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-- Assessment barred by limitation---Service of recovery notice be re completion of assessment---Validity---Failure in framing of assessment by prescribed date rendered the same barred by time---Instead of accepting declared position, some tampering seemed to have been attempted leaving discrepancies viz. (i) the date in the DCR, (ii) late issuance of notice under S.116 of the Income Tax Ordinance, 1979 and (iii) the disparity in the date of recovery notice---Such flaws occurred as cover-up was attempted by manipulating record which left some irreconcilable flaws which betrayed the manipulation---Federal Tax Ombudsman recommended that Commissioner by resort to S.122 of the Income Tax Ordinance, 2001 amend the assessment accepting the Return as no order was passed in the eye of law till 30-6-2002; a legally valid reassessment could be framed on or before 30-6-2002 as the assessment was set aside by the Commissioner of Income Tax (Appeals) on 10-5-2001; an enquiry should be conducted to identify the tax functionaries responsible for making the assessment time-barred for suitable disciplinary action against those found guilty and the said enquiry should be in addition to enquiry already in hand about, the delayed service of assessment order etc.  

Nemo for the Complainant.

Abu Bakar (A-CIT) for Respondent.

DECISION/FINDINGS

The complaint alleges that the assessment for the year 1997-98 framed ex parte under section 63 on 28-6-2002, is illegal, uni4st and unlawful and thus contrary to law, mala fide, perverse, and arbitrary as it has been ante-dated to 28-6-2002 though it was passed on 16-10-2002.

2. None was present' for the complainant when called out despite this being the third opportunity of hearing.

3. The facts (in brief) are that the complainant AOP runs a cold storage. Original assessment framed for the year 1997-98 under section 63 on 29-6-2000 determining income at Rs.398,672 against the declared loss of Rs.187,474, was set aside for the de novo proceedings by the CIT (A) on 10-5-2001. In the second round also notices under section 61 having gone un-responded, assessment had to be framed under section 63 on 28-6-2002 which is alleged to have been framed on 16-10-2002 and is the cause of grievance.

4. The parawise comments by the R-CIT, Islamabad forwarded by the respondent, first of all question the competence of complaint for admission in view of the bar placed by clause (b) of subsection (2) of section 9 of the Establishment of the Office of Federal Tax Ombudsman Ordinance (hereafter called the FTO Ordinance). It further explains that ex parte assessment framed for the second time on 28-6-2002 was entered' at Serial No.586 of the DCR on that very day. It refutes the allegation that no proper enquiry was made by deputing the Circle Inspector and asserts that the Inspector did visit the premises on 14-6-2002 to ascertain the magnitude of the business. The R-CIT, however, admits that (i),the recovery notice issued on 2-10-2002 was inadvertently dated 10-2-2002, (ii) the service of the order on the complainant was considerably delayed which matter is being probed into by the Commissioner, Sialkot Zone, and (iii) since for non-compliance of statutory notice, penalty under section 110 was not originally imposed, a show-cause notice under section 116 of the repealed Ordinance has now been issued.

5. A scrutiny of record with the -help of DR shows that admittedly:--

(i) Recovery Notice was served earlier than the assessment order, a discrepancy which the Commissioner is already probing;

(ii) The photo copy of the DCR indicates that the case was entered at Serial No.506 and not on 586 as mentioned by the R-CIT.

These deficiencies are indicative that all was not above board and some irregularities did occur which were not expected to have happened in the normal course. In the first round the ex parte assessment was set aside by the Commissioner on 10-5-2001 for lack of proper service of notice. Adhering to section 66(1)(c) of the repealed Ordinance, reassessment should have been framed on (or before) 30-6-2002. The lapse of not framing of assessment by the prescribed date rendered it barred by time. Instead of accepting the declared position, which was a loss of Rs.187,474, some tampering seems to have been attempted leaving discrepancies (i) the date in the DCR, (ii) late issuance of notice under section 116, and (iii) the disparity in the date of recovery notice. It stands to reason that these flaws occurred as cover up was attempted by manipulating record which left some irreconcilable flaws which betray the manipulation. It is therefore, recommended that:--

(i) Commissioner by resort to section 122 of the Income Tax Ordinance, 2001 amend the assessment accepting the Return as no order was passed in the eyes of law till 30-6-2002. A legally valid reassessment could be framed on, or before 30-6-2002 as the assessment was set aside by CIT (A) on 10-5-2001.

(ii) An enquiry should be conducted to identify the tax functionaries responsible for making the assessment time-barred for suitable disciplinary action against those found guilty.

(iii) The above enquiry should be in addition to enquiry already in hand about the delayed service of assessment order (etc.) as intimated by R-CITs.

6. Compliance be reported within 30 .days of the receipt of this order.

C.M.A./875/FTO Order accordingly.