TRANS GLOBAL LOGISTICS PAKISTAN (PVT.) LTD. through Chief Executive/Director VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1125 (2004)

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

----Ss.55, 61, 62, 80C & 143B---C.B.R. Circular No.26(17)/ITP/58 dated 8-10-1958---C.B.R. Circular No.32-C(2) IT-28 dated 28-3-1928---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2) & 2(3)(ii)---Return of total income---Notices---Statements filed by contractors etc.---Confidential record---Inspection of record---Maladministration---Jurisdiction---Maladministration was alleged against Taxation Officer of a particular circle who proceeded to pass assessment order for year (2001-02), without completing order sheet, without taking into account the details, evidence, nature of receipts and erroneously treating some receipts as commission income and remittance of freight bill in USA---Further allegation was that assessment order was passed after about 9-1/2 months---Regional Commissioner of Income Tax, in reply, had objected to the jurisdiction of Federal Tax Ombudsman .as remedies of appeal were available, Taxation Officer had made best judgment assessment after affording several opportunities to the assessee, order sheet was properly maintained, delay in service of assessment order had occurred due to illness and accidental death of Notice Server's near relative---Copies of eight out of nine sheets were provided and ninth being confidential was not provided---Federal Tax Ombudsman found that the Department had failed to comprehend the nature of receipts and his neglect and disregard for the practice of assessment of such receipts followed by the department in complainant's own case in Assessment year 2000-01 proved his incompetence and inaptitude in discharge of his duties---Such incompetence and inaptitude attracted the jurisdiction of Federal Tax Ombudsman---Return of Income filed under S.55 of the Income Tax Ordinance, 1979 was not properly explained and identified during the course of assessment proceedings---Complainant was neither called upon to explain it nor proper opportunity was provided to complainant---Denial of allegations was not supported by affidavits---Allegation of maladministration on account of arbitrariness in refusing to issue copy of ninth order sheet and even disallowing its inspection was found invalid---Federal Tax Ombudsman recommended Commissioner to conduct the written counselling of the concerned Taxation Officer and take cognizance of the apparent error in the assessment order and proceed under S.122A suo motu to allow such relief as found due in the circumstances.

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

----S.9(2)---Jurisdiction---Matters alleged in the complaint related to inattention, neglect, incompetence in discharge of duties and departure from established practice and procedure---Matter did not relate to assessment of Income et cetera---Complaint was not hit by the bar on jurisdiction envisaged under section 9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000.

S.M. Sibtain, Advisor, Dealing Officer.

Arshad Naseem Khan for the Complainant.

Messrs Masood Jahangir, DCIT & Kaleemuddin, T.O. for Respondent.

DECISION/FINDINGS

JUSTICE (RETD) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Maladministration is alleged in the instant complaint on the part of Mr. Hanif Shaikh, Taxation Officer, Circle-A-8, Companies-III, Karachi for proceeding to pass an assessment order for Assessment year 2001-02 on 31-3-2003 without completing order sheet entries of assessment proceedings since 11-3-2003, without taking into account "the details, evidence and explanations about the quantum, nature and history of assessment of complainant's receipts of various nature submitted on behalf of the complainant from time to time during the course of assessment proceedings from 15-1-2002 upto 20-3-2003. Consequently, he has failed to understand the difference between complainant's commission income as a percentage on the value of air freight as per I.A.T.A. Rules and receipts from clients against billing for taxes, insurance, demurrage and charges for other services rendered on their behalf such as handling, customs labour/overtime, transportation and loading/unloading etc. Thus he has erroneously treated the later receipts also as commission income. Besides he has also treated share of profit on business of ocean freight for shipping space acquired by the complainant, Messrs T.G.L. Pakistan as partner of Tower Group-USA. The partner in USA billed the consignee for the ship space, received the proceeds of freight bill in USA and remitted complainant's50% share of profit on such part of business.

2. It is the sixth year of business operations of the complainant and assessment year 2001-02 is the second year since the Finance Act, 1999 has included the commission receipts in presumptive income chargeable under section 80C of the Income Tax Ordinance, 1979 (Repealed Ordinance). The complainant had been declaring receipts of commission on air freight, proceeds of bills for services rendered and share of profit in business of shipping space in the return filed under section 55 of the Repealed Ordinance. But it declared commission receipts for and from A.Y 2000-01 in the statement under section 143-B of the Repealed Ordinance while it declared proceeds of bills for services rendered as well as share of profit from the aforesaid business in the return filed under section 55 of the Repealed Ordinance. The respondent accepted the declared receipt both in the statement under section 143-B as well as in the return of income under section 55 for assessment year 2000-01 but refused to accept the statement under section 143-B and Return of Income under section 55 filed on the same basis for A.Y 2001-02 without any valid reasons and in total contravention of the unambiguous law on presumptive income and in sheer disregard of the facts available on record, which were duly explained from time to time. Further, the order passed on 31-3-2003 was served on 13-10-2003.

3. The complainant has thus alleged maladministration as defined under section 2(3) of Ordinance XXXV of 2000 on the part of Taxation Officer on following counts.

(i) The decision of Taxation Officer is contrary to law, rules or regulations or is a departure from established practice or procedure.

(ii) The decision is arbitrary or unreasonable, unjust, biased or discriminatory.

(iii) The decision is based on irrelevant grounds.

(iv) It involves the exercise of powers or the failure or refusal to do so for improper motives and administrative excesses.

(v) The process adopted by him to reach such decision, establish the allegations against him on account of neglect, inattention, incompetence and delay in the administration or discharge of duties and responsibilities.

4. Forwarding the parawise comments on the complaint, the R.C.I.T. Corporate Region, Karachi observed, "Prima facie, the complaint fall out side the jurisdiction of Honourable Federal Tax Ombudsman as the matter relates to assessment of income for which legal remedies of appeal/review/revision are available. The Taxation Officer had made best judgment assessment, after affording several opportunities to the assessee. The order sheet has been properly maintained and has been duly provided, except that portion which did not 13 relate to the assessment proceedings, in view of Circular No.15 of 1958, dated 8th October, 1958. As regards delay in service of assessment order, the explanation of the Notice Server was also called for by the "competent authority. The respondent has stated that contents of para. 1 to 3:111 are matters of record warranting no comments. Contents of para 3.1 to 4.2 have been admitted. The allegation in Para 4.3, that order sheet has not been recorded on day-to-day basis and that it was not complete, has been denied and it is stated that it has been recorded as per established and prescribed procedure.

5. Contents of Para 4.4 too are denied stating that basic issues as to the nature of receipts were raised on 11-3-2003 and case was finally adjourned for 20-3-2003 when the assessee vide its A.R. letter dated 19-3-2003 filed detailed reply/documents regarding all queries raised on 11-3-2003. As such no one attended personally, however all queries were replied. The assessee neither explained further nor any adjournment was sought. The case was reserved for judgment. The case was entered in D.C.R. on 31-3-2003. A detailed order sheet was also written, which is available on record and no prejudice has been caused to the complainant. After final reply and discussion on the assessment order the assessee was never issued a notice of attendance under section 61 nor the demand notice for tax payable was served before service of order on 31-10-2003. The delayed service was caused due to accidental death of Notice Server's nephew. And his own operation, resulting into misplacement of the said order. The explanation of the Notice server was also called upon for delay in service of the order.

5. Regarding allegations in paras. 4.4 to 4.10 that the Taxation Officer confirmed that there were only 8 Order Sheets on record, the copies whereof had been issued and that complainant's Authorised Representative was denied inspection of record despite proper application along with duly paid challan of inspection fee having been submitted, the Taxation Officer has stated that the 9th Sheet was confidential and that the file was provided to the A.R for inspection in the office of Taxation Officer in response to application dated 18-11-2003. The Taxation Officer has further stated that after receipts of reply of the assessee, the case was reserved for order on 20-3-2003. The order sheet was also recorded on page 9 in this regard; it is available on record. The copy of the same was not issued for being confidential. However, no prejudice has been caused to the assessee and a speaking order was served. Till service of the order, neither any notice of hearing under sections 61/62 nor notice of demand of tax was served on the assessee. The assessee's version had been categorically discussed and rebutted in the order. The assessment order was framed as per law without causing any prejudice to the assessee during the entire proceedings.

7. Although contents of affidavit referred to in para. 4.10 of the complainant have been denied by the respondent but no counter affidavit has been filed.

8. Regarding the responses of the complainant to the questions raised about the details and nature of receipts declared in the statement under section 143-B as well as in the Return of Income under section 55, narrated in the complaint from para. 5.1 to 11 the only comments offered by the respondent are as under:

5.1 "Denied. The assessee was initially confronted on the lines of history of the case. The analysis unfolded the nature of receipts being commission as such final legal treatment was accordingly given in the order".

5.2 "It is a matter of record and needs no comments".

5.3 "It is a matter of record and needs no comments".

5.4 "It is a matter of record and needs no comments".

6.1 "It is a matter of record and needs no comments".

6.2 "It is a matter of record and needs no comments".

6.3 "It is a matter of record and needs no comments".

7. "It is a matter of record and needs no comments".

8. "It is a matter of record and needs no comments".

9. "Denied. The order has been passed in a spending manner as per law and facts".

9.1 "It is a matter of record and needs no comments".

10. "Denied being baseless. During the whole proceedings 3 officers were transferred. The entire entries on the order sheet are also made by 3 different assessing officers".

9. The late service of the order was necessitated due to the under mentioned reason:---

"The notice server lost sight of the service of the same due to rush of work, his leaves for operation of his eye and accidental death of his nephew who was brought up by him.

However, through this late service, no prejudice has been caused to the assessee as explained earlier.

Denied. The assessee order comprises of 9 pages and contains Factual/legal discussion/rebuttal. The proceedings have been concluded within the four corners of law.

It has been established that the exact nature of assessee's entire receipts was commission and tax was deductible thereon as per law. The same squarely falls under the presumptive tax regime for the year".

10. Mr. Arshad Naeem Khan, A.R of the complainant and Mr. Masood Jahangir and Mr. Kaleemuddin, Tax Officer (B-18) and (B-17) respectively, for the respondent have been heard. Perusal of details, evidence and explanations filed by the complainant during the course of assessment proceedings clearly show that complainant received commission from Airlines on Air freight of cargo of shippers booked for the Airlines which was declared in statement under section 143-B both in assessment year 2000-01 as well as in assessment year 2001-02. The complainant in the course of delivering the booked cargo to the Airline, performed certain services on behalf of shippers such as payments of documentation charges, watchman charges, Fuel was Risk surcharges, E.D.S. & Excise Duty, customs clearance, warehousing, transportation/ cartage and wages/overtime of loading/unloading labour etc. Bills were raised for reimbursement of expenses plus charges for complainant's services. The failure of the respondent not to comprehend the nature of such receipts and his inability to distinguish such proceeds from the commission receipts proves his incompetence and ineptitude in the discharge of his duties and responsibilities or at the least proves his inattention to the evidence, details and explanations as well as neglect and disregard for the practice of assessment of such receipts followed by the Department in complainant's own case in assessment year 2000-01. Such intention, neglect, incompetence and ineptitude in discharge of duties and responsibility has been defined as maladministration under clause (ii) of subsection (3) of section 2 of F.T.O. Ordinance XXXV of 2000. Receipts amounting to Rs.135,938 included in the declared Service Revenue amounting to Rs.6,553,793 in the return of Income filed under section 55 was not properly explained and identified during the course of assessment proceedings. The complainant could be called upon to explain it further with documentary evidence through a specific query. It proves that proper opportunity was not provided before determining that the receipt was in the nature of commission. It has been explained during the course of personal hearing that the complainant, Messrs Trans Global Logistics Pakistan (Pvt) Limited have entered into an arrangement with Messrs Tower Group International, Atlanta, USA to share equally the gross profit earned on shipping space acquired by the complainant at a port of loading in Pakistan for the cargo booked and billed by the later. Messrs Tower Group International collect the proceeds of sale of space; pay the cost of space bought and share the gross profit on such ventures equally. Supporting' documentary evidence comprising copies of Bills of Lading, Cost Schedule and debit Notes have been submitted to prove the veracity of the declared nature of such receipts. The denial of allegation supported by affidavit to refuse inspection of file cannot be relied upon in the absence of any counter affidavit of respondent.

11. The C.B.R. Circular No.15 of 1958, referred to in support of the plea that the last order sheet No.9 was confidential, bears C.No.26(17)-I.T.P./58 dated October 8, 1958 and confirms that following instructions issued vide Circular No.32-C(2)I.T.-28, dated 28-3-1928 are still in force and should he followed:

"The assessee cannot be herd to have any right to inspect his assessment file either in person or through a representative. There may be cases in which it would be unreasonable to refuse the assessee or his representatives access for the purpose of reference to original documents filed in the case, of which the assessee is entitled to have copies, specially if they are very bulky (e.g., balance sheets), or such that a copy would not serve the purpose completely."

12. Thus the allegation of maladministration on account of arbitrariness in refusing to issue copy of 9th order sheet and even disallowing its inspection is invalid. However, all other matters alleged in the complaint relate to inattention, neglect, incompetence and inaptitude of the respondent in discharge of his duties and responsibilities and departure from established practice and procedure for which no valid reason could be offered by the respondent. Since the matters do not relate to assessment of income et cetera, the instant complaint does not fall in the ambit of bar on jurisdiction envisaged under clause (b) of subsection (2) of section 9 of the F.T.O. Ordinance, XXXV of 2000, hence objection is overruled.

13. It is now recommended.

(i) That the Commissioner does conduct written counselling of concerned Taxation Officer on the weak aspects of his performance.

(ii) That the Commissioner in his own discretion takes cognizance of the apparent error in the assessment order in consequence of identified maladministration in the process employed by the Taxation Officer during the examination of evidence and proceed under section 122A suo motu to allow such relief to the complainant as he finds due on facts apparent from record.

(iii) Compliance is reported within 45 days.

M.I./268/F.T.O.Order accordingly.