income Tax Ordinance, 1979 were issued but remained uncomplied. It is reiterated that since the return was invalid and did not qualify for acceptance under the Self‑Assessment Scheme, it was not reported for random balloting through computer. It is pleaded that since the action has been taken strictly in accordance with law, the allegation of `Mala fide' is absolutely unfounded.

8. The complainant's authorised Representative has vehemently contended that the return of income for the assessment year 2002‑2003 was filed on 30‑9‑2003 alongwith statements of account and the wealth statement for the year ended 30‑6‑2002. Had any statement/document not been filed a requisition letter/notice was to be issued by the taxation officer immediately after the initial scrutiny of the return as provided in para. 8 of C.B.R. Circular No.7, dated 15‑6‑2002. If Wealth Statement was misplaced by the officials of he tax department, the complainant cannot be held responsible for that. The authorized Representative further argued that on receipt of letter, dated 13‑1‑2003 from the taxation officer Circle‑C‑16, Mr. Arshad Rizwan Siddiqui, the complainant's A.R. personally appeared before the taxation officer on 20‑1‑2003 and informed him that all the requisite documents including wealth statement were field on 30‑9‑2002 alongwith the return of income. He however, personally handed over the copy of wealth statement alongwith his letter, dated 20‑1‑2003 to the taxation officer. Affidavit of Mr. Arshad Rizwan Siddiqui, has been furnished in support of the aforesaid observations.

9. The authorised Representative strongly repudiated the plea taken by the respondents in the parawise comments that since the wealth statement was not filed alongwith the return of income, the return was invalid and not acceptable under the Self‑Assessment Scheme. He asserted that if the wealth statement was considered to be a part of income‑tax return, why a separate provision has been made in para. 3 of Board's Circular No.7 referred above in this behalf.

10. The departmental Representative reiterated the pleas taken in the parawise comments and argued that the complainant's reply vide his letter, dated, 20‑1‑2003 alongwith wealth statement was received in the office of the Taxation Officer, Circle‑16, Zone‑C, Karachi on 12‑4 -2003. He furnished photo coy of the relevant order‑sheet and also produced the receipt register of the Circle in support of his arguments.

11. The authorised Representative of the complainant has denied the receipt of notices under sections 61 and 58, dated 15‑2‑2003 as alleged by the respondents in the parawise comments. The departmental Representative has produced the copies of the aforesaid notices but has not been able to identify the persons on whom the said notices were served.

12. The arguments of both the sides have been given due consideration. The records of the case produced by the D.R. have also been examined. It is an undisputed fact that the complainant filed return of income for the year 2002‑2003 on 30‑9‑2002 i.e. within the stipulated time alongwith statements of account, evidence of tax deduction, tax paid and statement under section 143B supported with evidence of tax deduction. It is difficult to reconcile with the views of the respondents that the wealth statement was not filed alongwith the aforesaid documents particularly in the presence of affidavit of Mr. Arshad Rizwan Siddiqui the A.R. of the complainant wherein has confirmed filing of relevant wealth statement on 30‑9‑2002. The possibility of misplacing the wealth statement by the official of the department cannot, be ruled out. The observations of the respondent that non‑filing of wealth statement alongwith the return of income made the return invalid are not well founded.

13. The Reference to proviso to clause (c) of subsection (1), of section 55 of the repealed Income Tax Ordinance, 1979 does not support the plea taken by the respondents in this regard. The first proviso relates to salary cases and in the second proviso reference is to wealth tax return in particular category of cases. Section 55 of th6 repealed Ordinance was amended in 1994 and the following condition was added:‑‑

"Alongwith the return of wealth tax in accordance with the Wealth Tax Act 1963 (XV of 1963)". The aforesaid amendment made it obligatory to file the wealth tax return alongwith the Income Tax Return under section 55 of the Ordinance. The return of income was not valid unless it was accompanied by the Wealth Tax Return as provided by the explanation inserted by Finance Act, 1994. It is reproduced hereunder:‑‑

"Explanation: Non‑furnishing of wealth .tax return alongwith the return of total income, certificate or statement of income shall render such return, certificate, or statement as invalid."

It is thus evident that filing of wealth statement is not included in section 55 of the Income Tax Ordinance, 1979. There is however, a separate section 58 which provides for filing of wealth statement alongwith the return of income if the income declared is two hundred thousand rupees or more.

14. The reference to Rule 190 of the Income Tax Rules, 1982 made by the respondents in the parawise comments also appears to be misplaced. Rule 190 provides for the documents to be filed alongwith the return of income. The, copies of ten documents/statements including copy of Wealth Statement at serial No. 7 are to be attached alongwith the return of income. It is also to be noted that in all the Circulars issued by the C.B.R. whereby Self‑Assessment Scheme was announced, there has been a specific provision for making requisition of short documents. In Circular No.7 of 2000, dated 15‑6‑2002 this is provided in para. 8 of the Circular. The relevant clause (b) is reproduced as under:‑‑

"In case of non‑filing of documents as required by this Scheme, a notice shall be issued to the person indicating the deficiency to be made up within fifteen days of the receipt of the such notice. "

15. The arguments of the complainant's A.R. that if the filing of wealth statement was a pre‑requisite of Section 55 of the repealed Ordinance then there was no necessity to provide for it in para. 3 of the Circular. No.7 of 2002 carries weight. In the light of the facts stated above it is evident that the nature of default of non‑filing of wealth statement or the relevant statement of account is the same. The short documents including wealth statement can be requisitioned by the Assessing Officer before accepting the return under the Self‑Assessment Scheme as always provided in C.B.R. circulars on Self‑Assessment Scheme.

16. The respondent's observation that the complainant's letter' No. T‑0820 of 2003, dated 20‑1‑2003 was not received in the office of the concerned taxation officer until 12‑4‑2002 is not substantiated by conclusive evidence: The copy of the relevant order sheet field by the Departmental Representative in support of the aforesaid plea shows that this has been prepared in a very careless and casual manner. This appears to have been prepared in one sitting by one person. The most of the entries are neither signed nor initialled by the Assessing Officer. It is distressing to observe that the order sheet which is the most important record of assessment proceedings is not maintained properly by the Assessing Officers. There appears to be no reason to doubt the veracity of the contents of the affidavit filed by Mr. Arshad Rizwan Siddiqui of Messrs Anjum Asim Shahid Rehman, Chartered Accountants, the authorised Representative of the complainant that he personally appeared before the then Assessing Officer Mr. S. Ishrat Ali on 20‑1‑2003 and handed over the copy of the relevant wealth statement alongwith the forwarding letter, dated 20‑1‑2003. This is prima facie a case of maladministration committed by the functionaries of the department.

17. The respondent's objection regarding jurisdiction of the complaint in terms of section 9(2) of the Federal Tax Ombudsman Ordinance, 2000 is misconceived and misplaced. It has been repeatedly held in various complaints that where maladministration is established the Federal Tax Ombudsman has jurisdiction to investigate the allegation of complaint. This issue has been elaborately discussed in Complaints No. 1438 of 2002.

18 In view of the above stated facts it is recommended as under:‑‑

(i) The C.B.R. to direct the taxation officer concerned to accept the return of the complainant for the year 2002‑2003 under the Self‑Assessment Scheme within 30 days of receipt of this order.

(ii) The compliance be reported within a week thereafter.

C.M.A./1051/FTOOrder accordingly.