JOTAANA ENTERPRISES through M. Shahid Baig (Advocate) VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1804 (2005)

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 61, 62 & 143-B---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment was deemed to be finalized under S.59(4) of the Income Tax Ordinance, 1979 by 30-6-2003---Neither assessment was made till the date of limitation nor any intimation was sent to the complainant/assessee regarding non-acceptance of the return---Return was ousted from the scope of Self Assessment Scheme on the basis of statement filed under S.143-B of the Income Tax Ordinance, 1979 for the previous assessment year---Validity---Assessment had not been made fairly and carefully---Present case was indeed 'a case of "maladministration" where inaptitude, inefficiency and bias of the Taxation Officer was so obvious that it could not be easily condoned---Assessment was deemed to have been made on 30-6-2003 and subsequent proceedings were not at all warranted---Taxation Officer in haste had made mistake after mistake and fell into error by making a "Duplicate Assessment" on 30-6-2005 almost two years after the assessment year was deemed to have been concluded---Taxation Officer could resort to any other legal measure at that time but the action taken was indeed ab initio illegal and could not be sustained---Lenient view was taken by the Federal Tax Ombudsman in the light of verbal apology by the Taxation Officer and recommended that the concerned officer should be warned to be careful in future---Since grievance of the complainant had already stands redressed by the First Appellate Authority, the case was closed.

Imtiaz Ali Khan (Advisor) Dealing Officer.

M. Shahid Baig for the Complainant.

Ghulam Mujtaba Bhatti (IAC), Ms. Fatima Hussain (D-CIT) and S.H. Qamar Muftee (Taxation Officer) for Respondents.

FINDINGS/DECISION

JUSTICE (RETD.) MUNIR A. SHEIKH, (FEDERAL TAX OMBUDSMAN).---The grievance of the complainant is against the alleged duplicate assessment for the year 2002-2003. The complainant prays for the cancellation of the aforesaid duplicate/illegal assessment and initiation of disciplinary action against the respondent No.4 (Mr. S.H. Qamar Muftee, Taxation Officer) on account of oppressive and discriminatory order passed by him.

2. Brief facts of the case are that the complainant enjoys income from commission receipts. Return was filed declaring income at Rs.605,869. The case has been taken up under normal law on the basis of statement filed under section 143-B of the Repealed Income Tax Ordinance, 1979 for the assessment year 2001-2002. The Assessing Officer issued statutory notices under sections 61 and 62 of the Repealed Income Tax Ordinance, 1979 from time to time and requisitioned various documents. The case did not qualify for acceptance under SAS on the basis that returns previous to the assessment year 2002-03 were filed in the name and style of the Messrs New Dalwal Goods Forwarding Agency, Gharibwal whereas return for the assessment year 2002-2003 was filed in the name of Messrs Jotaana Enterprises, 25-Raza Block, AIT, Lahore. The declared version of the complainant was rejected and add backs out of P&L account expenses under different heads have been made to arrive at total income of Rs.2,606,066 against the declared income of Rs.605,968 and created infructuous demand of Rs.787,623.

3. The complainant has contended that return for the assessment year 2002-2003 was filed within the stipulated time limit fulfilling all the statutory requirements. There has been no reason to oust the return from the scope of SAS. The assessment had to be finalized as per subsection (1) of section 59 read with 'subsection (4) of section 59 by 30-6-2003. Neither assessment was made till the date of limitation nor any intimation was sent to the complainant regarding non-acceptance of the return. If assessment was not finalized by the date of limitation under section 59(1) of the Repealed Income Tax Ordinance, 1979 i.e.,30-6-2003, then the same shall be deemed to have been made on the such date. The additions made on account of salaries, advertisement and business promotion expenses are against the spirit of law. The additions on account of commission expenses had arbitrarily been made at Rs.504,973 without .any reason or justification. The complainant alleges that this illegal action of respondent No.4 falls within the definition of "maladministration" and has given rise to this complaint.

4. Respondents have forwarded parawise comments as under:--

(a) That para. 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 provides that "a complaint shall be made not later than six months from the day on which the person aggrieved first had notice of the matter alleged in the complaint". In the instant case notice under section 61 of the Repealed Income Tax Ordinance, 1979 for the assessment year 2002-2003 was issued on 30-11-2004 which was responded by the complainant through his AR vide letter dated 2-12-2004. This complaint was filed in mid of August, 2005 i.e. after expiry of 6 months from the date of service of the first notice. Thus the filing of instant complaint is barred by time.

(b) That the complaint is against the proceedings of section 62 of the Repealed Income Tax Ordinance, 1979 for which legal remedy of appeal is available under the said Ordinance: The complaint is not entertainable before the Hon'ble F.T.O. in view of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

5. Today i.e. 22-11-2005, on the date of hearing, Mr. M. Shahid Baig (Advocate), AR, appeared for the complainant and Mr. Ghulam Mujtaba Bhatti (IAC), DR, along with Ms. Fatima Hussain (D-CIT) and Mr. S.H. Qamar Muftee (Taxation Office) attended on behalf of the respondents.

6. The D.R. submitted a rejoinder in respect of the above cited complaint which states as follows:-

(i) That the complainant challenged the completion of assessment simultaneously before two forums i.e. before the Commissioner of Income Tax, Appeals Zone-III, Lahore and the Hon'ble Federal Tax Ombudsman.

(ii) That the learned CIT, Appeals Zone-III, Lahore has decided the appeal vacating the assessment order vide Order No.222 dated 13-9-2005.

(iii) That the complaint is not entertainable before the Hon'ble F.T.O. in view of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

A.R. of the complainant while arguing the case rebutted the above rejoinder by stating that he filed the instant complaint before the Hon'ble F.T.O. prior to filing an appeal before the CIT(A). As such he still maintains that this action on the part of respondent No.4 is "maladministration" because ineptitude and bias are visible. He further submitted that CIT(A) has also observed and confirmed his contention. It would be worthwhile to reproduce below the findings of the CIT(A) in this case as under:--

"The assessment record was perused and appellant's contentions as well as written arguments were given due consideration. The assessing officer has stated in the opening para. of the assessment order that as the assessee filed statement under section 143-B of the Repealed Income Tax Ordinance, 1979 for the immediate preceding year i.e. 2001-2002, therefore, the case has been taken up for normal law assessment. A notice under section 61 dated 30-1-2004 was issued by the MTU and in response thereto the A.R. of the appellants vide letter, dated 2-12-2004 submitted that jurisdiction over the case vests with Taxation Officer, Cirlce-11, Zone-C, Lahore where this case has been regularly assessed. On receipt of assessment record Taxation Officer, Cirlce-11, Zone-C, Lahore issued a specific notice under section 61 of the Repealed Ordinance on 21-6-2005. It is evident from the record that income tax proceedings were intimated in MTU after 30-6-2003 when by the operation of law the assessment has become final being deemed under section 50(4) of the repealed Ordinance. The department has not been vigilant to initiate any proceedings for taking of the case under normal law within the stipulated statutory period. The assessment framed is not only void ab initio being illegal and unjustified but also not sustainable in the eyes of law on the available facts and material on record. The basis for taking the case for normal assessment that the appellant was an existing assessee in the name and style of Messrs New Dalwal Goods Forwarding Agency, Gharibwal, upto the assessment year 2001-2002 for which statement under section 143-B of the Repealed Ordinance was filed while for the assessment years 1999-2000 return was filed declaring income at Rs.100,000. The same person was earlier carrying on business of dealing in cement under different name and style. Now nature of business had been changed and name and style of Ch. Muhammad Ashraf, Prop. Messrs Jotana Enterprises was adopted. The same person was owner of Messrs New Dalwal Goods Forwarding Agency and Messrs Jotana Enterprises. The appellant was thus entitled to claim the assessment to be finalized under SAS as the same has been filed within stipulated period and fulfilled all the statutory conditionalities. The assessment framed under section 62 of the Repealed Ordinance is illegal and unjustified which being void ab initio is vacated. The appeal succeeds to the extent and in the manner as indicated above."

The judgment of CIT(A) as reproduced above leaves no doubt that the assessment has not been made fairly and carefully by the respondent No.4. Needless to say that it is indeed a case of "maladministration" where ineptitude, inefficiency and bias of the Taxation Officer is so obvious that it cannot be easily condoned. Assessment is deemed to have been made on 30-6-2003. The subsequent proceedings by the Taxation Officer were not at all warranted. Taxation Officer in haste had made mistake after mistake and fell into error by making a "Duplicate Assessment" on 30-6-2005 almost two years after the assessment (2002-2003) was deemed to have been concluded.

7. Taxation Officer could resort to any other legal measure (available to him) at that time but the above action taken by him was indeed ab initio illegal and cannot be sustained.

8. In the light of verbal apology of the concerned Taxation Officer (Mr. S.H. Qamar Muftee), which he tendered during the course of proceedings for his lapse", a lenient view is being taken. Therefore, it is recommended that the concerned officer (Mr. S. H. Qamar Muftee) should be warned to be careful in future.

9. Since the grievance of the complainant already stands redressed vide CIT(A) order dated 13-9-2005, therefore, the case is closed and file is consigned to record.

C.M.A./6/FTOOrder accordingly.