(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65 & 13‑‑‑Wealth Tax Act (XV of 1963), S. 17‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance. (XXXV of 2000), S.2(3)‑‑‑Additional assessment‑‑‑Addition in income and wealth on the basis of information provided by the Informer, without ascertaining the reliability of information about acquisition of assets ‑‑‑Validity‑‑ Department admittedly asked for evidence from the Informer to substantiate the allegation about concealment of assets‑‑‑When the Informer failed to respond, ‑no. independent enquiry was conducted by contacting the Bank with whom the properties were alleged to have been pledged for obtaining loan/advance‑‑‑Little effort could unearth the whole truth and the ownership of the properties could be verified from the Excise and Taxation Department; the Motor Vehicle Registration Authorities and the Stock Exchange‑‑‑Backing out of the Informer should have all the more alerted the Department to proceed in a more sure and conscious manner to assess the properties in the hands of complainant/ assessee‑‑‑Federal Tax Ombudsman recommended that the Commissioner by resort to S.25 of the repealed Wealth Tax Act, 1963 and S. 122 of the Income Tax Ordinance, 2001 cancel the assessments framed for the years, 1996‑97 and 1997‑98 in the case of the four complainants; an enquiry be conducted adhering to law, rules and procedure to determine whether the complainants owned moveable/ immovable assets which were not offered for assessment and further action, if called for, be initiated adhering to relevant law.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 9‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Every allegation concerning 'maladministration' calls for investigation to determine its truth which brings in the jurisdiction of the Federal Tax Ombudsman.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 2(3)(i)(a)‑‑‑Maladministration‑‑‑Burden to prove bona fides‑‑‑To justify action/order which is contrary to law; arbitrary or biased it is the duty of the Department to show that it acted, bona fide ‑‑‑Burden'is upon the Department to prove bona fides as envisaged by clause (i)(a) of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑S. 9(2)(b)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Matters, which relate to assessment of income or wealth must be according to law but where it is contrary to law, arbitrary, baseless, biased, subsections (2)(b) of S. 9 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 will not apply.

(e) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Federal Tax Ombudsman as a general rule may not interfere with the merits of a decision though unmeritorious without maladministration in the exercise of discretion vested in the authority ‑‑‑Process/order or decision tainted with maladministration can be questioned by the Federal Tax Ombudsman even if appeal is provided.

(f) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑ ,

‑‑‑‑S.2(3)‑‑‑Maladministration‑‑‑Reliance on half‑backed information furnished by an inimical person, without attempting confirmation or verification as to the credibility of information, rendered the conduct of public functionary arbitrary and contrary to law and fell in the realm of maladministration.

Javed Iqbal Khan, F.C.A. for the Complainants.

M. Asadullah, D.‑C.I.T. and Shah Khan, D.‑C.I.T. for Respondent.

A.A. Zuberi, Advisor Dealing Officer.

FINDINGS/DECISION

These six complaints have been filed to agitate against:‑‑

(i) consolidated Wealth Tax assessments framed under sec tions 16(3)/17 of the Wealth Tax Act (hereinafter called the repealed Act)‑for the years, 1996‑97 and 1997‑98 in respect of the two Complainants; and

(ii) consolidated Income Tax assessments under sections 62/65 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) for the years, 1996‑97 and 1997‑98 in respect of four Complainants.

These assessments are alleged to be a result of (i) misuse of authority, and (ii) "maladministration" in the exercise of powers under section 17 of the repealed Act under section 65 of the repealed Ordinance.

2. Briefly the facts are that the Complainant‑Individuals belong to one family and are Members of the same AOP. They were assessed on various dates under section 16(1) of the repealed Act and section 62 of the repealed Ordinance for the assessment years 1996‑97 and 1997‑98. Later the Department came to have the knowledge (through an `Informer'), that the, Complainant had concealed the following assets:‑‑‑

(i) investment in an AOP known as Asia Trading Company for

(ii) ownership of House/land

(iii) Motor Vehicles

(iv) Stocks and Shares. Notices under section 17 of the repealed Act and under section 65 of the repealed Ordinance were then issued for reassessments/Additional Assessments. Considering the explanation tendered by the Complainant as unsatisfactory consolidated assessments (in each case) were framed as under:‑‑

Faisal Sayid:C. No. 1279‑L/2003 (Wealth Tax)

Notice on 12‑6‑2003Additional Assessments on 23‑6‑2003

C. No. 1333‑L/2002 (Income Tax)

Notice on 12‑6‑2003Additional Assessments on 28‑6‑2003

Mst. Ume Kalsoom:IC. No. 1280‑L/2003 (Wealth Tax)

Notice on 12‑6‑2002Additional Assessment on 23‑6‑2003

C. No. 1334‑L/2003 (Income Tax)

Notice on 18‑6‑2003 Additional Assessments on 23‑6‑2003

Aizad Sayid:C. No. 1335‑L/2003 (Income Tax)

Notice on 12‑6‑2000Additional Assessments on 28‑6‑2003

Mst. Ruhi Sayid:C. Nol281‑L/2003 (Income Tax)

Notice under section 13 on 18‑6‑2003Add: Assessment on 28‑6‑2003

Notices under sections 18/16(2) of the repealed Act and Sections 65/62 of the repealed Ordinance for concealment and for furnishing inaccurate particulars of Wealth/Income were also ordered to be issued under the respective Act/Ordinance. With this the Complainant is aggrieved.

3. The Respondent have forwarded para ‑ wise 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 as .per 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 the informer, Mr. Muhammad Malik Tarar, had provided information regarding ownership of the assets "duly supported with documents in respect of allegation levelled against the Complainant". These documents are said to be in the shape of "letter addressed to the Credit Department, Bank of Punjab, Head Office, Lahore, dated " duly signed by each Complainant. The R‑CIT has admitted that the informer attended, when summoned, and promised to furnish documentary evidence regarding detail of assets pledged with the Bank for obtaining loan but failed to honour his Commitment because litigation between the Complainant and the rival Group (to which the Informer belonged) had been compromised before the Lahore High Court on 23‑11‑1999. Consequently, the informer "did not pursue the complaint lodged by him (with the Department) and hesitated to provide any documentary evidenced in support of the allegations". However, according to R‑CIT, each Complainant was duly confronted by whatever evidence the Department had about non‑declaration of moveable and improvable assets and their valuation.

4. The Complainant's Counsel, Mr. Javed Iqbal Khan (FCA), explained that there was civil litigation with a Group to which Mr. Muhammad Malik Tarar (the Informer) belonged. Therefore, with a vengeful motive to harm the Complainant, Mr. Tarar lodged a frivolous complaint with the Department on which the tax functionaries acted with uncalled for haste and without caring to ascertain the reliability of the (mis). information about acquisition of assets by the Complainant. Even when the Informer, Mr. Tarar, did not come up with the promised evidence, the Department blindly proceeded to confront the Complainant with the alleged letter to the Punjab Bank in which ownership of certain assets was alleged to have been claimed for obtaining loan/overdraft facility. The learned counsel attempted to strengthen his argument by referring to a decision CIT(A), Zone‑I, Lahore in the case of another Member of the AOP (Mr. Faisal M. Sayid complaint in C. No. 1279/03) belonging to the same family. Adjudicating on the same issue as raised in the present complaint, the CIT(A) unequivocally held: "the Assessing Officer acted arbitrarily and dishonestly by adding the value ofwithout any basis and evidence" moreso when ownership of the assets was denied. It was submitted by the AR that the notices by the Department to, the Complainants did not specify (a) the identification number of the moveable/immoveable properties, (b) the registration number of motor vehicles, or (c) the particulars of share‑holdings; purported to be owned by the Complainants, thus clearly revealing that the Assessing Officer was acting on hearsay evidence having no specific or definite information to justify resort to section 17 of the repealed Ordinance Act or to section 65 of the repealed Ordinance.

5. Mr. M. Asadullah (D‑CIT) appearing for the Revenue on his turn repeated the arguments conveyed by the R‑CIT in the para‑wise comments. According to the DR, when information was received about Complainant's alleged ownership of moveable and immoveable properties which were not declared in the Returns but were claimed to belong to him/her when applying for loan/overdraft from the Bank, proper approval was obtained from the IAC and opportunity extended by calling for an explanation. Therefore, no "maladministration" or misuse of powers was involved.

6. The objections by the Respondent to the jurisdiction of the FTO to entertain the Complaint warrant prompt rejection in view of innumerable decisions (particularly C. No. 1438 of 2002) to the effect that every allegation concerning 'maladministration.' calls for investigation to determine its truth. This brings in the jurisdiction of the FTO.

7. Scrutiny of record in the light of arguments by the two sides brings out that after the receipt of information from a person of the rival Group litigating with the Complainant, the Department admittedly (and rightly so) asked for evidence from the Informer to substantiate the allegations about concealment of certain assets. However, when the Informer failed to respond, no independent enquiry was conducted by contacting the Bank with whom the properties were alleged to have been pledged for obtaining loan/advance. A little effort could unearth the whole truth and the ownership of the properties could be verified from (a) the Excise and Taxation Department of the Provincial Government, (b) the Motor Vehicle Registration, Authorities, or (c) the Stock Exchange. This was not done. The backing out of the Informer should have all the more alerted the Department to proceed in a more sure and conscious manner to assess the properties in the hands of the Complainants. The reliance on half-backed information furnished by an inimical person, without attempting confirmation or verification as to the credibility of "information", rendered the conduct arbitrary and contrary to law thus falling in the realm of 'maladministration' as defined in clause (3) of section 2 of the FTO Ordinance.

8. The entire proceeding was used as a cloak to give it a colour of legality. To justify action/order which is contrary to law, arbitrary or biased it is the duty of the Department to show that it acted bona fide. The burden is upon the department to prove bona fide as envisaged by clause (i)(a) of subsection (3) of section 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance 2000. The department has not established bona fide to justify an order which is contrary to law. The matters, which relate to assessment of income or wealth must be according to law but where it is contrary to law, arbitrary, baseless, biased, subsections (2)(b)‑of section 9 will not apply. It is to be noted that as a general rule the Federal Tax Ombudsman may not interfere with the merits of a decision though unmeritorious without maladministration in the exercise of discretion vested in the authority. A process order or decision tainted with maladministration can be questioned by the Federal Tax Ombudsman even if appeal is provided. In the facts of the present case the objection to jurisdiction is misconceived.

9. It is, therefore, recommended that:‑‑

(i) The Commissioner by resort to section 25 of the repealed Wealth Tax Act and section 122 of the Income Tax Ordinance, 2001 cancel the assessments framed for the years, 1996‑97 and 1997‑98 in the case of the four Complainants.

(ii) An enquiry be conducted adhering to law, rules and procedure to determine whether the Complainants owned moveable/ immovable assets which were not offered for assessment. Further action, if called for be initiated adhering to relevant law.

(iii) Compliance be reported within 30 days of the receipt of this Order.

C.M.A./96/FTO Order accordingly.