QAISER SHEHZAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2007 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 2002 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.66(1)(c) & 13(1)(d)---Establishment. of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Limitation for assessment in certain cases---Assessments were set aside with the directions to obtain proper evidence regarding ownership of the shop and business---Addition under S.13(1)(d) of the Income Tax Ordinance, 1979 was also set aside---No re-assessment order was available on record---Demand notice was never served and the signatures in acknowledgement of receipt of demand notice were in fact fabricated on the direction of the concerned Record-keeper---No record in the regular Demand and Collection Register of the re-assessments statedly framed---DCR numbers given' on the order were admittedly did not exist in the circle DCR---Assessee contended that. no re-assessment proceedings had been conducted and recovery notice had no legal basis ---Assessing Officer contended that the re-assessment order was not placed on record earlier due to inadvertence---Validity---Record-keeper/UDC reported that no -such re-assessment order existed on the assessment record---Naib Qasid also admitted in writing that he had himself signed the demand notice (in acknowledgement of its service) when asked to do so by the Record keeper---Such was a blatant case of manipulation and tampering with records---No re-assessment was actually made in the name of assessee and an unsuccessful attempt had been made to make it appear that an order of re-assessment had been passed before the expiry of limitation---When in fact no such order had been passed, recovery notice issued regarding tax demand had no legal basis---Matter was obviously covered by the definition of "maladministration"---Federal Tax Ombudsman recommended that no re-assessment be considered to have been made in `the case after the setting aside the assessments for the years 1998-99 to 2000-2001 by the Appellate Additional Commissioner in the case; no action for recovery of any tax based on the so-called re-assessments for the said years be taken; enquiry be made by the Enquiry Wing of the Central Board of Revenue regarding the circumstances in .which a combined assessment order was purportedly passed by the taxation officer which in fact was apparently never passed during his posting in the Circle; the matter of the apparently bogus and forged service of demand notice be also examined and disciplinary action be taken against the guilty officer and officials) identified as a result of the enquiry.

Mirza Muhammad Wasim, Adviser.

Sajid Rehman Malik, A.R. for the Complainant Asif Haider Orakzai, DCIT for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---This is a complaint by one Mr. Qaiser Shehzad in his own name and in the name of his younger brother, Muhammad Aamir. The main points in the complaint are as under---

(i) Qaiser Shehzad is doing Karyana and General Store business in Abbottabad and is borne at NTN 1298496(TR126).

(ii) The complainant's case was booked on income tax rolls on the basis of survey profile.

(iii) The income tax assessment proceedings (for the assessment years 1997-98 to 2000-2001) were concluded with the following irregularities/deficiencies.

(a) The name of the actual proprietor i.e. Qaiser Shehzad was ignored and the (combined) assessments were completed in the name of his younger brother, Muhammad Aamir who was a student at that time and had no concern with the business.

(b) The relevant survey form available on record (on which the tax proceedings, were based) was filled by Qaiser Shehzad, the actual proprietor and not by Muhammad Aamir.

(c) The addition made under section 13(1)(aa) in the assessments should have been considered in the hands of the actual proprietor who had sufficient sources.

(d) The income tax returns were filed in the name of Qaiser Shehzad and not in the name of Muhammad Aamir.

(iv) The facts were placed in appeal before the AAC, Peshawar Zone who set aside the assessments (for the years 1998-99 to 2000-2001, no income having been assessed in 1997-98) with the directions to conduct enquiries to establish the year of commencement of business, the actual ownership and the volume of business.

(v) The taxation officer overlooked the directions of the AAC.

(vi) Section 66A (actually section 66) of the repealed Income Tax Ordinance., 1979 provides that in cases set aside by the AAC, re-assessments are to be finalized by the end of the financial year (following the one) in which the order is received.

(vii) In the instant case the limitation started running from 20-1-2002 and ended on 30-6-2003.

(viii) A single notice under section 61 was issued on 5-5-2003 and Qaiser Shehzad, the complainant attended on 5-6-2003 and was forced to sign a blank sheet on the pretext that the assessing officer would study the case further.

(ix) No enquiry was conducted nor confronted under section 62 as directed by the AAC,

(x) Neither any further notice was issued/served (after 5-6-2003) nor any further correspondence was made till 23-3-2004 when after almost 9/10 months of silence the complainant was served a tax recovery notice from the ACIT, Survey Profile Circle, Abbottabad.

(xi) On being approached, the ACIT vide a letter dated 4-5-2004 wrote to the complainant as under-

"To

Qaiser Shehzad

Ex-Prop: Rehman General Store,

PMA Link Road, Mardian,

Abbottabad.

SUBJECT:- INCOME TAX RE-ASSESSMENT FOR ASSESSMENT YEAR 1998-99 2000-01.

Please refer to the subject noted above and your letter No.NIL dated.3-3-2003.

As per the report submitted by the Record-keeper/UDC of this office no re-assessment decision in the light of L/AAC decision of the set aside case in your regard is found in the respective file comprised of 119 pages.

As far as your request for the demand notice is concerned it is stated that the notice server has denied the service of notice to the respective assesses by just .signing the notice on the directions of the previous Record-keeper.

However, the demand notice in duplicate is enclosed on request.

(SUMRIA MEHMOOD QAZI)

ASSISTANT COMMISSIONER OF I.TAX

SURVEYPROFILE CIRCLE,

ABBOTTABAD"

(xii) It further came to the knowledge of the counsel for the complainant that the demand notice was shown to have been served on Muhammad Aamir whose signatures on the notice were bogus and forged which was also admitted by the notice server.

(xiii) It has been admitted by the officer currently holding the charge of the Circle that no assessment order was actually passed or issued.

(xiv) The assessment entered only in the DCR is thus liable to be cancelled.

It has been prayed that appropriate action be taken against the then assessing officer/officials of the Survey Profile Circle and the complainant be saved from illegal tax demand and harassment by deciding the point of limitation in the case.

2. The respondent's reply consists of the comments of the RCIT, Islamabad. It is stated in the reply that no act of maladministration is involved in the case and that the matter falls within the purview of section 9(2)(b) of Ordnance XXXV of 2000 as the matter relates to assessment of income. On facts the reply contains the following main points-

(i) Proceedings were started in the case on the basis of survey profile received in the Circle. The assessing officer issued notices under sections 56/61 of the repealed Ordinance and one Mr. Aamir attended and admitted karyana business in the name of Rehman General, Store to be owned by him. He admitted to have started the business two years back with a capital of Rs. 180,000. Daily sales were admitted at Rs.6,000 and 1/10th share in a market purchased in September, 1998 was also admitted. The assessing officer made an entry to this effect in the order sheet and also recorded the statement of Mr. Aamir.

(ii) Notice under section 13(1)(aa) of the repealed Ordinance was issued to Mr. Aamir who attended and requested for adjournment but never turned up thereafter. He also failed to furnish any return of total income in compliance with the .notice under section 56.

(iii) On 5-9-2001 Mr. Qaiser Shehzad, the complainant (who is the brother of Mr: Aamir). attended with his AR and' filed return of total income for the assessment year 2000-2001 along with an affidavit stating that he was the actual owner of the said business of Rehman General Store and Mr. Aamir had no concern with it. The claim of Mr. Qaiser Shehzad was, however, not entertained by the assessing officer.

(iv) The assessing officer proceeded ex parte against Mr. Aamir and finalized assessment's at net incomes of Rs.165,000, Rs.369,000 and Rs.233,750 for the assessment years 1998-99 to 2000-2001 respectively. Later the assessments for the .years 1999-2000 and 2000-2001 were rectified under section 156 which resulted in the income of Rs.354,000 and Rs.185,000 .respectively for the two years.

(v) The above treatment was contested before the AAC who vide his order dated 29-12-2001 set aside the assessments with the directions to obtain proper evidence regarding the ownership of the shop and business. The case was also set aside on the point of addition under section 13. It was also directed that assessments be made in the proper hands viz. in the hands of Mr. Qaiser Shehzad or Mr. Muhammad Aamir according to facts.

(vi) Re-assessment proceedings were .initiated end in response to notice under section 61, Mr. Aamir attended and requested adjournment which was allowed for 5-6-2003. He attended again and requested, for further adjournment which was` allowed for 28-6-2003. On the said date Mr. Aamir did not attend and the assessing officer finalized the proceedings ex pane.

(vii) As explained above, Mr. Muhammad Aamir, brother of the complainant had categorically admitted that the business was in his own name grid he even attended 'proceedings upto the last and, therefore, the claim of the complainant that it was he who actually, ran the business is unfounded.

(viii) Due opportunity was provided to Mr. Muhammad Aamir to produce evidence of source of investment but he failed to do so.

(ix) The returns filed by Mr. Qaiser Shehzad, the complainant, were not entertained in the light of the statement of his brother Mr. Aamir.

(x) The action in the case was taken within the stipulated time.

It has been stated that the complaint is without substance and it may, therefore, be rejected.

3. The contentions of the two sides have been considered and the records examined. It is seen that a property survey profile was filled in by Mr. Muhammad Aamir in which 1/10th share in eleven shops and Plats known as "Shamim Market", Abbottabad was shown. Notices under sections 56/61 dated 31-7-2001 for 13-8-2001 were issued by the assessing officer to Mr. Aamir on this basis. Subsequently Mr. Aamir attended and recorded a statement in which he also admitted the ownership of the business of a Karyana Store. A combined order under sections 62/13(1)(aa) was then passed in the case of Mr. Aamir at incomes indicated above. The combined assessments were later set aside by the AAC vide order dated 29-12-2001 but the name of appellant in the appellate order apparently due to some error was Mr. Qaiser Shehzad, Prop; Rehman General Store, although the assessments had been made in the name of Muhammad Aamir. During the re-assessment proceedings Mr. Aamir apparently denied the ownership of the business. The important point in the context of the complaint, however, is that according to the complainant no communication was subsequently received from the assessing officer and the so-called orders of re-assessment pertaining to the assessment years 1998-99 to 2000-2001 were never served. It was pointed out that indication regarding the orders was received for the first time through a recovery notice dated 22-3-2004 issued by the ACIT who had taken charge of the Circle. The, contention of the complainant is that in fact no such order of re-assessment was passed on or before 30-6-2003 by which date the re-assessments had to be finalized in the light of the provisions of section 66(1)(c) of the repealed Ordinance.. In this connection it was again pointed out that the Assistant Commissioner of Income Tax had herself admitted in her letter dated 4-5-2005 (reproduced above) that no order of re-assessment was available on record and that the notice server 13 had admitted that the demand notice was never served and the signatures in acknowledgement of the receipt of the demand notice were in fact fabricated in the office on the directions of the concerned Record-keeper. The contention of the complainant in this regard appears to be correct and no comment has been made on this point in the respondent's reply. During the hearing, the representative of the respondent who is currently holding charge of the Circle further admitted that there was no record in the regular Demand and Collection Register of the re-assessments statedly framed by Mr. Chanzeb Khan Swati, Taxation Officer. It was further stated that Mr. Swazi who had since been transferred had only recently sent a signed order under sections 63/132 framing re-assessments in the hands of Mr. Muhammad Aamir, Rehman General Store, Abbottabad which according to Mr. Swati could, due to inadvertence, not be placed on the record earlier. A copy of the said order purportedly passed on 28-6-2003 was furnished in which ex parte assessment under sections 63/132 had been framed in the hands of Mr. Muhammad Aamir at incomes of Rs.189,000, Rs.354,000 and Rs. 185,000 respectively for the years 1998-99 to 2000-2001. The DCR numbers given on the order are, however, Nos.1, 2 and 3 which entries admittedly. do not exist in the circle DCR and it is also otherwise not plausible that towards the end of the financial year the DCR, or any portion thereof would have serial numbers beginning with "1".

4. Regarding the service of the so-called combined order of re-assessment it is seen from the record that in the light of the complainant's contention that no re-assessment proceedings had been conducted a report was called for by the then taxation officer from the Record-keeper/UDC on 4-5-2004 and he reported that no such re assessment order existed on the assessment record. Muhammad Afzal, Naib Qasid also admitted in writing that he had himself signed the demand notice (in acknowledgement of its service) when asked to do so by the Record-keeper, Majeed Ywius. This is thus a blatant case of manipulation and tampering of records. It is also established that no re-assessment was actually made in the name of Mr. Muhammad Aamir for the assessment years 1998-99 to 2000-2001 and an unsuccessful attempt has been made by Mr. Chanzeb Khan Swazi, the then taxation officer to make it appear that an order of re-assessment had been passed before the expiry of limitation after 30-6-2003 when in fact no such order had been passed. The recovery notice issued regarding tax demand for the said years has also no legal basis. The matter is obviously covered by the definition of "maladministration" as contained in section 2(3)(i)(a), (b) and (d) of Ordinance XXXV of 2000.

5. In the light of the above, it is recommended that---

(i) No re-assessment be considered to have been made in the case of Mr. Muhammad Aamir after the setting aside the assessments for the years 1998-99 to 2000-2001 by the AAC in the case.

(ii) No action for recovery of any tax based on the so-called re-assessments for the said years be taken.

(iii) Enquiry be made by the Enquiry Wing of the Central Board of Revenue regarding the circumstances in which a combined assessment order was purportedly passed by Mr. Chanzeb Khan Swazi, taxation officer which in fact was apparently never passed during his posting in the Circle. In this connection the matter of the apparently bogus and forged service of demand notice be also examined.

(iv) Disciplinary action be taken against the guilty officer and officials identified as a result of the enquiry.

(v) Compliance in respect of (i) and (ii) above be furnished within 30 days and in respect of (iii) and (iv) above within 60 days.

C.M.A./309/FTOOrder accordingly.