MUHAMMAD TANVIR ELAHI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1013 (2004)

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

----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessments on production of accounts, evidence etc.---Estimation of sales on 'the basis of inspector's report ignoring the report of Survey team relevant to assessment year under consideration---Enquiry conducted during the irrelevant income year, though specifically taken in appeal before the First Appellate Authority, was ignored by the two tax functionaries---Department contented that complainant/assessee filed appeal before the Appellate Tribunal and since the issue of estimate of sale, is sub judice before a Court of competent jurisdiction, the bar as per clause (a) of subsection (2) of S.9 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would be applied---Validity---Scrutiny of record did not reveal any mala fide or "maladministration"---There being no specific stance of "mal administration" and matter being still pending adjudication before the Appellate Tribunal, the complaint was filed and the case was closed by the Federal Tax Ombudsman.

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

---Ss. 5(1)(c) & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Jurisdiction---Assessment was framed under S.62 of the Income Tax Ordinance, 1979 and case was assigned to Inspecting Additional Commissioner under S.5(1)(c) of the Income Tax Ordinance, 1979---Under S.5(1)(c) Inspecting Additional Commissioner exercises the power of Assessing Officer and Commissioner exercises the power of an Inspecting Additional Commissioner---Was not correct for Inspecting Additional Commissioner to designate himself as Assessing Officer when framing an assessment particularly when S.62 of the Income Tax Ordinance, 1979 empowers only an Assessing Officer to do so---Merely mentioning "this case was assigned to this office vide worthy Commissioner of Income Tax---------Letter--------" did not clearly bring out that the transfer was under S.5(1)(c) of the Income Tax Ordinance, 1979 to frame assessment and did not simply transfer the case from one Range to another---Federal Tax Ombudsman recommended that it would be prudent if the Central Board of Revenue clarified this subtle point for future guidance of the officers.

Yousaf Siraj Khalid for the Complainant.

Behzad Anwar (DCIT) for Respondent.

FINDINGS/DECISION

This complaint relates to the assessment year 2001-2002 and alleges "maladministration" on the part of (i) the Assessing Officer for showing preference to ITI's report over the estimates by the Survey Team, and (ii) the CIT(A) for non-disposal of specific grounds taken before him. It is prayed that the FTO:

(i) Set aside the order of the assessing authority and learned CIT(A) with the direction to the Assessing Officer to proceed in accordance with law.

(ii) To grant any other appropriate relief.

2. Briefly the facts are that the Complainant is a retail vendor of crockery. The business is carried on in Individual capacity bearing NTN 05-19-0150700. For the assessment year 2001-2002 the position of assessed and declared Income is as under:

Appeal before the CIT(A) succeeded to the extent that estimate of Sales were reduced but disallowances out of P&L expenses were maintained. This is the cause of grievances.

3. Respondents have forwarded para-wise comments by RCIT, Eastern Region, Lahore which, in addition to questioning the competence of the complaint for admission in view of the bar as per section (2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance), deny "maladministration". The dispensation by the two officers below has been justified by contending that "the assessee has failed to produce any documentary evidence in support of his declared trading results during the course of assessment proceedings" and that the CIT(A) had "given due consideration to the ITI report and history of the case and also examined the P&L additions. The allegation that the ITI report is at variance with the estimates reported by the Survey Team, is countered by the R-CIT by pointing out "the assessee has himself violated the norms of rotating stock three time for retail in the light of Circular quoted by the assesseebecause perusal of assessment record shows that assessee rotated stock more than six time".

4. Mr. Yousaf Siraj Khalid (Advocate) appearing for the Complainant submitted that the Survey Team which visited the premises of the Complainant on 8-12-2000 had estimated sales at Rs.1.8 (M) as against the declared Rs.1.35 (M). Since the report of the Survey Team was relevant to the assessment year-under-consideration, the estimated stock by the Inspector at Rs.2.5 to 3.0 (Th) is arbitrary, incorrect and without any basis and material. Consequently the estimate of sales as made by the Assessing Officer, is clearly perverse having been based on this fallicious report. The learned counsel asserted that the aspect about the report of ITI being not relevant, the enquiry having been conducted during the income year, though specifically taken in appeal before the CIT(A), was conveniently ignored by the two tax functionaries thus causing "maladministration" as defined in Clause (3) of section 2 of the FTO Ordinance.

5. Mr. Behzad Anwar (DCIT) appearing for the Respondents defended the dispensation by the officers below by submitting that the credibility of the Survey Report was itself eroded when the Complainant declared turnover at six-time of stocks so as to reach the figure of estimates of sales by the Survey Team (Annex `A' to Complaint) whereas normally it is only three-time. This necessitated a fresh enquiry to determine the real extent and volume of business for which the Inspector was deputed. The Complainant was duly confronted with the estimates proposed by the Inspector and an assessment framed after a fair opportunity to which no exception could possibly be taken. The DR drew attention to the observations by the CIT(A): "in connection with estimate of Sales the AR referred to the proposal of assessment/tax Survey Team as well as C.B.R. circular, dated 8-12-2000. There is some force in the arguments of AR hence, to be fair and just, the Sales are reduced and fixed at Rs.2600,000". This, according to the DR, amply demonstrated that the issues raised by the Complainant at Ground No.1 about ITI report, was duly considered. The DR concluded by submitting that no "maladministration" was occasioned. Moreover, according to the DR, the matter related to assessment of income hence hit by the bar imposed by Clause (b) of subsection (2) of section 9 of the FTO Ordinance. The DR is summation submitted documents pertaining to the appeal filed by the Complainant against CIT(A) order, dated 13-4-2004 before the Appellate Tribunal. This appeal was filed on 6-7-2004 and assails the issues of estimate of Sales as reduced by the CIT(A). The instant complaint has been filed on 9-7-2004. Therefore, the DR pleaded, the issue is sub judice before a Court of competent jurisdiction with the result that the bar as per Clause (a) of subsection (2) of section 9 of the FTO, Ordinance, applied.

6. The arguments by the two Representatives and scrutiny of record do not reveal any mala fide or "maladministration". Moreover, the last leg of the arguments by the DR about the matter being sub judice before the Appellate Tribunal remained un-dislodged by the AR of the Complainant. There being no specific stance of "maladministration" and matter being still pending adjudication before the Appellate Tribunal, the complaint is FILED and case is CLOSED.

7. It appears appropriate to point out that assessment in this case was framed under section 62 (TA) of the Income Tax Ordinance, 1979 and the case was assigned to the IAC under section 5(1)(c). It is significant that under this provision of law the IAC exercises the power of a D-CIT and Commissioner exercises the power of an IAC. It is, therefore, not correct for IAC to designate himself as an IAC when framing an assessment particularly when section 62 empowers only DCIT to do so. In order to avoid confusion it should be clearly mentioned that IAC was exercising the power of DCIT. Merely mentioning "this case was assigned to his office vide worthy CIT -------Letter--------" does not clearly bring out that the transfer was under section 5(1)(c) to frame assessment and did not simply transfer the case from one Range to another. It would be prudent if the C.B.R. clarifies this subtle point for future guidance of the officers.

C.M.A./300/FTOOrder accordingly.