NEW BISMILLAH AUTOS, FAISALABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1099 (2003)

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

----Ss. 56 & 61---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Notice to furnish return of total income for 3 years---Assessee's plea that no business was conducted during years 1999-2000 and. 2000-2002 was accepted by Assessing Officer, who gave him income tax challan of Rs.550 for year 2001-2002, which he deposited on next date---Assessing Officer thereafter issued consolidated ex parte assessment order of all 3 years for non-compliance of such notice---Validity---Revenue had not denied factum of appearance of assessee before Assessing Officer and handing over him such challan bearing his tax number, stamp and initials of concerned official---Assessee had furnished certificate from Bank regarding his employment as Guard till 3-6-2000 and rent agreement about hiring business premises, but same were not available on record---Assessing Officer in order to support assessed income had not conducted enquiry regarding date of commencement and extent of assessee's business---By issuing challan for 2001-2002, impression had been given that no demand had been created for years 1999-2000 and 2001-2002---Revenue could not explain, why after issuing such challan, assessment creating a demand for 3 years had been made---Entire proceedings by Assessing Officer lacked bona fides and amounted to fraud on statute and assessee as well---Impugned assessment was arbitrary, baseless, abuse of power and violative of principles of natural justice---Maladministration was proved---Federal Tax Ombudsman recommended to Revenue to cancel impugned assessment under S.122-A of Income Tax Ordinance, 2001 and frame fresh assessment after conducting enquiry and hearing assessee.

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

----Ss. 56 & 61---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Framing of ex parte assessment order---Good faith of Assessing Officer---Proof---Not necessary to probe motive of Assessing Officer, where maladministration was proved---Burden would lay on Assessing Officer .to prove his bona fides.

Muhammad Anwar, Consultant (Dealing Officer).

None present for the Complainant.

Tahir S. Bhatti, ACIT for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Brief facts of the case are that the complainant an ex-army personnel 'was previously working as guard with N.B.P. on contract which expired on 30-6-2000. He started an auto workshop at Khurianwala Adda in August, 2000. In response to notice under sections 56 and 61 for the assessment years 1999-2000 to 2001-2002 the complainant statedly appeared before the assessing officer on 18-2-2002 and produced bank certificate and rent agreement. The officer is stated to have accepted his submission that no business was conducted during the years 1999-2000 and gave him a challan of Rs.550 for payment of income tax for the assessment year 2001-02 which the complainant deposited in N.B.P. Jarawanla on 19-2-2002. Later on the complainant received a consolidated assessment order for all the 3 years stating that the complainant had not complied with notice of hearing under section 61 issued on 11-2-2002 for compliance on 18-2-2002. It is contended that the complainant had complied with the notice under section 61 and he has been illegally assessed to tax for the years 1999-2000 and 2000-2001 during which he had done no business and tax levied for the year 2001-02 at Rs.2200 was harsh and excessive being over and above the agreed amount of Rs.550 for which the assessing officer had issued challan which was paid by the complainant 19-2-2002. The assessment order is contested to be illegal and prayed to be vacated.

2. In reply the respondent has stated that the case of the complainant was booked on the basis of external survey and notice under sections 56 and 61 were issued for the assessment years 1999-2000 to 2001-2002 and ex parte assessment were made at income of Rs.60,000 , Rs.70,000 and Rs.80,000 for the respective years for non-compliance of statutory notices. It is further stated that the complainant has paid a sum of Rs.550 for the year 2001-02 and the balance demand was outstanding against him.

3. Representative of the respondent attended that reiterated his contentions as per reply. Nobody attended on behalf of the complainant despite the fact the hearing was fixed twice on 23-7-2003 and 5-9-2003. The complainant is therefore taken up of disposal on merits.

4. The respondent in his reply has not given any comments on allegation of the complainant that he appeared on 18-2-2002 before the assessing officer who handed over to him the income tax challan for Rs.550 in respect of the assessment year 2001-02 which he deposited on 19-2-2003. A perusal of the copy of the challan shows that it was issued on 18-2-2002 under the stamp and initials of an official of the income tax Circle-28 Jaranwala for payment of an amount of Rs.550 as income tax for the assessment year 2001-2002 indicating the complainant's NTN as 03-28-0086673. The representative of the respondent admitted the issuance of this challan. This proves that the complainant had attended the office on 18-2-2002 when he was asked to pay tax of Rs.550 for the assessment year 2001-02 and no demand was created for the years 1999-2000 and 2000-2001. Later on by an ex parte assessment tax demand of Rs.1100, Rs.1650 and Rs.2200 was created for the assessment years 1999-2000 to 2001-02 respectively. The complainant has also stated that on 18-2-2002 he had furnished certificate from the N.B.P. regarding his employment on contract as guard till 3-6-2000 and rent agreement about hiring of business premises but these documents were not available on the income tax record produced by the respondent's representative. No enquiry was conducted regarding the date of commencement and extent of complainant's business to support the assessed income. The complainant has alleged in definite terms that he had attended the office personally and provided the Bank certificate and rent agreement etc. and a challan for Rs.550 for the year 2001-2002 was issued and he deposited the next day on 19-2-2002. These allegations have not been denied specifically and a vague reply has been submitted that the complainant did not appear on the date of hearing. The department admits to have issued the challan for Rs.550. It is not the case of the department that the said challan was served on the complainant through a notice server. It proves the presence of the complainant on 18-2-2002 and submission of documents which have not been denied. The department has failed to explain why after issuing the challan assessment was made creating a demand for three years. It was the duty of the assessing officer to have framed the assessment of all the three years after considering the facts and making inquiries. It has been noted that the documents filed by the complainant are not on record. The entire proceeding by the assessing officer lacks bona fide and amount to fraud on statute and the complainant as well. By issuing the challan for the year 2001-2002 impression was given that no demand has been created for the years 1999-2000 and 2000-2001. Thereafter by fraudulent means documents filed by the complainant were removed or not placed in the file and treating the complainant absent framed ex parte assessment which is belied by the admission of department to have issued the challan on 18-2-2002. The entire proceeding leading to framing of assessment orders stands vitiated as they suffer from mala fide and fraudulent act on the part of the assessing officer. Moreover the orders are arbitrary, baseless, abuse of power and in violation of principles of natural justice. Maladministration is established. Where maladministration is proved it is not necessary to probe the motive of the assessing officer as in such circumstance it is for him to prove his bona fides.

5. It is therefore recommended that:

(i) The assessment orders for the assessment years 1999-2000, 2000-2001 and 2001-2002 be cancelled under section 122A of the Income Tax Ordinance, 2001 for fresh assessment after conducting enquiry and affording a reasonable opportunity to the C complainant of being heard.

(ii) Compliance be reported within 30 days.

S.A.K./202/F.T.O.Order accordingly.