Dr. ABDUL WAHEED KHAN VS SECRETARY, REVENUE DIVISION ISLAMABAD
2004 P T D 2040
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Dr. ABDUL WAHEED KHAN
Versus
SECRETARY, REVENUE DIVISION ISLAMABAD
Complaint No. 1105‑L of 2003, decided on /01/.
th
October, 2003. (a) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss. 63 & 59‑‑‑Income Tax Ordinance (XLIX of 2000), S.122‑A‑‑ Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑‑Ex parte assessment was framed on a day which was not fixed for hearing and on which no default was committed to warrant ex parte order‑‑‑Validity‑‑‑Circumstances demonstrated arbitrary conduct of Assessing Officer falling in the definition of "maladministration" ‑‑‑Federal Tax Ombudsman recommen ded that Commissioner to invoke S. 122A of the Income Tax Ordinance, 2001 to cancel the assessment framed on 30‑6‑2003 under section 63 of the repealed Income Tax Ordinance, 1979 and that the Return filed by the Complainant for the year 2000‑2001 declaring income at Rs. 275,771 be accepted under Self‑Assessment Scheme.
M.B. Qureshi's case 1975 PTD 126 and Anwar & Co. (1976) 33 Tax 219 rel.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S. 63‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV. of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑ Incumbent on the Assessing Officer to have carefully gone through the record especially When proceeding ex parte under S. 63 of the Income Tax Ordinance, 1979‑‑‑Assessing Officer was under legal obligation to determine the Income to the best of his judgment without being arbitrary or vindictive.
(c) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S. 63‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑ Inspector's report‑‑‑Undated report of inspector lends support to the assertion by the complainant/assessee that this report was introduced on the record later on and was not available when he inspected the file, after due permission.
Ahmad Shuja Khan for the Complainant.
Muhammad Nadeem Arif, DCIT for Respondent.
FINDINGS/DECISION
This complaint has been filed to agitate against the exclusion of the Return for the assessment year 2000‑2001 from the ambit of SAS.
2. The facts in this regard are that the Complainant‑Individual is a Professor of Surgery in the Services Hospital, Lahore, Return for the assessment year 2000‑2001 was filed declaring Income from Salary and share‑income from Property aggregating at Rs.275,771. When notice under section 61 of the Income Tax Ordinance, 1979 (hereinafter called the, repealed Ordinance), dated 8‑5‑2003 was received by the Complainant, the Assessing Officer was reminded that the Return was filed under SAS which is to be processed under that Scheme. No reply was received. However, the Complainant was served with another notice under sections 61 and 62 of the repealed Ordinance, dated 10‑6‑2003. In response, the concerned IAC was requested to direct the Assessing Officer to accept the Return under SAS. A copy of this communication was sent to the Assessing Officer, as well. Although the IAC did not respond but the Assessing Officer issued a letter on 28‑6‑2003 (served on 29‑6‑2003) informing that the Return was excluded from SAS for non filing of Wealth Statement of which due intimation was given to the then AR on 22‑2‑2001. The Complainant was requested to cooperate with the framing of the normal assessment. The Assessing Officer then framed. an ex parte assessment on 30‑6‑2003 (served on 14‑7‑2003) determining, Total Income at Rs.1,132,260 against the declared Rs.275,771. This is the cause of grievance.
3. The Respondent have forwarded parawise comments by the R‑CIT Eastern Region, Lahore which in addition to questioning the competence of the complaint for admission in view of the bar, contained 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 contended that appropriate opportunity' through notices of short document under section 61 of the repealed Ordinance were issued from time to time and that assessment was finalized after extending opportunity being heard. It is inter alia admitted that the short document notice was served on "Messrs Shamim and Co. who was AR of the assessee, in the assessment year 1999‑2000. The assessee neither intimated nor submitted new Power of Attorney in the assessment year, 2000‑2001.
4. The learned counsel for the Complainant submitted that the Return was arbitrarily excluded from the ambit of SAS and obviously care was not taken to serve the short document notice on the Complainant. No Power of Attorney existed on record for the year under‑consideration. Much emphasis was, laid by the learned counsel on the admission by the R‑CIT that the short document notice was served on the AR whose Power of Attorney was obtaining a record for the year 2000‑2001. The learned counsel went on to explain that, as in the past the Complainant, is the owner of one property, and in four others he is only an inherited co‑owner alongwith four ladies. The tenants of these properties continue to be the same and all the co‑owners are existing taxpayers having valid NTN. For the year‑under‑consideration, these co owners were assessed for the share Income from the same properties which have been treated as totally owned by the Complainant in the impugned assessment order. According to the learned counsel when he inspected the file no Enquiry Report was obtaining on record but, some how one is available now. As respects framing of the impugned assessment, the learned counsel alleged inadequate time by referring to Assessing Officer's letter, dated 28‑6‑2003 (served on 29‑6‑2003) whereas the assessment was framed on 30‑6‑2003. This, according to him belied the assertion by the R‑CIT in para.4 that ample opportunity was given to the Complainant.
5. Mr. Muhammad Nadeem Arif (D‑CIT) appearing for the Revenue on his turn submitted that declared Income was above Rs.200,000, therefore, it was mandatory for the Complainant to have filed a Wealth Statement alongwith the Return. Consequently, 'short document' position was very well in his knowledge from the very beginning. The DR brought on record report by the Inspector after the sc‑called `spot and local enquiry' containing particulars such as the area and size of the properties and name of the tenants etc. which, according to the DR, were the basis for framing the assessment.
6. A scrutiny of record after arguments by the two sides revealed that direction for issuance of `short‑document' notice was recorded on the order sheet on 22‑2‑2002. Thereafter, notice under section 61 was ordered on 8‑5‑2003 and assessment framed on 30‑6‑2003. However, there is no entry as to the date for which the case was fixed for hearing and what transpired on that date to warrant an ex parte order. Entry on 10.6‑2003 had ordered for issuing notice under sections 61 and 62 of the repealed Ordinance fixing hearing for 27‑6‑2003. The entry on 26‑6‑2003 refers to receipt of a letter which was ordered to be POF (=Place on file). There is no other entry thereafter except the one on r0‑G‑2003 which reads: "assessed under section 63 of the repealed Ordinance issue demand notice and IT‑30". It is manifest that an ex parte assessment was framed on a day for which the case was not fixed for A hearing and on which no default was committed to warrant ex parte order. The situation is covered by the Lahore High Court in re: M.B. Qureshi= 1975 PTD 126 and Anwar and Co. (1976 33-Tax-219 where the learned Judges declared the ex parte assessment illegal. The record further reveals that in the preceding years, as also in the succeeding year of 2002‑2003, the Complainant had attached working of rental Income clearly showing that he enjoyed share in the properties alongwith other co‑owners. This evidence, despite being available on record, was totally ignored. At the hearing the Complainant's Counsel indicated the NTN of other co‑owners as under:‑‑
Ms. Kaniz Fatima=NTN 06‑08‑0842171‑4
Ms. Waheeda Akthar=NTN 06‑08‑1447568‑5
Ms. Hameeda Fakhar=NTN 06‑08‑0842161‑7
Ms. Shamshad Fatima=NTN 06‑08‑1468932
The DR could not deny that these taxpayers do exist on record and have filed their Returns. It was, therefore, incumbent on the Assessing Officer to have carefully gone through the record especially when proceeding ex parte under section 63 he was under a legal obligation to determine the Income to the best of his judgment without being arbitrary or vindictive. It also is significant that the order sheet nowhere records that the Inspector was deputed to conduct `local and spot enquiry'. Glaring also is the fact that the report by the Inspector bears no date which lends support to the assertion by the AR of the Complainant that this report was introduced on the record later on and was not available when he inspected the file, after due permission.
7. The foregoing circumstances clearly demonstrate arbitrary conduct falling in the definition of "maladministration" as per Clause (3) of section 2 of the FTO Ordinance. It is, therefore, recommended that:‑‑
(i)Commissioner invoke section 122A of the Income Tax Ordinance, 2001 to cancel the assessment framed on 30‑6‑2003 under section 63 of the repealed Ordinance.
(ii)The Return filed by the Complainant for the year 2000‑2001 declaring Income at Rs.275,771 be accepted under SAS.
8. Compliance be reported within 30 days of the receipt of this order.
C.M.A./123/FTOOrder accordingly.