EVER GREEN PESTICIDES (PVT.) LTD., LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2004 P T D 1763
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
EVER GREEN PESTICIDES (PVT.) LTD., LAHORE
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 208‑L of 2003, decided on /01/.
th
July, 2003. Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S. 65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Additional assessment ‑‑‑Assessee was a company‑‑‑Nil income was assessed on the basis of affidavit that no business was conducted by the company‑ ‑‑Proceeding under S.65 of the Income Tax Ordinance, 1979 for additional assessment were initiated on the basis of Balance Sheet and Profit & Loss Account prepared by the Chartered Accountant and assessment was framed accordingly ‑‑‑Assessee contended that accounts obtained from a Chartered Accountant were not signed by any Director or official of the Complainant/company and these could not be called as `definite information' which was mandatory to initiate additional assessment proceedings‑‑‑Validity‑‑‑Authenticity had to be attached to the information supplied by a Chartered Accountant by way of statement of accounts and the Balance Sheet‑‑‑Proceedings were initiated as far back as 1999, and till today the Complainant/assessee had not accused the Chartered Accountant of any professional misconduct before any appropriate authority like the Security and Exchange Commission or the Institute of Chartered Accountants in Pakistan‑‑ There appeared no "maladministration" because the Department was in possession of `definite information' in the shape of systematically prepared Statement of Accounts and the Balance Sheet which were claimed by the Author as having the support of books of accounts revealing dealing in pesticides of which the profit had been subjected to tax after fulfilling the prescribed legal requirements precedent to the initiation of proceedings and by confronting the Complainant as required by law‑‑‑Complaint being without merit was closed by the Federal Tax Ombudsman.
(1993) 68 Tax 1 ref.
M. Ajmal Khan and Amir Umar Khan for the Complainant.
Hassan Kamran, D‑CIT for Respondent.
DECISION/FINDINGS
The Complainant is a company formed to carry on manufacturing and sale of pesticides. It is aggrieved by the initiation of proceedings for Additional Assessment under section 62/65 for the assessment year 1996‑97 which are said to be in violation of law and a product of "maladministration".
2. The brief facts are that the assessment for the year 1996‑97 was framed under section 62 on 30‑6‑1997 at Nil income on the basis of an affidavit by the company to the effect that no business was done. Subsequently, when Department came into possession of Balance Sheet and Profit and Loss Account prepared by Mr. Inam‑ul‑Haq and Co. (Chartered Accountants), proceedings for additional assessment were initiated by issuing a show‑cause notice followed by a statutory notice under section 65 on 14‑5‑2002 and finally assessment was framed under section 62/65 on 8‑2‑2003 at Rs.12,373,390 creating a tax demand of Rs.5,651,762. This is the cause of grievance.
3. Respondent have forwarded parawise comments from RCIT, Eastern Region, Lahore initially questioning competence of the complaint for admission in view of section 9(2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance) as also limitation as per subsection (3) of section 10 of the said Ordinance. It further contends that the Complainant; (i) was unable to disprove appointment of the firm of Chartered Accountants as their Auditors, (ii) did not produce the books of accounts, nor (iii) could disprove the Statement of Account and the Balance Sheet made available by the Firm of Chartered Accountants. Therefore, the Complainant does not merit consideration. It has been finally suggested that compensation be awarded to the tax officials, as provided in subsection (4) of section 14 of the FTO Ordinance because a false and frivolous complaint was filed.
4. The learned counsel for the Complainant submitted that no appeal against Additional Assessment framed under section 62/65 has been filed. It was insisted that at no stage Mr. Inam‑ul‑Haq or his firm was appointed Auditors for the Complainant. He expressed ignorance about the material on which the Balance Sheet and the statement of accounts are said to have. been prepared by the Auditor as no books of accounts were kept or handed over to them for preparation of accounts or for auditing. It was vociferously pleaded that copy of accounts obtained from Mr. Inam‑ul‑Haq are nowhere signed by any Director or official of the Complainant company and, therefore, could not be called as `definite B information' which was mandatory to initiate additional assessment proceedings. For this assertion reliance was placed on Supreme Court decision (1993) 68 Tax 1 in re: Chappal Builders.
5. Mr. Hassan Kamran (D‑CIT) appearing for the Revenue brought on record a bill from Mr. Azhar Imran Associates of which Mr. Inam‑ul- Haq (Chartered Accountant) was the Principal. This bill for Rs.5,000 relates to "legal and professional charges against company formation and legal matters, dated 4‑3‑1995". The payment was made by the complainant by Voucher No.3, dated 20‑3‑1995. The DR asserted that these documents proved that Mr. Inam‑ul‑Haq was professionally associated with the Complainant. Another document which the DR placed on record is a letter, dated 19‑2‑2002 from Inam‑ul‑Haq and Co. in response to notice under section 148 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) confirming that the management of the Complainant company had "provided us some book of accounts for preparing accounts as on 30‑6‑1999" on the basis of which "we prepared accounts without carrying out any audit or verification of books/transactions". It was demonstrated by the DR that even before the inspection note by the IAC, the assessing officer had already confronted the complainant on 22‑10‑1998 with a copy of accounts obtained from the Chartered Accountants. It was pleaded that the complaint was lodged to frustrate the Departmental action and to save the complainant from consequential penal action. Any "mal administration" was insistently denied. The DR concluded by submitting that fair treatment extended by the Department is evident from the fact that Sales were adopted on the same figures as disclosed in the statement of accounts an no enhancement was made.
6. The arguments from both the side and scrutiny of record makes it crystal clear that Mr. Inam‑ul‑Haq was professionally involved with) the complainant, hence authenticity has to be attached to the information, supplied by him by way of statement of account and the Balance Sheet. This view is further strengthened by the fact that although proceedings were initiated as far as back as 1999, till today the complainant has not accused Mr. Inam‑ul‑Haq of any professional misconduct before any appropriate authority like the Security and Exchange Commission or the Institute of Chartered Accountants in Pakistan. On this visualization there appears no "maladministration" because the Department is in possession of `definite information' in the shape of systematically prepared Statement of Accounts and the Balance Sheet which are claimed by the Auditor as having the support of book of account revealing dealings in pesticides of which the profit has been subjected to tax after fulfilling the prescribed legal requirements precedent to the initiation of proceedings and by confronting the Complainant as required by law. The complaint, therefore, appears to be without merit it is consequently FILED and the case is consequently CLOSED.
C.M.A./964/FTOOrder accordingly