Income Tax Ordinance (XXXI of 1979)---

----S. 63---Income Tax Ordinance (XLIX of 2001), S.122A-- Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Maladministration---Rice husking business---Rate of gross profit---Arbitrary application of rate---Validity---Application of GP at 15 % was discriminatory in view of identical cases, where GP rate of 8% was applied in a case referred by the assessee --Still another case, decided by the First Appellate Authority, GP rate of 3 % was applied-- GP rate of 5 % was the history of the assessee---To remove the arbitrariness which amounted to "maladministration" Federal Tax Ombudsman recommended that Commissioner may amend the assessment by resort to S. 122A of the Income Tax Ordinance, 2001 to ensure that correct amount of tax was levied on the taxpayer's income.

Ch. Muhammad Aslam for the Complainant.

M. Anwar Sheikh, D-CIT for Respondent.

FINDINGS/DECISION

This complaint relating to the year 2002-2003 agitates against the assessment framed ex pane under section 63 characterizing it as "perverse, arbitrary, unreasonable, biased, oppressive, discriminatory thus falling in the category of "maladministration".

2. Briefly the facts are that the business of rice husking is being run by an AOP. No books of account are maintained. Return for the assessment year 2002-2003 was filed under normal law at Rs.55,000. When notices issued under sections 61/62 and 58 remained un responded, the Assessing Officer framed ex parte assessment under section 63 of 'the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) determining Income at Rs.5,50,000 by estimating Sales at Rs. 5.5 (M) applying, GP at 15% and deducting Overhead Expenses at 1/3rd of the amount of GP (at Rs.2,75,000). With this dispensation the Complainant is aggrieved.

3. The respondent have forwarded para-wise comments by R-CIT Eastern Region, Lahore which in addition to questioning the competence of the complaint for admission in view of the bar in section 9(2) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance) deny "maladministration". It is explained that no computation chart for Trading or Profit and Loss Account even on estimated basis were filed and there was no evidence about the business having been closed as was the requirement as per section 72 of the repealed Ordinance and section 117 of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance).

4. The learned counsel for the complainant submitted that the non-compliance to notices, the default of which resulted in ex parte assessment was the illness of Mr. Mukhtar Ahmad, the Managing Partner who suffered heart attack on 13-3-2003 soon after he sought adjournment. He remained in the Punjab Institute of Cardiology, Lahore till 20-3-2003 and his family members were so upset and involved that compliance could not be made. In support of this contention, copies of prescriptions and other record of PIC were brought on record. The AR further argued that the estimate of turnover at Rs.5.5 {M) and the GP at 15 % was too excessive and convessed that normally obtaining GP rate is 5-8% in this line of business. On record was brought an assessment in the case of identical concern bearing NTN 21-21-0451513 where rate of 8% was applied.

5. Mr. M. Anwar Sheikh (D-CIT) appearing for the Revenue submitted that the assessment for the preceding year 2001-2002 was till pending where the Income was declared at Rs.104,000. In the still earlier year of 2000-2001 though the Return was accepted under SAS, Sale was declared at over Rs.2.4 (M), therefore, after a passage of two years, the estimate at Rs.5.5 (M) was not excessive or harsh considering inflation in the prices. The DR further explained that three opportunities were offered through notices under section 61/62 for 13-1-2003, 12-3-2003 and 18-3-2003 of which only one i.e. 12-3-2003 was responded. The Assessing Officer, therefore, rightly proceeded under section 63 to frame an ex parte assessment. It was averred by the DR that it has already been ruled by the Balochistan High Court that the Assessing Officer cannot continue postponing proceedings at the whim and Will of the taxpayer and once taken in hand, these are to be taken to its logical end. The DR concluded by submitting that the matter purely relates to assessment of Income against which remedy of appeal or revision is available. Therefore, the complaint is incompetent for admission.

6. The discussion with the two representatives and scrutiny of record is indicative that the Complainant is an AOP and, therefore, if one member of the AOP fell ill, the others were looking after the business and could attend the proceedings as well. Therefore, the Assessing Officer was justified in resorting to ex parte assessment in the face of repeated non-compliance more so when no intimation of sickness was reported to him at the appropriate time. However, there appears harshness and arbitrariness in the application of GP at 15 % which in discriminatory in view of an identical case referred to by the learned counsel, where GP rate of 8% was applied. In still another case, decided by the CIT(A) Zone-V, Lahore, GP rate of 3% was ordered to be applied in Rice husking business. Moreover, the record is indicative that in Complainant's case GP rate of 5 % is the history. To remove the arbitrariness which amounts to "maladministration" it is RECOMMENDED that Commissioner may amend the assessment by resort to section-122A of the Income Tax Ordinance, 2001 to ensure that correct amount of tax is levied on the taxpayer's Income for the tax year.

7. Compliance be reported within 30 days of the receipt of this Order.

C.M.A./1016/FTO Order accordingly