(a) Income Tax Ordinance (XLIX of 2001)---

----S.126(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment order---Evidentiary value---Assessment order is an original document characterized as "cognizable evidence" as per provisions of S.126 (1) of the Income Tax Ordinance, 2001 so much so that "all particulars" contained in it are to be treated as correct.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional assessment---Definite informa tion ---Change of opinion--- Assessment order contained the words "the balance-sheet was discussed"---Significance---Re-opening of assessment on the ground that property was trot sold out but leased out and denied the receipts of balance-sheet by the Department---Validity---Observations in assessment that "the Balance Sheet was discussed", indicated that mind was applied and conscious decision was taken with the result that any deviation now was a mere `change of opinion' especially when no definite or new evidence was secured subsequent to the framing of the assessment ----Assessee could not be blamed for the absence from Department's record of the Balance Sheet or the affidavit, which find mention in the assessment order---Facts, in circumstances, oust the legality of assumption of jurisdiction by resort to S.65 of the Income Tax Ordinance, 1979---Maladministration was occasioned by wrongful assumption of jurisdiction and the proceedings were contrary to law-- Federal Tax Ombudsman recommended that additional assessment proceedings initiated in the case of the assessee for the assessment year 1998-99 by issuing notice under S.65 of the Income Tax Ordinance, 1979 be dropped.

1997 PTD 47; 1995 PTD (Trib.) 580 and PLD 1997 SC 700 rel.

Ch. Anwar-ul-Haq for the Complainant.

Muhammad Nadeem Arif (D-CIT) for Respondent.

DECISION/FINDINGS

This complaint, by a company agitates against initiation of additional assessment proceedings by resort to section 65 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). It is prayed that the respondent be directed to drop the proceedings and "any other relief the Court deems necessary" may kindly be allowed.

2. The facts leading to the complaint are that assessment for the year 1998-99 was framed on 27-3-1999 at `NIL' income. Ian the earlier years the complainant was not able to successfully run the restaurant at Fortress Stadium, Lahore and losses- had accumulated. For the year under consideration i.e. 1998-99, it was explained to the Assessing Officer that "the business was not done from 1st July, 1997 to 30th June, 1999" hence he assessed the income at `NIL'. Subsequently it was discovered that the complainant was not correct in conveying to the Department that premises, which he had constructed to run the restaurant, was sold out whereas it was given on lease. Therefore, a show-cause notice dated 20-10-2001 was followed by a notice under section 65 dated 26-11-2001 but the reply submitted on 19-11-2001 was not considered satisfactory. This is the cause of grievance.

3. The respondent has forwarded parawise comments by R-CIT, Lahore which deny "maladministration" and convey that the transaction by the complainant was not a sale/purchase in the nature of capital transaction whereas the correct position was that the premises was given out on lease on a consideration of Rs.48.0 (M) and the agreement in this behalf "was executed for a definite term and compensation received was rightly treated as Income".

4. The learned counsel for the complainant pointed out that the notice under section 65 related to "escaped assessment" and not "under assessment" with the result the notice became invalid as per the verdict of Lahore High Court 1997 PTD 47. It was emphasized that full information as respects the true nature and resultant surplus was reflected in the Balance Sheet which was attached with the original Return on which an assessment was framed on 23-3-1999. Therefore, nothing was concealed and additional assessment proceedings could only be initiated when some new information of definite nature was acquired, subsequent to the framing of assessment. Since no new facts or definite information was acquired after the framing of assessment, the initiation of proceedings under section 65 was not valid. For these assertions reliance was placed on decision reported 1995 PTD (Trib.) 580 and on PLD 1997 SC 700. Attention was emphatically drawn to the wording of assessment order originally passed under section 62 admitting.

"Suo motu return was filed to declare Nil income. Case was fixed. Notices under section 61 were issued. In response to these notices Mr. Nawaz Khan A.R. of the assessee attended the office. Balance Sheet was discussed and affidavit from the Director of the Company submitted declaring that no business was done from 1st July, 1997 to 30th June, 1999. The assessee's claim is found to be correct so Income is assessed at `NIL'". (here underlined for emphasis)

According to the learned counsel the above clearly discloses that the Balance Sheet and other documents were considered and discussed. Therefore, it could not be said that some fresh information or evidence had come in the knowledge of Assessing Officer after finalization of assessment. In fact the situation represented `change of opinion' which went beyond the scope of section 65.

5. Mr. Muhammad Arif Nadeem (D-CIT) appearing for the Revenue presented the record to show that Return originally filed was not accompanied with any set of accounts or the Balance Sheet. He presented the record to demonstrate that Balance Sheet was never submitted by the complainant. According to the DR, even when afresh Return was filed on 15-11-2002, it did not contain account statement or Balance Sheet. Photocopies of the two Returns were brought on record to show that the list at the bottom on the Return captioned "document attached" was blank and nowhere was it 'ticked' as respects Balance Sheet or any other document. It was advocated that a notice under section 61 was issued on 4-3-1999 before the finalization of original assessment, but order sheet shows no compliance as regards furnishing of books of accounts or copies of accounts. A photocopy of this `order sheet' was furnished for the record. The DR emphasized that the information by way of agreement for lease, and the original agreement were collected by the Department after the assessment and thus constituted definite evidence to authorize initiation of proceedings under section 65.

6. The discussion with the two representatives and the examination of record shows that the complainant had not brought on record (a) the agreement regarding the so-called sale of premises, or (b) the supplementary agreement which the Department considers as lease agreement. However, it is significant that the Assessing Officer clearly mentioned in the original assessment that `the Balance Sheet was discussed'. The assessment order is an original document characterized as "cognizable evidence" as per provisions of subsection (1) of section 126 of the Income Tax Ordinance, 2001 so much so that `all particulars" 'contained in it are to be treated as correct. The recognization by the Legislature of the sanctity of the assessment order and particulars contained therein, pales into insignificance lapses like not attaching documents with the Return or the non-availability of certain papers on record of the Department. What is of prime importance is the fact, specifically proclaimed in the assessment, "the Balance Sheet was discussed", indicating that mind was applied and conscious decision taken with the result that any deviation 'now is a mere `change of opinions especially when no definite or new evidence was secured subsequent to the framing of .the assessment. Obviously the complainant cannot be, blamed for the absence from Department's record of the Balance Sleet or the Affidavit, which find mention in the assessment order. These attending facts oust the legality of assumption of jurisdiction by resort to section 65 of the repealed Ordinance. On this visualization,' the arguments and objections by the learned counsel of the complainant appear valid that "maladministration" was occasioned by wrongful assumption of jurisdiction, and the impugned proceedings are contrary to law. Maladministration is thus established.

7. As regards objection to jurisdiction it is observed that similar objection raised in Complaint No. 1438 of 2002 was overruled. Where maladministration is established the Federal Tax Ombudsman has jurisdiction in the matter. The objection is rejected.

8. It is recommended that:--

(i) Additional Assessment proceedings initiated in the case of the complainant for the assessment year 1998-99 by issuing notice under section 65 on 26-11-2001 be dropped.

(ii) Compliance be reported within 30 days of the receipt of this order by the Revenue Division.

C.M.A./890/FTOOrder accordingly.