FAQIR MUHAMMAD MASOOM VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1936 (2004)

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

----Ss. 59, 61, 62 & 50(7H)---C.B.R. Circular No. 21 of 2000 dated 11-9-2000---C.B.R. Circular No.4 of 2001 dated 18-6-2001---C.B.R. Circular No.7 of 2002 dated 15-6-2002--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self- assessment---Property income---Returns were filed under Self-Assessment Scheme---Assessments were processed, by issuing notice under S.61 of the Income Tax Ordinance, 1979---Assessee objected to the issuance of notices under S.61 of the Income Tax Ordinance, 1979 while returns had been filed under Self-Assessment Scheme---Objection was rebutted vide notice under 5.62 of the Income Tax Ordinance, 1979 with the remarks that returns were not qualifying under the "Self-Assessment Scheme" as the returns filed did not fulfil the condition regarding the percentage increase in tax"---Validity---Reason recorded by the Assessing Officer in the assessment order proved the incompetence and inaptitude of the Assessing Officer in discharge of his duties and responsibilities---Inattention to the Note attached to para. 1.2 of the Self-Assessment Scheme had caused undue harassment to the complainant/assessee and loss to the State in terms of wastage of time and effort of its employees---Admittedly, total income declared in the returns of income riled under S.55 of the Income Tax Ordinance, 1979 was derived only from house property and the condition regarding the percentage increase in tax was not applicable---By simple reading of Law which required due attention it was proved that the process employed by the Assessing Officer to exclude the returns from the purview of Self-Assessment Scheme was ab initio contrary to unambiguous provisions of Circulars---Very basis to invoke jurisdiction to make assessment in any manner other than Self-Assessment Scheme did not exist in the case---Having found that the reason that the complainant/assessee had been confronted with the notice under S.62 of the Income Tax Ordinance, 1979 for exclusion of the returns from Self-Assessment Scheme was misconceived---Other matters raised on the complainant/assessee became inconsequential---Federal Tax Ombudsman recommended that the Commissioner undertakes written counselling of the concerned Taxation Officer to impress upon him the need to improve his, competence and to pay more attention to the facts and .relevant provisions of law applicable thereto and try to avoid causing undue harassment to taxpayers and that the Commissioner in discharge of his responsibility under S.122A of the Income Tax Ordinance, 2001 may call for the record of proceedings considered in which the orders had been passed by the Taxation Officer working under him and proceed under subsection (2) of S.122A of the Income Tax. Ordinance, 2001 as he deemed fit.

Complaint No.845 of 2001- distinguished.

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

----S.2(3)---Maladministration---Meanings---In most general terms bad or poor management or regulation of public affairs is maladministration---Bad or poor management/regulation of public affairs will remain bad notwithstanding that it is bona fide and for valid reason because goals of good management or regulation of public affairs cannot be achieved without eradication of such reasons/causes.

Chambers 21st Century Dictionary, Revised Edition at page 829 and Black's Law Dictionary, 7th Edition, at page 967 rel.

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

----S.2(3)(i)(a)---Maladministration---Words "unless it is bona fide and for valid reasons", "bona fide", "valid reason", "contrary to law", "departure from established practice or procedure"---Interpretation and meanings.

Chambers 21st Century Dictionary, Revised Edition at page 155 and Black's Law Dictionary, 7th Edition, at Page 168 rel.

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

----S.2(3)(i)(a)---Maladministration---No malice/mala fide is required to be proved for any conceivable maladministration on the part of Revenue Division or tax employees.

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

----S.2(3)(i)(a)---Maladministration---Contrary to law---Any act, process or decision, which is contrary to law, suffers .from malice in law.

PLD 1989 SC 26 and PLD 2003 Kar. 721 rel.

Muhammad Aslam Marwat for the Complainant.

Aurangzeb Khattak and Taza Khan, Taxation Officers, Bannu for the Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Maladministration is alleged in the instant complaint on the part of the Taxation Officer, Circle 24, Bannu, precisely for proceeding under sections 61 and 62 of the Income Tax Ordinance, 1979 (hereinafter referred to as the Repealed Ordinance) despite, the fact that returns of income for assessment .years 2000-01, 2001-02 and 2002-03 were filed under Self-Assessment Scheme (SAS) for the respective years.

2. Briefly the facts are that the Complainant is a petroleum dealer operating a petrol pump and a co-owner of let out immovable properties. Commission on sale of petroleum products is chargeable as presumptive income and tax collected under, section 50(7H), added by Finance Ordinance---In the Repealed Ordinance, is full and final discharge of liability of tax in that respect since assessment year 2001-02. Property income is to be declared in a return required to be filed under section 55 of the Repealed Ordinance. Complainant has been filing his returns accordingly. Returns for assessment years 2000-01, 2001-02 and 2002-03 were filed under section 55 within due dates under Self-Assessment Schemes for respective years.

3. Following figures gild facts have been reproduced in the combined ex parte assessment order passed by the respondent under section 63 of the Repealed Ordinance for the three respective years:

"Previous history of the case is that: assessment for -the year 1999-2000 made under section 59(1) at net income of Rs.110,000 with admitted tax payable liability of Rs.7,250. Since through amendment by Finance Act from assessment year 2000-2001, income through petroleum products with withholding tax deduction under section 50(7H), being final tax liability covers under section 30C of the Income Tax Ordinance, 1979 and to assess as a separate block of income, while assessee's declared income excluding petroleum products being less than last assessed the returns do not qualify under the SAS, are accordingly proceeds to normal assessments." (Emphasis provided).

4. The main issue in this case is whether the process of assessment for the three assessment years initiated on 7-4-2003 vide notice under section 61 of the Repealed Ordinance was in accordance with law or was it contrary to law? It is pertinent to note that the A.R. of the complainant/assessee filed with the Taxation Officer written objection dated 5-5-2003 against issuing notices under section 61 while returns had been filed under Self-Assessment Scheme.

5. The objection of complainant's A.R. was rebutted, vide notice .under section 62 dated 7-5-2003, with following remarks:---

"That the claim of qualifying the returns under the Self-Assessment Scheme is incorrect and cannot be accepted, as the returns filed do not fulfil the conditions as per Para 2(v) with explanation (a) of Circular No. 21 of 2000, Para-I(e) with explanation (ii) of Circular No 4 of 2001 and Para-I(i) with explanation (ii) of Circular No, 7 of 2002."

6. The reason supra recorded by the respondent in the combined assessment after confronting the complainant with it vide notices under section 62 of R.O. proves the incompetence and ineptitude of the respondent in discharge of his duties and responsibilities. His inattention to the Note attached to Para 1.2 of the Circulars ibid has caused undue harassment to the complainant and loss to the State in terms of wastage of time and effort of her employees. The Note ibid read with relevant Para of the Circulars ibid is reproduced hereunder---

"SCOPE OF THE SCHEME"

1.1 All returns filed by taxpayers, other than those that are ineligible under Para 7 of this Scheme, shall qualify for acceptance subject to the fulfilment of the following conditions, namely:---

(f) returns of Persons not being Companies or Registered Firms of Professionals, as indicated in sub-paras (c) (d) and (e) above, where tax payable on income declared is higher by twenty percent- (20%) or more as compared to the -tax payable on the income last declared or assessed, whichever is higher.

Note: The conditions regarding percentage increase in tax shall not be applicable if income consists of or includes salary and such income constitutes more than 50% of the total income declared for the year, or where income is derived only from house property. (Emphasis provided)

7. Admittedly, total income declared by the complainant in the three respective returns of income filed under section 55 of R.O. is derived only from house property and the condition regarding the percentage increase in tax is not applicable. Thus by a simple reading of law with required and due attention it is proved that the process employed by the respondent to exclude the aforementioned return from the purview of Self-Assessment Schemes for the three respective years was ab initio contrary to unambiguous provisions of the Circulars ibid. 'The very basis to invoke jurisdiction to make assessment in any manner other than Self-Assessment Scheme did not exist in complainant's case. The matter, therefore, does neither relate to assessment of income nor requires any interpretation of law. The preliminary objection of the respondent that the claim of qualifying the returns under the Self-Assessment Scheme is incorrect and cannot be accepted, as the returns filed do not fulfil the conditions as per para-2 (v) with explanation (a) of Circular No. 21 of 2000, Para-I (e) with explanation (ii) of Circular No.4 of 2001 and Para-I(f) with explanation (ii) of. Circular No.7 of 2002 relevant, legislation, therefore, is misconceived in the context of instant complaint.

8. Inattention, negligence, incompetence and ineptitude of tax employees in discharge of their duty and responsibility have impaired the very credibility of C.B.R. This is why the foregoing traits have been specifically included in the .definition of maladministration per se provided under section 2(3)(ii) of the Ordinance XXXV of 2000. The view that mala fide is to be proved to hold a tax employee responsible for maladministration is based on the misconceived understanding that the words "unless it is bona fide and for valid reasons" appearing at the end of sub-clause (a) of claus8 (1) of subsection (3) of section 2 of the FTO Ordinance apply to any decision, process, recommendation, act of omission or commission which is contrary to law, rules and regulations or is a departure from the established practice or procedure. Maladministration according to subsection (3) of section 2 of the FTO Ordinance, besides all else, which the word "maladministration" ordinarily means or connotes, includes whatever is enumerated in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii) subsection (3) of section 2 ibid.

9. Before proceeding to analyse what the clauses supra literally convey, a comprehension of common dictionary meanings of the word "maladministration" is desirable. Meanings of the word given in Chambers 21 Century Dictionary, Revised Edition, at Page 829 published 1999, Reprinted 2000 are---

maladminister > verb to manage (e.g. public affairs) badly, dishonestly or incompetently, maladministration noun.

Further, the meaning of the term "maladministration" as given in Black's Law Dictionary, 7th Edition at Page 967 published-1999, 6th Reprint-2003 are

Maladministration.---Poor management or regulation, esp, in an official capacity--Also termed misadministration.

Thus in most general terms bad or poor management or regulation of public affairs is maladministration. Bad or poor management/regulation of public affairs will remain bad notwithstanding that it is bona fide and for valid reason because goals of good management or regulation of public affairs cannot be achieved without eradication of such reasons/ causes. This is the pronounced objective in the Preamble of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 reproduced hereunder---

Whereas it is expedient to provide for the appointment of the Federal Tax Ombudsman to diagnose, investigate, redress and rectify any injustice done to a person through maladministration by functionaries administering tax laws;"(Emphasis provided)

10. Coming to the traits specifically included in the definition of "maladministration" provided in the FTO Ordinance, sub-clause (a) of clause (i) of subsection (3) of section 2 ibid includes in the definition of maladministration a decision, process, recommendation, act, of omission or commission, which

(i) is contrary to law, rules or regulations or

(ii) is a departure from established practice or procedure, unless it is bona fide and for valid reasons.

11. In order to comprehend the rider, "unless it is bona fide and for valid reasons," supra literally, a reference to the dictionary meanings of the term bona fide may be beneficial. Chamber 21st Century Dictionary-Revised Edition at page 155 offers the meanings of the word as under---

bona fide > adj. genuine or sincere; done or carried out in good faith a bona ride offer. > adverb genuinely or sincerely; in :good faith. 16c ad adverb: Latin.

Meanings of the word in Black's Law Dictionary, 7th Edition, at Page 168, Published 1999, 6th Reprint are as under--

bona fide-adj. [Latin "in good faith"] 1. Made in good faith; without fraud or deceit, 2. Sincere; genuine. See GOOD FAITH.-bona fide, adv

11-A. The foregoing meanings of the term "bona fide" show that al decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or a departure from established practice or procedure may be claimed to be done in good faith (bona fide), the concept of malice in law notwithstanding. However, attributing any "valid reason" to a decision, process, recommendation, act of omission or commission which is "contrary to law" (the law as settled by the binding decisions of judicial forums) is inconceivable. Departure from established practice or procedure is the only act for which valid reasons may be offered. Thus the rider supra governs only the second part of sub-clause (a) of clause (i) of sub-section (3) of section 2 ibid i.e. the phrase, "act of omission and commission which is a departure from established practice or procedure" because it may be both-bona fide as well as for valid reasons."

11. Further, the use of conjunction "and" in the rider supra requires the tax employee to prove that an act of omission or commission which is a departure from established practice or procedure on his part was both bona fide as well as for valid reasons. Failure to discharge the onus on anyone of the two counts or both shall not absolve him of mal-administration because the use of the word "unless" with the rider suggests that it is for the respondent to prove bona fide and valid reasons.

12. It is also significant that the rider "unless it is bona fide and for valid reasons" governing the second part 'of sub-clause (a) of clause (i) supra, is an exception to the common dictionary meanings of the word "maladministration". The exception seems to have been made to suggest that the Federal Tax .Ombudsman does not recommend any adverse action against a tax employee who is able to prove that departure from established practice or procedure on his part was bona fide and for valid reasons.

13. It is pertinent to observe at this juncture that no malice/mala fide is required to be proved for any conceivable maladministration on the part of Revenue Division or tax employees. The only act that can be condoned is a departure by the respondent from established practice or procedure if he is able to prove that such departure is bona tide and for valid reasons. This exception to the established principle is specifically provided through sub-clause (a) of clause (i) of sub-section (3) of section 2 of Ordnance XXXV of 2000. With utmost reverence to the decision of Honourable President of Pakistan cited by the Respondent, that malice/mala fide is to be proved against the respondent in a complaint of maladministration is based on misreading of law because element of malice/mala fide is alien not only to the common dictionary meaning of the word "maladministration" but also to the specific inclusions of the rider made by the Ordinance XXXV of 2000 to its common meaning through sub-clause (a) of clause (i) of subsection (3)of section 2 of the Ordinance ibid. How can an impugned action which is contrary. to law can be justified on ground of being bona fide. Any act, process or decision which is contrary to law suffers from malice in law (See PLD 1989 SC 26 and PLD 2003 Kar. 721.)

14. Decision of Honourable President of Representation against finding/recommendation of this forum in Complaint No.845 of 2001 is distinguishable because maladministration has been clearly identified in the instant complaint. The decision on Representation against the Findings/ Recommendation of this forum in Complaint No.708 of 2001 is also inapplicable to the instant complaint because the matter alleged in the complaint neither relates to assessment of income nor to interpretation of law for which legal remedies of appeal, review or revision is provided under the relevant law as found through. investigation supra.

15. The contention of the respondent that the returns of income, did not qualify under SAS is also misconceived as proved supra. Having round that the reason that the complainant has been confronted with the notice under section 62 for exclusion of the returns from SAS was misconceived, other matters raised in the complaint become inconsequential.

16. It is recommended---

(i) That the Commissioner Peshawar Zone undertakes written counselling of the concerned Taxation Officer to impress upon him the need to improve his competence and to pay more attention to the facts and relevant provisions of law applicable thereto and try to avoid causing undue harassment to taxpayers.

(ii) That the Commissioner in discharge of his responsibility under section 122A of the Ordinance may call for the record of proceedings considered supra in which the orders ibid have been passed by the Taxation Officer working under him and proceed under subsection (2) of section 122A as he deems fit.

(iii) Compliance is reported in 30 days.

C.M.A./349/FTO(I)Order accordingly.