AIZAD SAYID VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1061 (2003)

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

----Ss. 2(3) & 9---Jurisdiction of Federal Tax Ombudsman---Scope---Every allegation concerning "maladministration" would call for investigation to determine its truth by invoking jurisdiction of Ombudsman.

(b) Wealth Tax Act (XV of 1963)---

----Ss. 16, 17, 18(2) & 25---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9---Wealth escaping assessment on basis of information provided by an "informer" without conducting independent inquiry to ascertain truth in allegations of concealment of assets by complainant---Validity---Informer when asked by department had failed to substantiate such allegations---Department had neither contacted Bank, with whom complainant was alleged to have pledged property for obtaining loan nor verified same from Excise and Taxation Department or Motor Vehicles Registration Authority and Stock Exchange---Reliance on such half-baked information provided by informer who was inimical to complainant without attempting confirmation or verification as to credibility thereof, had rendered departmental conduct arbitrary, perverse and contrary to law, thus, falling within ambit of maladministration---Department had not established its bona fides to justify impugned order being contrary to law---Federal Tax Ombudsman recommended to Commissioner to cancel impugned assessment by resorting to S.25 of Wealth Tax Act, 1963 and take further action, if called for, after conducting an enquiry adhering to law, rules and procedure, to determine, whether complainant owned movable/immovable assets, which he had not offered for assessment.

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

----Ss. 2(3)(i)(a) & 9---Impugned action/order contrary to law---Bona fides of department---Burden of proof---Complainant not bound to prove lack of bona fides of department---Burden would lie on department to prove to have acted bona fide.

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

----S. 9(2)(b)---Assessment of income or wealth---Interference with---Jurisdiction of Federal Tax Ombudsman---Scope---Such assessment must be in accordance with law---Bar of S. 9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would not apply to assessment, if same was contrary to law, arbitrary, baseless or biased.

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

----S. 9---Merits of impugned decision/order-Interference with--Jurisdiction of Federal Tax Ombudsman---Scope---Ombudsman as a general rule would not interfere with merits of a decision, though unmeritorious but without maladministration in exercise of discretion vested in authority---Appealable order or decision, if tainted with maladministration, could be questioned by Ombudsman.

A.A. Zuberi, Advisor (Dealing Officer).

Javed Iqbal Khan (FCA) for the Complainant.

M. Asadullah (D.C.I.T.) & Shah Khan (D.C.I.T.) for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Briefly the facts are that the complainant-individual was assessed on 29-9-2007 and 16-1-1998 under the Wealth Tax Act at Rs.2,029,000 and Rs.2,123,800 respectively for the assessment years i996-97 and 1997-98. Later, the Department came to have information through an `informer', that the complainant had concealed the following assets:

(i) investment in an A.O.P. known as Asia Trading Company;

(ii) 8 Kanals land in Thokar Niaz Baig;

(iii) a Mercedes Benz Car;

(iv) a Honda (Civic) Car; and

(v) Stocks & Shares

Notices under section 17 of the Wealth Tax Act were then issued on 12-6-2002 for reassessment. Considering the explanation tendered by the complainant as unsatisfactory, a consolidated assessment was framed on 23-6-2003 as under:--

Notices under section 18(2) of the Wealth Tax Act for default of notice under section 16(2) and for furnishing inaccurate particulars of assets were also ordered to be issued. With this the complainant is aggrieved.

2. The respondents have forwarded parawise comments by' the R-C.I.T. 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 Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the F.T.O. 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 20-11-1997 duly signed by Mr. Aizad Sayid...". The R-C.I.T. 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 he 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 complainant lodged by him (with the Department) and hesitated to provide any documentary evidence in support of the allegations". However, `according to R-C.I.T., the complainant was duly confronted on 18-6-2002 by whatever evidence the Department had about non-declaration of movable and immovable assets and their valuation.

3. 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 C.I.T. (A), Zone-I, Lahore in the case of another member of the A.O.P. (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 C.I.T. (A) unequivocally held: "the assessing officer acted arbitrary and dishonestly by adding the value of ..without any basis and evidence" moreso when ownership of the assets was denied. It was submitted by the A.R. that the notice by the Department dated 12-6-2002 did not specify (a) the identification number of the 8 Kanals plot, nor (b) the registration number of any of the two cars (Mercedes Benz and Honda Civic) 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 Wealth Tax Act.

4. Mr. M. Asadullah (D-C.I.T.) appearing for the Revenue on his turn repeated the arguments conveyed by the R-C.I.T. in the parawise comments. According to the D.R., when information was received about complainant's alleged ownership of movable and immovable properties which were not declared in the Returns but were claimed to belong to him when applying for loan/overdraft from the Bank, proper approval was obtained from the I.A.C. and opportunity extended by calling for an explanation. Therefore, no "maladministration" or misuse of powers was involved.

5. The objections by the respondent to the jurisdiction of the F.T.O. to entertain the complaint warrant prompt rejection in view of innumerable decision to the effect that every allegation concerning `maladministration' calls for investigation to determine its truth. This brings in the jurisdiction of the F.T.O.

6. 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 (a) the identification of the properties could be further verified from the Excise and Taxation Department of the Provincial Government, or (b) the Motor Vehicle Registration Authorities, and (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 complainant. The reliance on half-backed information furnished by an inimical person, without attempting confirmation or verification as to the credibility of the "information", rendered the conduct arbitrary, perverse and contrary to law thus falling in the realm of `maladministration' as defined in clause (3) of the section 2 of the F.T.O. Ordinance.

7. The entire proceeding was used as a cloak to give it a colour of legality. The argument that any person attacking the validity of the impugned order or action as contrary to law must prove lack of bona fides of the Department is misconceived. To justify such action/order 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, sub-section 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 and 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 these facts objection to jurisdiction is misconceived.

8. It is, therefore, recommended that:-

(i) The Commissioner by resort to section 25 of the Wealth Tax Act cancel the assessment as framed on 23-6-2003 for the assessment years 1996-97 and 1997-98 under sections 16(3)/17 of the Wealth Tax Act.

(ii) An inquiry by conducted, adhering to law, the rules and procedure to determine whether the complainant owns moveable/immoveable assets which were not offered for G assessment, for further action, if called for.

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

S.A.K./189/F.T.O.Order accordingly.