MUHAMMAD MUSHTAQ VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2006 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1476 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 138 & 62---Income Tax Ordinance (XLIX of 2001), S.122A---Finance Act (1 of 2003), Preamble---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Revision by Commissioner---Revision petition under S.138 of the Income Tax Ordinance, 1979 was filed before the Commissioner by the complainant/ assessee under the belief that the assessment year to which matter pertained was covered by the Income Tax Ordinance, 1979, especially when final assessment order was also passed under S.62 of the Income Tax Ordinance, 1979---Commissioner of Income Tax did not entertain such petition on the ground that in the year, 2004 when the matter came before him, the Income Tax Ordinance, 1979 stood repealed---Validity---View of Commissioner was not in accordance with law because though the Income Tax Ordinance, 2001 initially did not contain any provision parallel to 5.138 of the Income Tax Ordinance, 1979, S.122A of the Income Tax Ordinance, 2001 was incorporated vide Finance Act, 2003 which was parameteria with S. 138 of the Income Tax Ordinance, 1979-Section 122A of the Income Tax Ordinance, 2001 had been placed in Chapter-X dealing with the "Procedure"---Procedure was applicable retrospectively---Revision petition filed under S.138 of the Income Tax Ordinance, 1979 in the year, 2004 should in all fairness have to be treated as having been filed under S.122A of the Income Tax Ordinance, 2001---Adjudicating Authority should apply the correct law even if the contestants were ignorant of, it---Section 122A of the Income Tax Ordinance, 2001 required the Commissioner to proceed suo motu to make "such enquiry as was necessary" and to "make such revision to the order as the Commissioner deems fit"---To dispose of the petition legally pending before the Commissioner, Federal Tax Ombudsman recommended that the Commissioner treating the petition pending before him as having been filed under S.122A of the Income Tax Ordinance, 2001 proceed to adjudicate it on merits.2003 PTD 2109 rel.

Nemo for the Complainant.

Muhammad Naeem, DCIT for Respondent.

DECISION/FINDINGS

JUSTICE (RETD.) MUNIR A. SHAIKH, FEDERAL TAX OMBUDSMAN.---Facts of, the complaint, as narrated by the complainant, are that in response to a notice issued by the respondents under section 114 of the Income Tax Ordinance, 2001 he had submitted income tax returns for Assessment years 2001-2002 and 2002-2003. Income was assessed at Rs.200,000 and Rs.222,000 respectively on the basis of sales estimated at Rs.1,600,000 and Rs.1,800,000 respectively. The sales estimated by the respondents vis-a-vis the complainant's declared sales of Rs.825,000 and Rs.880,000 were excessive and arbitrary because even if the rotation of business capital was taken 6 times, the income determined by the Assessing Officer could not be reached, especially when complainant's declared capital as on 30-6-2001 was merely Rs.205,000. The complainant was neither issued any notice under section 62 of the Income Tax Ordinance, 1979 (now repealed) nor was he confronted with estimate of sales determined by the Survey Team nor, for that matter, with any proposed assessment' to enable him to rebut the same. He had preferred a revision petition against the assessment order before CIT (Multan), who, vide his order, dated 4-9-2004, rejected, the Petition without providing the opportunity of hearing to. the complainant. Not only did the Taxation Officer ignore the past history of the case but also failed to ascertain the correct volume of business despite the fact that the complainant had questioned the pitch of `estimated sales' before Collector of Sales Tax, Multan. The Taxation Officer had failed to apply proper parameters to determine the quantum of business. He also failed to disclose in the impugned assessment order the grounds on the basis of which sales were estimated and income was assessed. Although section 56 of the repealed Ordinance was not saved by the Income Tax Ordinance, 2001 yet the Taxation Officer exceeding his jurisdiction issued him a notice under the aforesaid section inserting in the printed notice section 114 of the Income Tax Ordinance, 2001. The CIT was not just)fied in rejecting the revision petition in limine as right to file revision petition was granted by the learned High Court in reported case No. 2003 PTD 2109. It is pleaded that the CIT, Multan be asked to consider the revision petition with direction to cancel the assessment order passed by the Taxation Officer without jurisdiction.

2. In reply, the respondents have submitted that assessment in the case was completed in accordance with the provisions of law. No inquiry was required in the presence of survey form. In the course of assessment proceedings the complainant was confronted with `agreed sales'. Notice under section 114 of the Income Tax Ordinance, 2001 was issued for assessment year 2002-2003 after making necessary alteration/correction on the printed notice. So far as the issuance of other .notice i.e. the notice under section 56 of the repealed Ordinance is concerned, it was properly served upon the assessee before the promulgation of Income Tax Ordinance, 2001. For assessment year 2002-2003 a notice under section 114 of the Income Tax Ordinance, 2001 (and not under section 56 of the repealed Ordinance, as alleged by the complainant) was properly issued. Therefore, the question of acceptance of return under section 120(1)(b) of the Income Tax Ordinance, 2001 did not arise. Estimation of sales was not exaggerated. Revision petition was disposed of on its merit as per the provisions of law. No maladministration was committed. The complaint being devoid of merit may be rejected.

3. No one appeared on behalf of the complainant on the date appointed for hearing. The DR reiterated the arguments as advanced in parawise comments.

4. It is transpired that the complainant filed the revision petition under section 138 of the repealed Ordinance under the belief that the assessment years to which matter pertained were covered by the repealed Ordinance, especially when final assessment order was also passed under section 62 of the repealed Ordinance. The Commissioner, on the other hand, believed that in the year, 2004 when the matter went before him, the Income Tax Ordinance, 1979 stood repealed and, therefore, he could not entertain the petition under section 138 of the repealed Ordinance. This view by the Commissioner does not appear to be in accordance with law and is obviously contrary to the decision of the Lahore High Court reported as 2003 PTD 2109 because though the Income Tax Ordinance, 2001 (hereinafter called the Ordinance) initially did not contain ally provision parallel to section 138 of the repealed Ordinance, section 122A was incorporated vide Finance Act, 2003 and is Para meteria with section 138 of the repealed Ordinance. Section 122A has been placed in Chapter-X dealing with the "Procedure". It is accepted on all hands that procedural law is applicable retrospectively. Therefore, the revision petition by the complainant filed under section 138 in the year, 2004 should in all fairness have been treated as having been filed under section 122A of the Ordinance. It is also well-settled that Adjudicating Authority should apply the correct law even if the contestants are ignorant about it.

5.A glaring infirmity in the order-in-dispute is that it has apparently not been passed by the Commissioner himself but by his Staff Officer who had no authority in law to adjudicate on a revision petition. The State Officer could communicate the outcome of an order already passed by the Commissioner whereas he has rejected the petition himself caving "...therefore, revision petition being devoid of merit is hereby rejected". This illegality coupled with the summary rejection of the petition without affording an opportunity of hearing amounts to "maladministration" as defined in. Clause (3) of section 2 of the FTO Ordinance. The communication, dated 4-9-2004 is apparently non-est in law with the result that the petition as filed in July, 2004 is still pending for adjudication. Moreover, section 122A of the Ordinance requires the Commissioner to proceed suo motu to make "such enquiry as is necessary" and to "make such revision to the order as the Commissioner deems fit". Therefore, to dispose of the petition legally pending before him it is Recommended that:--

"The Commissioner treating the petition pending before him as having been filed under section 122A of the Ordinance proceed to adjudicate it on merit."

5. Since the revision petition is to be adjudicated afresh, other legal issues raised in the complaint are left to be decided by the Commissioner on merit.

6. Compliance report be submitted within 45 days of the receipt of this Order.

C.M.A./399/FTOOrder accordingly.