Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 59(1) & 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 10(8)‑‑‑Self assessment‑‑‑Return was set apart for total audit‑‑‑Complaint was filed against such setting apart‑‑‑Assessment was finalized under S.62 of the Income Tax Ordinance, 1979 during the pendency of Complaint‑‑‑Department contended that Assessing Officer was under no legal compulsion to wait for Federal Tax Ombudsman's decision nor Federal Tax Ombudsman had issued any stay order‑‑‑Validity‑‑‑Merit of allegation of mala fides lies in the principles governing exercise of administrative discretion by the concerned tax employee‑‑‑Exercise of discretion had to be judicious‑‑ Ordinary demand of administrative justice was that the Assessing Officer should have waited for Federal Tax Ombudsman's decision unless the assessment was getting time barred‑‑‑Injudicious action without any valid reason had created extra administrative and legal obligations in implementing the recommendations of the Federal Tax Ombudsman Department's review application in respect of recommendation had been rejected‑‑‑Section 10(8) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 though did not bar any action taken by the Revenue Division, during the pendency of investigation but such discretion had to be exercised judiciously‑‑‑As review application was decided in favour of assessee, he would get the benefit/relief allowed by Federal Tax Ombudsman‑‑‑Department should implement the assurance given by its representative.

Muhammad Younis Khalid for the Complainant.

Abdul Rehman Warraich, D.C.I.T. for Respondent.

Muhammad Akbar, Advisor Dealing Officer.

DECISION/MINDINGS

The complainant alleges 'maladministration' on the part of the Revenue for framing an illegal and arbitrary Assessment under section 62 of the Income Tax Ordinance, 1979 (hereinafter called as repealed Ordinance) for assessment year, 2001‑2002 despite the fact that the Honourable FTO on earlier complaint No. 786‑L of 2002 filed against RCIT's order setting apart his tax return for total audit had recommended acceptance of the same under SAS (Self‑Assessment Scheme).

2. Facts of the case are that he had filed his Return under SAS for assessment year 2001‑2002 declaring an income of Rs.1,503,204. The return was set apart for total audit by the RCIT on 17‑6‑2002 against which a complaint (No. 786L/2002) was filed with the FTO. This was heard on 7‑10‑2002.However, the Taxation Officer of Circle 2 Zone‑B, continuing the assessment proceedings issued a notice, dated 15‑10‑2002 under section 62 of the repealed Ordinance for completion of assessment. The notice was complied but the Assessing Officer was informed that since the matter was sub judice before the FTO and hearing had taken place, the proceedings may be kept pending. Decision/Findings in the complaint were released on 29‑11‑2002 declaring that the RCIT's decision to set apart the case was without valid reasons and contrary to law. Meanwhile the respondent passed an assessment order on 31‑10‑2002. This is the cause of grievance.

3. In parawise comments, the respondents have taken preliminary objection to FTO's jurisdiction on the grounds that the matter relates to assessment of income and determination of tax liability and as such is beyond the jurisdiction of the FTO in terms of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. Legal remedies, including appeal and revision, are available to the complainant. The decision of President of Pakistan, dated 30‑1‑2003 under section 32 of the FTO Ordinance, 2000 on a `reference' in Complaint No. 845 of 2001 has been quoted to canvass that FTO's jurisdiction is restricted in matters relating to assessment of income, interpretation of law, Rules and Regulations in respect of which legal remedies of appeal, review or revision are available under the relevant tax law. The allegation that notice under section 62 was issued anticipating FTO's adverse decision is denied. As to the contention that the Assessing Officer should have refrained from finalizing the assessment because he knew that the set apart order was sub judice before the FTO, according to the RCIT, the officer was under no legal compulsion to wait for FTO's decision nor had the Honourable FTO issued any stay order. The RCIT concludes by submitting that since decision on the Review Application filed against the FTO's Order is still pending, the complainant's assertion, that the Assessing Officer passed under section 62 is invalid is premature.

4. During the hearing the AR reiterated that the assessment order was mala fide inasmuch as it tended to frustrate the proceedings before the Honourable FTO. The Taxation Officer finalized the assessment in haste despite the knowledge that complaint alleging maladministration in selection of the case for assessment through the total audit proceedings was pending ‑decision before the FTO. The AR further contended that mala fide is evident because the hearing before the FTO having been concluded on 7‑10‑2002 'the department should have waited for FTO's decision on the complaint.

5. The DR on the other hand submitted that there was no mala fide on the part of the Assessing Officer because there was no provision for stay of assessment proceedings due to pendency of complaint before the Federal Tax Ombudsman. There was no attempt to frustrate the proceedings before the Honourable FTO. The department had the legal right to seek review of FTO's findings. A Review Application No. 74 of 2003, moved by Department was scheduled for hearing on 3‑9‑2003. If the review application is decided in favour of the complainant, he would get the relief allowed by the FTO.

6. The arguments of the parties and the record of the case have been considered and examined. The merit of allegation of mala fide lies in the principles governing exercise of administrative discretion by the concerned tax employee. The exercise of discretion has to be judicious. On facts and circumstances of the case it was an ordinary demand of administrative justice that the Assessing. Officer should have waited for FTO's decision unless the assessment was getting time barred. His injudicious action without any valid reason has created extra administrative and legal obligations in implementing the recommendation of the Federal Tax Ombudsman. The Department had to move a review application in respect of recommendation of the FTO which has been rejected on 26‑1‑2004.

7. No doubt section 10(8) of the FTO Ordinance, 2000 does not bar any action taken by the Revenue Division, during the pendency of investigation but such discretion has to be exercised judiciously as explained above. On this view and the DR's assurance that in case the Review Application is decided in favour of the complainant, he would get the benefit/relief, as allowed by FTO's decision, dated 26‑11‑2002, the department should implement the assurance given by its representative.

8. This complaint is disposed of with observations made above.

C.M.A./263/FTO Order accordingly.