Messrs PUNJAB BEVERAGE CO. (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2004 P T D 1707
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Messrs PUNJAB BEVERAGE CO. (PVT.) LTD.
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 448 of 2003, decided on /01/.
th
August, 2003. (a) Income Tax Ordinance (XXXI of 1979‑‑‑---
‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002, dated 15‑6‑2002, para. 9(a)(ii) (Self‑Assessment Scheme)‑‑‑C.B.R. Letter No. C. 7(7)S. asstt/2002, dated 17‑12‑2002‑‑‑C.B.R. Letter No. C. 7(7)/S.asstt/2002, dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self‑Assessment‑‑‑Setting apart‑‑ Limitation‑‑‑Intimation of selection of case for audit was received by the complainant/assessee on 19‑4‑2003 and actual order of selection, which was, dated 12‑3‑2003 was received on 19‑4‑2003‑‑‑Complainant/assessee contended that selection of the case could not be considered as having been made within due, dated i.e. by 31‑3‑2003‑‑‑Validity‑‑‑No indication was available in the guidelines or in the letter extending the date that the intimation of selection or the order of selection had to be served on the assessee by 31‑3‑2003‑‑‑Neither on facts nor in the light of the legal position was there any reason to hold that the selection of the Complainant/assessee's case or total audit was barred by limitation.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.7 of 2002, dated 15‑6‑2002, para.9(a)(ii) (Self‑Assessment Scheme) ‑‑‑C.B.R. Letter No. C.7(7)S. asstt/2002, dated 17‑12‑2002‑‑‑C.B.R. Letter No. C. 7(7)/S.asstt/2002, dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑Assessment‑‑‑Setting apart‑‑ Selection of case was based on the grounds that net profit rate in respect of income from manufacturing had declined from 0.0169 for the year 2001‑2002 to 0.0096 in the year 2002‑2003 and also that sales had increased during the year by only 1.1% whereas expenditure had increased by 18.2%‑‑‑Working capital had also doubled from Rs.40,878,170 to Rs.80,436,099 but there was no corresponding increase in sales‑‑‑Validity‑‑‑Grounds for selection of the case communicated to the Complainant/assessee and the Complainant/ assessee's replies showed that these were issues which could be properly considered only during regular assessment proceedings‑‑‑Selection of the case for audit was found to be justified and the complaint was rejected accordingly by the Federal Tax Ombudsman.
Abdur Rehman Mir FCA/A.R. for the Complainant.
Dr. Muhammad Iqbal, IAC HQ, Muhammad Ashfaq, Staff Officer to RCIT and Ms. Iram Sarwar, ALIT for Respondent.
FINDINGS/DECISION
This is a complaint against the selection of the complainant's income‑tax return for assessment year 2002‑2003 for total audit under para. 9(a)(ii) of the Self‑Assessment Scheme by the RCIT; Central Region; Multan. The basic contention in the complaint is that even if the date for selection of cases for audit is considered to have been validly extended by C.B.R. to 31‑3‑2003, in the complainant s case even this requirement was not met as the intimation of selection of the case for A audit was received by the complainant on 19‑4‑2003 and the actual order of selection, which was, dated 12‑3‑2003 was received on 19‑4‑2003. It is thus contended that the selection of the case could not, therefore, be considered as having been made by 31‑3‑2003. The selection for audit has also been contested on merits as the grounds of selection are stated to be not valid and the points involved are also stated to have been explained in the reply to the show‑cause notice.
2. The respondent's reply consists of the comments of the RCIT in which it is stated that a speaking order regarding the selection of the case for total audit was served on the assessee on 29‑4‑2003 and it could not be considered as a time‑barred order. The selection of the case has also been defended on merits.
3. During the first hearing of the case of the representative of the complainant reiterated his objections on the point of limitation statedly involved in the selection while the respondent's representative stated that in fact the selection had been made much before the cut‑off date of 31‑3‑2003 and it was only the speaking order which was served on 29‑4‑2003. In the light of the these contentions the respondent's representative was required to produce the relevant records of the RCIT's office. These were produced on the given dace to show that as per the order sheet entry written by the RCIT himself the complainant's representative attended on 27‑2‑2003 in response to the show‑cause notice and the matter was adjourned to 5‑3‑2003 on which date written arguments were filed and an adjournment was requested to 8‑3‑2003 which was, allowed. Again on the next date, Mr. Abdul Rehman Mir, FCA attended and filed further written arguments and on 12‑3‑2003 Mr. Ashraf Zia the Company's Accounts Officer finally appeared and filed details. On that date the RCIT has written the word 'Fit' on the order sheet indicating that the case had been considered as fit for selection. Subsequently the consolidated list of selected cases was conveyed to the Commissioners through fax letter, dated 31‑3‑2003 on the basis of which individual letters intimating selection were sent by the concerned officers to the assessees. The orders of selection were also sent by the RCIT to the Commissioners for service and in the complainant's ease the order of selection, dated 12‑3‑2003 was served on 29‑4‑2003, as already noted.
4. The contention of the complainant's A.R. was that since the intimation of the selection was received vide the ACIT letter, dated 17‑4‑2003 and the actual order, dated 12‑3‑2003 was received on 29‑4‑2003, the complainant was right in the assumption that the selection was made after 31‑3‑2003. The records of the RCIT office do not, however, support this: view and it is quite evident that as per the RCIT's order sheet entry, the selection was made on 12‑3‑2003. The consolidated list of cases selected was also dispatched to the Commissioner on 31‑3‑2003. In the relevant C.B.R 's guidelines, dated 17‑12‑2002 it was desired by the Board that "the process of selection of total audit cases must be finalized by 10‑1‑2003" and vide the letter dated 15‑3‑2003 (relating to companies cases) the date was extended to 3 i‑3‑2003. There was no indication in the guidelines or in the letter extending the date that the intimation of selection or the order of selection had to be served on the assessee by 31‑3‑2003. Thus nether on facts nor in the light of the legal position is there any reason to hold that the selection of the complainant's case for total audit was barred bye limitation.
5. Coming to the merits of the selection it is seen that the selection was based on the show‑cause notice stating that the complainant's net profit rate in respect of income from manufacturing had declined from 0.0169 for the year 2001‑2002 to 0.0096 in the year 2002‑2003 and also that sales had increased during the year by only 1.1 % whereas expenditure had increased by 18.2%. It was also pointed out that the working capital had also doubled from Rs.40,878,170 to Rs.80,436,099 but there was no corresponding increase in sales. The complainant had furnished detailed explanations in the context of the show‑cause notice but it is evident from grounds for selection communicated to the complainant and from the complainant's replies that these are issues which can be properly considered only during regular assessment proceedings. On merits also, the selection of the case for audit has, therefore, been found to be justified.
6. In the light of the above, no intervention is called for in the case. The complaint is accordingly rejected.
C.M.A./987/FTOComplaint rejected.