AL-NOOR DEVELOPER & PLANNERS through Khalid Mehmood VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1598 (2005)

Income Tax Ordinance (XXXI of 1979)---

----S.63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Assessment order was assailed on the grounds that order did not bear any date and was served after a lapse of 6 months from the last date of hearing; that the order was not a speaking order and that the Assessing Officer had not followed the directions of First Appellate Authority which made it illegal and unlawful---Validity---Undated order had been communicated to the complainant/assessee after a period of more than 6 months from the date of conclusion of the hearing---Such communication of order was contrary to settled law---Order was a mere repetition of the previous assessment order and no reason had been given for increase in the total income---Order in fact being not a speaking order, Federal Tax Ombudsman recommended that Commissioner of Income Tax to invoke the provisions of S.122(5-A) of the Income Tax Ordinance, 2001 for setting aside the order and de novo proceedings in the case as per law.

Messrs Crescent Sugar Mills Ltd. v. C.B.R. and others NLR 1982 Tax 1 rel.

Muhammad Sirjees Nagi, Advisor (Dealing Officer).

Muhammad Ajmal Khan and M. Sadiq Chaudhry for the Complainant.

Ms. Shabana Mumtaz (ACIT) for Respondent.

DECISION/FINDING

JUSTICE (RETD.) MUNIR A. SHEIKH (FEDERAL TAX OMBUDSMAN).----The complainant filed Income Tax Return under the `self-assessment scheme' with the Taxation Officer, Circle 20, Zone-A, Lahore for assessment year 2001-02 declaring income of Rs.1,10,000. The return was selected for total audit and assessment was finalized on 28-10-2003 at net income of Rs.11,12,000 under section 63 of the repealed Income Tax Ordinance, 1979. Aggrieved by this order the complainant filed an appeal and the CIT(A) vide order dated 9-2-2004 set -aside the order with the following observations:--

"In view of the foregoing facts and circumstances of the case, I am of the view that the contentions of the appellant have not been considered at all. In this manner important facts of the case have been ignored and the assessment has resulted into a harsh treatment. The assessment is not sustainable, hence it is ordered to be set aside for de novo proceedings with the directions that fresh assessment be framed after examining the relevant records and details filed by the appellant."

2. Respondent No.2 in compliance with the order of the CIT(A), summoned the complainant for 20-12-2004 and discussed the case in detail. She said that the fate of the case will be communicated to the complainant after discussion with the Additional Commissioner. But nothing was communicated to the complainant for over 6 months. On 29-6-2005 he received copy of the order of respondent No.2 under sections 62/132 of the repealed Ordinance along with demand notice, dated 31-12-2004. This impugned order repeated the earlier assessment ignoring the findings of the CIT(A). It has been assailed inter alia on the following grounds:--

(a) "That the order does not bear any date although the notice of demand is dated 31-12-2004. The order was served after a lapse of 6 months from the last date of hearing. This establishes intention, incompetence and ineptitude of respondent No.2 amounting to 'maladministration'.

(b) The order is not speaking order as there was no material with the respondent No.2 to enhance the total income of the complainant.

(c) The respondent No.2 has not followed the directions of CIT(A) which make it illegal and unlawful.

3. In the reply submitted by Regional Commissioner of Income Tax Eastern Region, Lahore, a preliminary objection has been raised that the complaint relates to assessment of income and determination of tax liability and is hit by section 9(2)(b) of the Establishment of Office of FTO's Ordinance, 2000. Legal remedies including appeal and revision are available in respect of these issues. It is urged that the assessment was finalized after providing the complainant reasonable opportunity of hearing and taking into account the directions of the CIT(A). The demand notice was served on the complainant and no `maladministration' was committed by the respondent. The order was passed on the basis of facts available on record and after providing the complainant with fair opportunity of being heard.

4. In the hearing of the case on 6-9-2005 the complainant was represented by Mr. Muhammad Ajmal Khan, Advocate. The respondent was represented by Ms. Shabana Mumtaz (ACTT). The parties reiterated the arguments contained in the pleadings. On a query the D.R. conceded that notice of demand and impugned order were served on the complainant after a lapse of over 6 months from the date of last hearing. She submitted that the complainant had not produced any documentary evidence in support of his contentions.

5. The impugned order suffers from infirmities and is not sustainable in the eyes of law for the following reasons:--

(a) The undated impugned order has been communicated to the complainant after a period of more than 6 months from the date of conclusion of the hearing. So communication of the impugned order is contrary to the decision of the Lahore High Court in the case of Messrs Crescent Sugar Mills Ltd. v. C.B.R. and others reported at NLR 1982 Tax 1. In its para. 9 it is observed that repeatedly the Supreme Court has made observation that in any case where judgment is reserved and it has not been written within a period of 3 to 4 months fresh hearing is necessary in such circumstances. This principle would attract to the instant case as well.

(b) The impugned order is a mere repetition of the previous assessment order and no reason has been given for increase in the total income from Rs.1,10,000 to Rs.11,12,000. It is in fact not a speaking order.

6. The preliminary objection of the respondent about maintainability of the complaint is not valid in view of infirmities in the impugned order and is therefore, overruled.

7. In view of the findings in the paras. 4 and 5 the CIT is advised to invoke the provisions of section 122(5A) for setting aside the impugned order and de novo proceedings in the case as per law.

8. Compliance to be reported within 30 days of the receipt of the findings.

C.M.A./555/FTOOrder accordingly.