SOHAIL ZAHEER LARI VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2004 P T D 2057
[Federal Tax Ombudsman]
Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman
SOHAIL ZAHEER LARI
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.779‑K of 2003, decided on /01/.
th
July, 2003. (a) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑Ss. 59A, 62, 96; 102 & 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Assessment on the basis of return‑‑‑Confirmation of assessment order by the First Appellate Authority, which was ab initio contrary to law‑‑‑Ground that order was bad in law was totally disregarded‑‑‑Finding recorded at the end of order spoke volumes about mala fide intentions‑‑‑Confirmation of fabrications of income made by the Assessing Officer‑‑‑Non‑issuance of refund‑‑ Complaint against‑‑‑Validity‑‑‑Glaring lapses of administrative control and failure of due exercise of judicious discretion were found in the actions of the First Appellate Authority and the complainant was being made to suffer for the incompetence, inefficiency and arbitrariness of the subordinate officers‑‑‑Federal Tax Ombudsman recommended that the Chairman Central Board of Revenue should impress upon the officers in BS‑20 and BS‑21 to ensure rule of law and motivate them to seize every opportunity to avoid unnecessary litigation on settled issues and mistakes apparent from record, notwithstanding any pending appeals that can always be withdrawn or dismissed as infructuous; that the Commissioner ensures that a fresh Wealth Tax assessment order for assessment year, 1997‑98 is passed in pursuance of the order of the Commissioner of Wealth Tax (Appeals) on the basis of correct fact available on record and in accordance with law; that the Taxation Officer issues copies of record required by the complainant in accordance with law; that the Taxation Officer, allows compensation admissible under S.102 of the Income Tax Ordinance, 1979 on all delayed refunds whether adjusted against any other demand or issued by cheques; that the Taxation Officer disposes of all pending notification applications and gives effect to orders in appeals and that the Taxation Officer issues refunds with compensation for delay, if any due, after due and proper compliance of the foregoing recommendations.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S. 59‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑C.B.R. Circular No.5 of 1997, dated 12‑7‑1997 [Self‑Assessment Scheme]‑‑‑Self‑Assessment‑‑‑Short document notice-‑‑Assessing Officer, admittedly, had not issued any letter as required under para. 4 of the Self‑Assessment Scheme for the assessment year, 1997‑98 which was supposed to be issued prior to the initiation of exercise for random ballot‑‑‑No finding was given that the return was not included in the list of cases sent for random ballot which means that it was a return qualifying for Self‑Assessment Scheme.
(c) Interpretation of statutes‑‑‑--
‑‑‑‑ Mandatory provisions of law, rules and regulations could not be twisted or manipulated.
(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S. 2(3)‑‑‑Income Tax Ordinance (XXXI of 1979) S. 102‑‑‑Malad ministration‑‑‑Refusing complainant/assessee to inspect the file as well as non‑issuance of photo‑copies of the order‑sheets and assessment orders to assess the refund and compensation due under S.102 of the Income Tax Ordinance, 1979 amounted to maladministration.
(e) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑Ss. 59 & 61‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑assessment‑‑‑Assessment year, 1997‑98‑‑‑Action of Assessing Officer of informing the complainant on 9‑10‑1999 that his case for assessment year 1997‑98 did not qualify for Self‑Assessment Scheme and then issuing the notice under S.61 of the Income Tax Ordinance, 1979 in the year, 2000 was ab initio contrary to law.
(f) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑--
‑‑‑‑S.2(3)(i)(ii)(iv)‑‑‑Income Tax Ordinance (XXXI of 1979), Preamble‑ Deliberate baseless fabrications in the assessment of wealth against the facts available on record and valuation of certain assets contrary to settled law amounted to maladministration.
(g) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S. 2(3)(i)(d) & (ii)‑‑‑Income Tax Ordinance (XXXI of 1979), S.129‑‑ Tendency to set aside/remand the orders by First Appellate Authority for re‑consideration, where clear finding can be given amounts to maladministration.
(h) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑
‑‑‑‑S. 2(3)‑‑‑Income Tax Ordinance (XXXI of 1979), Preamble‑‑‑Role of Commissioner‑‑‑Primary role of Commissioners and above as envisaged by law was to ameliorate the hardships that were likely to be caused by the assessing/collecting officers firstly due to their inexperience, secondly due to their over‑enthusiasm to perform and thirdly due to the pressure of collection targets assigned to the Assessing Officer.
(i) Income Tax Ordinance (XLIX of 2001)‑‑‑--
‑‑‑‑Ss. 120, 121, 122 & 159‑‑‑Income Tax Ordinance (XXXI of 1979), S.50‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Assessments‑‑‑Role of Commissioners‑‑ Three roles of Commissioner under the Income Tax Law in relation to taxpayers stated.
Complainant in person.
Sultan Nazir, IAC, Basit Saleem Shah, T.O. for Respondent.
DECISION/FINDINGS
Maladministration is alleged in the instant complaint on the part of the Deputy Commissioner of Income/Wealth Taxes, for issuing notices under section 61 to the complainant, Mr. Sohail Zaheer Lari in 1999 in respect of assessment year, 1997‑98 which were contrary to law because the deemed assessment order under section 59A had already been passed on 29th September, 1997 as recorded on the order sheet. It is alleged that he was harassed by the DCIT after 19th October, 1999 to file a revised return to include accrued receipts from ABN AMRO BANK although he always declares the professional fees on receipt basis. The DCIT thereafter proceeded to assess the income again under section 62 by making arbitrary additions and further committing computation mistakes to inflate the amount of assessed income as under:‑‑
"Perusal of original return and revised return reveals that the assessee had declared receipts as follows:‑‑
OriginalRevisedDifference
(Worked out by
Complainant)
ABN Amro961,5001,396,500+ 435,000
KMC Ladies Club324,000306,000‑ (18,000)
PCO706,040670,738‑ (35,302)
OUP577,500559,760‑ (17,740)
Donation385,000NIL‑ (71,042)
Income‑B235,568NIL
OthersNIL620,568"
Total:3,189,6083,553,566+ 363,958
"The receipts of the assessee are estimated including the difference of both the returns filed by him.
Original receipts Rs.3,698,108
Add: difference Rs.1,126,610
The difference is added back in the total income. "
Computation of income:
"Income declared by the assessee as per his revised1,055,142
return: (Before depreciation)
Addition in receipts as discussed above1,126,610
Royalty income as declared (N.B. Royalty income11,228
is exempt under clause (139) of Second Schedule
for companies only).
Add back out of expenses declared.
(i)Books and newspapers declared at Rs.80,157,20,039
25 % is added back due to non‑furnishing of
any vouchers and unverifiability.
(ii)Entertainment and Office tea declared at48,356
Rs.96,711, 50% is added back due to non
furnishing of any vouchers and unverifiability.
(iii)Maintenance, declared at Rs.257,930, 1/3rd is85,977
added back due to non‑furnishing of any
vouchers and unverifiable.
(iv)Medical 8,912 is added back in toto being8,912
inadmissible.
(v)Printing and Stationery declared 493,313147,994
1/3rd is added back due to non‑furnishing of
any proof and unverifiability.
(vi)Postage declared 15,235, 1/3rd is added back4,600
due to non‑furnishing any proof and
unverifiability.
(vii)Telephone declared 160,24225 % is added40,061
back being personal call.
(viii)Travel and conveyance declared 304,54691,364
1/3rd is added back being personal.
Total add backs:447,303,
Total Income2,640,283
Income from profit from PLS as declared,64,801
Total Income Assessed2,705,084
Income from dividend from shares, accepted as94,976"
declared subject to action under section 65/156, to
be taxed as separate block of income.
Note:All bold figures are either miscalculated or a consequence of miscalculation or misappreciation of facts or misapplication of law.
2. Likewise assessment for the same year under Wealth Tax Act was made, according to the complainant, by recording baseless findings about the actual particulars of the immovable properties owned and declared by the complainant in his wealth tax return.
3. It is submitted in the complaint that the return of income for 1997‑98 was filed under the Simplified Self‑Assessment Scheme (SSAS) supported by 31 enclosures fulfilling all the conditions and it was accepted under the scheme because it was assessed under section 59A on 29th September, 1997 and because it was not set apart for audit under any Para of the Scheme. Letter, dated 9‑10‑1999 requiring certain documents and details in support of return of income and subsequent notice under section 61, dated 24‑5‑2000 and notice under section 62, dated 6‑6‑2000 issued by the DCIT were obviously contrary to law; hence all subsequent proceedings ab initio void.
4. However, in June, 2000 when the arbitrary proceeding were in progress and the DCIT was exercising extra threat military regime, the complainant did file a return revising certain figures to add accrued receipts receivable from Messrs ABN AMRO BANK. But, this revision of return too was invalid because no revised return could be filed after the assessment order was passed. Besides, the complainant submits that he was justified in not declaring the accrued fee in the original valid return of income because the Bank had withheld the payment at the eleventh hour. Applications filed under section 156 of the repealed Ordinance and under section 35 of the Wealth Tax Act, 1963 seeking rectification of mistakes apparent from record are pending but rectification orders are being delayed to avoid refund of excess taxes collected from him.
5. The complainant wrote a detailed letter to the RCIT on 24th July, 2000 to show that. the assessment order was full of mistakes; most of the figures and calculations in the assessment order were false and fabricated. For example on page 4 of the assessment order, the DCIT stated that the credit entries in his bank accounts bearing Nos. 854 and 921 amount to Rs.1,053,703, whereas according to photocopies of the bank statements supplied to the DCIT, the credit entries in the aforesaid bank accounts at HBL Muhammad Ali Housing Society Branch and UBL Sunset Gizri Branch respectively, total only Rs.222,733. The RCIT assured him that the CIT(A) was a good man and he would do the needful.
6. However, the said Commissioner (Appeals) failed to pass an order and was replaced by Mrs. Zareen Saleem Ansari, Commissioner of Income‑tax, Appeals‑III, Karachi who allegedly committed maladministration by confirming the assessment order which was ab initio contrary to law. The very first ground that the order was bad in law was totally disregarded. She has recorded in her order the submissions made by the two sides verbatim on the ground that the impugned order was bad in law but the finding recorded at the end of her order speaks volumes about her mala fide intentions. It has been pleaded that the CIT (Appeals) also confirmed the following fabrications of income made by the DCIT:
(i)The non‑existent difference of Rs.1,126,610 between the original and the revised receipts against the difference of the two figures given by the DCIT on page 4 of the assessment order amounting to Rs.363,958 only. Even if such difference did exist, it could not be added again to the revised receipt because it would amount to addition of the difference twice. [It was apparent from record that the addition of Rs.1,126,610 even to revised receipts was baseless and it was the obligation of the RCIT to require the CIT to take sun motu cognizance of the mistake].
(ii)The illegal addition of profit on PLS Accounts amounting to Rs.64,801 made by the DCIT to income despite the law that‑it is subject to a withholding tax as a separate block of income and in spite of the fact that bank had already withheld tax from such PLS Profit as full and final settlement of tax liability on such income, disregarding the law that an income cannot be taxed twice.
(iii)Whereas the DCIT had made the illegal additions on account of PLS Profit amounting to Rs.64,801 only, the CIT(A) mis recorded it in her order us Rs.648,041 and confirmed the addition of incorrect figure, in spite of the fact that the details of the PLS Profit were submitted on both 30th September, 1991 and 26th June, 2000, with the photocopies of the bank statement showing deduction of the withholding tax and Zakat acknowledged by the DCIT and was available on record.
(iv)The Dividend income of 94,967 which was not added by DCIT, was added by CIT(A) disregarding the law that it is subject to a withholding tax as a separate block of deemed income and tax had already been withheld from such dividend as full and. Final settlement of tax liability on such income impervious of the law that an income cannot be taxed twice. The details of the Dividend Income were submitted on both 30 September, 1997 and 26th June, 2000 with the photocopies of the Dividend Warrants showing deduction of withholding tax and Zakat. A copy of letter was also signed by the DCIT.
(v)The illegal add‑back of expenses of Rs.447,303 by the DCIT for alleged unverifiability, despite the fact that 91.77 % of expenses were incurred by cheques and the Receipt and Expenditure Book was submitted with the letter, dated 26th June, 2000 showing cheque and voucher numbers of every single expenditure alongwith bank statements and vouchers. A copy of letter was also signed by the DCIT. It was well‑settled in law that the DCIT is required under section 62, before disagreeing with accounts, to give a notice to the assessee of the defects in accounts and provide an opportunity to explain his point of view about such defects and record such explanation. The Appellate Tribunal has repeatedly held that every expense must re judged individually on merit.
(vi)The depreciation allowance of Rs.264,405 when similar claims of depreciation have been accepted in all previous years by the Income Tax Officers.
(vii)The Zakat deducted from Dividend Warants and PLS accounts shown at Rs.18,470 which all companies and banks are required to deduct under the law. The details were submitted on both 30th September, 1997 and 26th June, 2000, with the photocopies of the Dividend Warrants and Bank Statements showing deduction of withholding tax and Zakat. A copy of his letter was also signed by the DCIT.
7. The respondent submitted in the comments filed in response to notice under section 10(4) of Ordinance XXXV of 2000 that the assessee was informed by the Assessing Officer on 9‑10‑1999 that his case for assessment year 1997‑98 did not qualify for self‑assessment scheme. However, the assessee himself revised his return of income for the assessment year, 1997‑98 on 14‑6‑2000 and not only enhanced his receipts, but also reduced the expenses claimed in the statement of income and expenditure A/c. Assessment for assessment year 1997‑98 was made at net income of Rs.2,640,283 under section 62. The assessee preferred an appeal before CIT(Appeals)‑III, Karachi who dismissed assessee's appeal and he has filed a second appeal before the Income Tax Appellate Tribunal (ITAT), Karachi.
8. The respondent further submitted that the complaint was against assessment regarding which legal remedies were available. The assessee's appeal is pending before the ITAT, Karachi and the matter is sub judice and falls under the provisions of section 9(2)(b) of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. Reliance is placed on the decision of the President of Pakistan in C. No. 979‑K of 2001 wherein it is held that the jurisdiction of Federal Tax Ombudsman's office is confined to cases of maladministration and it does not involve the decisions of appeals on merits.
9. The complainant has submitted in his rejoinder at the time of hearing that there are certain parts of his complaint that are not sub judice in appeal. The moot point of complaint that the Regional Commissioner of Income Tax (RCIT) has completely missed is about a malaise in the Department that is not addressed by the ITAT. His main grievance is that the concerned senior officers too do not take cognizance of absolutely arbitrary actions and decisions of their subordinates even where such actions and decisions are patently contrary to settled law and void and the mistakes committed therein are apparent from record. The law requires them to do so; they are obliged to allow suo motu relief wherever due as well as to initiate appropriate administrative actions against such delinquent officers.
10. The complainant has submitted that the RCIT has failed to take due cognizance of his complaints against the assessment order as well as the appellate order. He has enclosed copy of a detailed letter addressed by him to the RCIT on 24th July, 2000, alleging that the entire proceedings were a nullity in law and every single figure and calculation in the assessment order passed by the DCIT were false and fabricated. However, the RCIT did not take cognizance of the incompetence inaptitude and the arbitrary mindset of the Assessing Officer.
11. The law applicable to the complainant's return was as under:‑‑
Section 59 of Income Tax Ordinance, 1979 (Repeated Ordinance)
"Self assessment. ‑‑‑(1) Where the return of total income for any income year furnished by the assessee not being a public company or a company engaged in the business of banking', leasing as Modarabas, under section 55 qualifies for acceptance in accordance with the provisions of a scheme of self‑assessment made by the Central Board of Revenue for that year or under any instructions or orders issued thereunder, the Deputy Commissioner shall assess, by an order in writing, the total, income of the assessee on the basis of such return and determine the tax payable on the basis of such assessment.
Explanation. ‑‑‑For the removal of doubt it is hereby declared that a return of total income furnished under section 55 does not include a return of total income furnished under section 57.
(1A)Notwithstanding anything contained in subsection (1), the Central Board of Revenue or any authority subordinate to it, if so authorized by the Central Board of Revenue in this behalf, may, in accordance with a scheme referred to in subsection (1), select out of returns referred to in that subsection any cases or classes of cages or persons or classes of persons, howsoever determined for assessment under section 62; and the Deputy Commissioner shall proceed to make the assessment under that section or, if the circumstances so warrant, under section 63, accordingly.
(3)In assessing the total income and determining the tax payable under subsection (1), the Deputy Commissioner may make such adjustments as may be necessary, including any adjustment under sections 34, 35, 36, 37,, 38, 50, 53 or 54, the rules made under section 165, the First Schedule and the Third Schedule.
(4)No order under subsection (1) shall be made in any case after the thirtieth day of June of the financial year next following the income year in respect of which a return of total income has been furnished under section 55:
Provided that if such order is not passed by such date, the acknowledgement issued under section 55A in respect of the return of total income shall be deemed to be the assessment order and notice of demand referred to in section 85. "
Income Tax Circular Ne.5 of 1997, dated 12th July, 1997.
Scope of the Scheme:
(1)The Scheme applies to returns of income, other than those filed by a company as defined in the Income Tax Ordinance, 1979,
(2)Returns filed for the assessment year 1997‑98 shall qualify for acceptance, under the scheme, provided that they fulfill the following conditions:‑‑
(a)Return is filed voluntarily by the due date; and
(b)The tax paid by an existing assessee on the basis of income declared for assessment year, 1997‑98 is not less than the tax payable for the assessment year, 1996‑97 on the basis of assessment or returned income whichever is higher.
(c)The tax wherever payable with the return under section 54 of the Income Tax Ordinance, 1979, has been fully paid;
(d)If the declared income or the last assessed income is Rs.100,000 or more, wealth tax return as required under the Wealth Tax Act, 1963, also accompanies the return of income;
(e)The income declared under the scheme has not been arrived at by making lump sum addition;
(f)The declared income has been arrived at without deducting those expenses which are legally inadmissible deductions;
(g)No legal issue is pending in any appeal or reference in respect of a previous assessment and the same issue does not exist in the current year, unless the appeal/reference is withdrawn either by the taxpayer or the Department, as the case may be, before the fling of return under the scheme;
(h)The requirements specified in paragraph 3 are fulfilled; and
(i)There is no concealment of income.
Requirements of Return:
(3)(i) The following statements, accounts, details and documents are to be filed alongwith the returns of income:
(A)Interest on Securities:
(B)Income from House Property:
(i) .............................................................
(ii) ............................................................
(iii) ............................................................
(C)Income from Business or Profession:
(i)Where the accounts are maintained;
(a)manufacturing and/or Trading Account(s), Profit and Loss Account and Balance Sheet and Receipt and Expenditure statement, wherever applicable; and
(b)the copies of personal accounts of the proprietor, partners or members.
(ii)Where no accounts are maintained, a Manufacturing and/or Trading Account(s) and Profit & Loss Account or Receipt and Expenditure Statement on estimate basis.
Processing of Returns Filed Under Self‑Assessment Scheme:
(4)In the case of short documents, notices will be issued for filing the same within fifteen days from the date of receipt of such notices, without asking for the attendance of the taxpayer. In case of non‑compliance, the return will be processed under the normal law.
(5)Selection of cases for special audit.
From amongst those qualifying for the Self‑Assessment Scheme 5 % returns may be selected for Special Audit through computer ballot.
(6)All returns falling outside the scope of the scheme shall be processed under normal law.
(7)The cases selected for Special Audit may be assigned for audit purposes to firms of Chartered Accountants and Cast and Management Accountants and such cases may be assessed by Special Officers appointed in this behalf ".
12. The DCIT, admittedly, has not issued any letter as required under para. 4 supra which was supposed to be issued prior to the initiation of exercise for random ballot. There is no finding that the return was not included in the list of cases sent for random ballot which means that it was a return qualifying for self‑assessment scheme. Investigation has proved that the return fulfilled all the conditions to qualify under SSAS as envisaged in para.2 of the Scheme supra and the time‑barred allegation that the tax due under section 54 of the repealed Ordinance was not paid alongwith the return has been found even otherwise baseless. The question about the validity of the order sheet entry about the assessment having been made under section 59A is a non issue after 30th June, 1998 in view of the provisions of subsection (4) of section 59 which provides:‑‑
"No order under subsection (1) shall be made in any case after the thirtieth day of June of the financial year next following the income year in respect of which a return of total income has been furnished under section 55:
Provided that if such order is not passed by such date, the acknowledgement issued under section 55A in respect of the return of total income shall be deemed to be the assessment order and notice of demand referred to in section 85. "
13. The RCIT, on the facts and circumstances of the instant case, was expected to appreciate that the entire proceedings are ultimately bound to be annulled. His first obligation, therefore, was to ensure that the assessee/complainant was saved of unnecessary harassment and the assessment was annulled under section 138 of the repealed Ordinance. Secondly he was obliged to appreciate that by the time it is annulled the time prescribed for any lawful proceedings, if called for, under section 65 or 66A of the repealed Ordinance might, expire.
14. The senior officers are supposed to know that mandatory provisions of law, rules and regulations cannot be twisted or manipulated by saying:
(i)That the assessee himself revised his return of income for the assessment year 1997‑98 on 14‑6‑2000 and not only enhanced his receipts, but also reduced the expenses claimed in the statement of income and expenditure A/c.
(ii)Assessee was informed by the Assessing Officer on 9‑10‑1999 that his case for assessment year 1997‑98 did not qualify for Self‑Assessment Scheme.
(iii)The assessee preferred an appeal before CIT (Appeals)‑III, Karachi who dismissed assessee's appeal and he has filed a second appeal before the Income Tax Appellate Tribunal (ITAT), Karachi
15. Similarly the RCIT, while offering the comments on the issues raised in the complaint and before raising objection to the jurisdiction of the Federal Tax Ombudsman on the ground that all the matters involved were sub judice, should have appreciated that the concerned officer committed maladministration insofar as:--
(i)He denied the complainant the inspection as well as the photocopies of the order‑sheets and assessment orders from the assessment year, 1982‑83 to date to assess the refund and, compensation due to him under section. 102.
(ii)He failed to reply to complainant's request to give effect to tote set aside Wealth Tax Assessment where no appeal against such assessment is pending. The issues on which the order has been set aside are as under:‑‑
(a)Complainant has been declaring for the last two decades an open Plot No.350 Beach Street, in DHA Phase VIII measuring 2000 sq. yds. Its .valuation at the rate given by the Collector was mandatory The Collector had notified the rate @ Rs.385 per sq. yd., for the assessment year 1997‑98. The DCWT Mr. Nashir arbitrarily assessed it as a built up residential property in DHA Phase DHA V in order to enhance illegally its rate from Rs.385 to Rs.2,826.
(b)Agricultural land has been declared for the last decade in Mouza Tajwal Tehsil Abbotabad in N.W.F.P. Although Jamabandi supplied to previous WTO's is on the file and DCWT Mr. Nashir refers to it yet he arbitrarily assesses agricultural land in N.‑W.F.P. as an urban property in Punjab to enhance its value by hundred times without recording any reason either for the new finding or for the enhanced v.auation.
(c)The DCWT unjustly added a plot in :Phase VI, DHA, Karachi to complainant's assets, although the complainant wrote to the DCWT that the computer would verify that he never owned the said plot.
(d)The Tools of Profession are exempt under section (20) of Second Schedule but the DCIT arbitrarily renamed these as "6uEiness Capital" to unlawfully add it to complainant's wealth.
(e)The DCWT perversely added the balance in PLS account on which tax and Zakat are deducted at source, hence exempt a/c (1) of the Second Schedule to the Wealth Tax Act.
(f)The DCWT flagrantly added value of shares and Government bonds to chargeable assets on Which Zakat had been deduced and deductible, therefore, exempt from wealth tax.
(g)The DCWT incorrectly states that shares are declared at Rs.531,645 out of which Rs.251,470 has been declared as exempt. In fact the cost of shares had been shown at Rs.531,645 and their value at Rs.276,310
(h)The DCWT arbitrarily enhanced the weight of gold although the same jewelry has been declared for three deceases, and it has been accepted by various WTO's since the assessment year 1986‑87. The price of gold may go up but they do not grow in weight. .
(i)Works of art have been declared which are exempt a/c (15) of the Second Schedule. Yet the DCWT blatantly added value of works of art in clear violation of law.
16. The next ground on which maladministration is alleged is the disregard shown to complainant's claims of refunds aggregating Rs.707,502 for and from assessment year 1982‑83 to the assessment year, 1999‑2000, despite the allegedly dishonest assessments and false demands created for the assessment years. 1997‑98 and 1998‑99. It is alleged that refunds are due from the assessment years, 1982‑83 to the assessment years, 1999‑2000 on the basis of assessments completed but not a single refund has been paid to him. According to complainant, he wrote to the CIT and RCIT on 5th June, 2003 that it was totally false that there were any' arrears of demand against him. Instead; a refund of Rs.707,502 was due. If one was to add compensation for delay @ 15% per annum as per the law, it would amount to a refund of Rs.1,240,068. And if the loss declared for next assessment years was taken into account, the total refund due would come to Rs.1,728,786.
17. However, the complainant has been denied inspection of his file and photocopies of the order sheets and assessment orders have not been issued despite repeated requests since 30th August, 2000. Referring to the earlier request of his lawyers for copies of the aforesaid documents alongwith a challan of Rs.100 he again requested for copies of order sheet sand assessment orders for the assessment years 1989‑90 to 1999‑2000 but did not receive any response. Last time he got photocopies from the ITO was when he complained to the Wafaqi Mohtasib over a decade ago and he was able to prove to the ITAT that the ITO had tampered with the record.
18. The complainant has questioned the statement of the Regional Commissioner of Income Tax, Southern Region, that `refund of Rs.1,21,468 for assessment years 1996‑97 and 1998‑99 has been adjusted against tax demand for the years 1997‑98 because it is contrary to rules, regulations and the ,law. According to complainant, a refund of Rs.86,944 was assessed and became due on 7th August, 1997 in the assessment year, 1996‑97 and it was to be paid in accordance with the provisions of section 100 irrespective of whether the assessee had or had not made claim in that behalf. According to section 102, if refund was not paid within three months of the date on which it became due, a further sum of 15 per cent per annum was to be paid as compensation. The RCIT, therefore, should know that the concerned officer cannot adjust merely the amount of Rs.86,944 in June, 2003. He must first add to it compensation for six years @ 15 % per annum from 7th August, 1997 to June, 2003.
19. The RCIT, therefore, cannot even raise the objection that the foregoing matters are sub judice. It is, therefore, alleged that RCIT, CIT, DCIT and the TO have not only deliberately and willfully acted contrary to the law and rules and regulations but they have repeatedly acted in a totally arbitrary and perverse manner, warranting recommendation for initiating disciplinary proceeding against them.
20. It is further alleged that the RCIT has also failed to reply to the complaint against the wealth tax assessment. As the Wealth Tax Assessment has been set aside and no appeal against the Wealth Tax Assessment is pending, the RCIT cannot even raise the issue of it being sub judice.
21. Further maladministration is alleged on the part of the same officer in the first instance for refusing to admit that the mistakes apparent from record in the orders passed under Income Tax Ordinance, 1979 (repealed Ordinance) for the assessment years 1984‑85, 1985‑86 in the case of Mrs. Yasmeen Lari are deemed to have been rectified because no action has been taken on rectification applications filed in 1991. Certificate of Vesting of applications on 14‑4‑1991 is produced by the complainant. It is further alleged that effect has not been given despite the fact that the CIT (Appeals) has already allowed relief in assessment year 1987‑88 vide decision, dated 31‑3‑1994 and recovery of bogus tax demand for all the aforesaid three years is being pursued.
22. Complainant and respondents have been heard. Rectification application, wealth statements and other relevant records in respect of assessment years, 1984‑85 and 1985‑86 have been perused with their assistance. The respondent officers presently posted in the concerned Circle and Range agree that the mistakes pointed out in the applications were evident from record and warranted rectification. They concede that the aforesaid two assessment orders shall be deemed to have been rectified and the due effect on determination of tax payable shall be given in the IT. 30 Assessment Form.
23. Relief in assessment year 1987‑88 has been allowed by CIT(A) and order has already been revised. Grievance has been redressed but refund has been arbitrarily adjusted against bogus demand. The respondent officers agree to determine the refund, if any due, on the basis of foregoing facts. The written comments submitted by the respondent on the aforesaid allegations, therefore, are irrelevant, outdated and misconceived.
24. The matters concerning the allegations in the case of Mr. Sohail Zaheer Lari that the action of the Assessing Officer of informing the complainant on 9‑10‑1999 that his case for assessment year, 1997‑98 did not qualify for Self‑Assessment Scheme and then of issuing the notice; under section 61, in the year, 2000 is ab initio contrary to law are sub judice. hence outside the purview of this forum. The allegations regarding the ineptitude and incompetence of the Commissioner (Appeals‑III), Karachi also relate to a sub judice order passed by her in Appeal No.249 on 27th February, 2003.
25. However, the deliberate baseless fabrications in the assessment of wealth against the facts available on record and valuation of certain assets contrary to settled law found supra amount to maladministration as defined in clauses (i), (ii), and (iv) of subsection (3) of section 2 of Ordinance XXXV of 2000. The tendency to set aside/remand the orders for re‑consideration where clear finding can be given amounts to maladministration by Commissioners of Appeal as defined under section 2(3)(i)(d) and (ii) of the Ordinance XXXV of 2000 and it is proved against the CWT (A) in the instant complaint.
26. It is noted with concern that the officers .at the level of Commissioners and at times even above do not appreciate that their) primary role as envisaged by law is to ameliorate the hardships that are H likely to be caused by the assessing/collecting officers firstly due to their inexperience, secondly due to their over‑enthusiasm to perform and thirdly due to the pressure of collection targets assigned to the Assessing Officers. It is worthwhile to observe that the Commissioner has all along been assigned the following three roles under the Income Tax Law it relation to taxpayers:‑‑
(a)Assignment of jurisdiction over the assesses in his zone to his subordinate officers;
(b)Only benevolent revision of assessment orders either on the basis of petitions filed by the taxpayers or suo motu where any relief is found due. (A conceptual modification has been made in the Income Tax Ordinance, 2001 whereby the Commissioner has been conceived as head of the audit/assessment wing by vesting him with powers to assess (under sections 120 and 121) and to amend the assessment (under section 122) where he:
(a)is of the view that the Ordinance has been incorrectly applied in making the assessment (including the misclassification, of an amount under a head of income, incorrect payment of tax with I the return of income, and incorrect claim for tax relief or rebate, an incorrect claim for exemption of any amount or an incorrect claim for a refund); or
(b)has definite information acquired from an audit or otherwise that the income has been concealed or inaccurate particulars of income have been furnished or the assessment is otherwise incorrect.
(The power of benevolent amendment suo motu is implied in the, provisions of clause (a). Section 135, which was para materia with section 138 of the repealed Ordinance, therefore, was omitted by Finance Ordinance, 2002. However, it was later realized that clause (a) of section 122(4) does not envisage the application for revision by the assessee; hence addition or section 122A by Finance Act, 2003.)
(c)Issuing certificates to the effect that withholding of tax from an assessee is either not called for or it is to be withheld at a lower rate. (Section 50 of the repealed Ordinance and section 159 of Income Tax Ordinance, 2001).
27. Similar glaring lapses of administrative control and failure of due exercise of judicious discretion are found in the actions of the Commissioner of Wealth Tax and the complainant is being made to suffer for the incompetence, inefficiency and arbitrariness of the subordinate officers.
28. Now it is recommended that:‑‑
(i)the Chairman Central Board of Revenue impresses upon the officers in BS‑20 and BS‑21 to ensure rule of law and motivates them to seize every opportunity to avoid unnecessary litigation on settled issues and mistakes apparent from record, notwithstanding any pending. appeals that can always be withdrawn or dismissed as infructuous;
(ii)the Commissioner ensures that a fresh Wealth Tax assessment order for assessment year 1997‑98 is passed in pursuance of the order , of the CWT (Appeals) on the basis of correct facts J available on record and in accordance with law;
(iii)the Taxation Officer issues copies of record required by the complainant in accordance with law;
(iv)the Taxation Officer allows the compensation admissible under section 102 of the repealed Ordinance on all delayed refunds whether adjusted against any other demand or issued by cheques;
(v)the Taxation Officer disposes off all pending rectification applications and gives effect to orders in appeals;
(vi)the Taxation Officer issues refunds with compensation for delay, if any due, after due and proper compliance of the foregoing recommendations
(vii)Compliance is reported within 45 days.
C.M.A./999/FTOOrder accordingly.