MAMA AND SONS VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1962 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.63 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Income was assessed by an ex parte order passed arbitrarily on the basis of notice issued under S.62 of the Income Tax Ordinance, 1979 without considering the history of the case---Validity---Process adopted by the Assessing Officer was improper, arbitrary, baseless and without any foundation---Federal Tax Ombudsman had jurisdiction to look into the maladministration committed during the process of arriving at an assessment---Regional Commissioner of Income Tax had taken notice of this fact and on his direction the Commissioner had passed the order against the Assessing Officer and the Complainant/assessee was satisfied with the relief granted to it---Regional Commissioner of Income Tax had dealt with the matter by. examining the case himself and not only provided justice to the party immediately and without any loss of time but also took disciplinary action against the tax officials---Such actions, if followed by other officials as well, will create a better and healthy image of the department and will help in building confidence in the tax officials---Regional Commissioner of Income Tax had not only taken note of the arbitrary and baseless assessment but had also given the Assessing Officer warning personally which was bound to create positive effect and also bring discipline amongst the officers leading to their efficiency---Case was closed by the Federal Tax Ombudsman with such remarks.

Ameeruddin Shaikh for the Complainant.

Taj Muhammad Jonejo, D.C.I.T. for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant deals in fertilizer at Shandadpur. For the assessment year 2001-2002 he had filed return at the total income of Rs.50,000. It has been alleged that there was no fertilizer business during this year and the income accrued from phutty and grain only. The Commissioner of Income Tax assessed income at total amount of Rs.5,50,000 under section 63 of the Income Tax Ordinance 1979 by an ex parte order and created a demand of Rs.88,550. It has been alleged that the ex parte order was passed without affording any opportunity of being heard. Further that the history of the case has not been taken into consideration and the order has been passed arbitrarily and without any basis.

2. In response to the notice issued, reply was submitted taking objection to the jurisdiction. It has been pleaded that the complainant is on the tax roll since assessment year 1996-97. It has never disclosed proper trading, profit and loss account and ex parte assessments were made during the years 1996-97 and 1997-98 at Rs.50,000 and 53,000 respectively. In the year 2000-2001 income at Rs.1,00,000 was assessed under section 62. It has been further stated that the complainant intentionally withholds necessary information to conceal the extent of business. Further it has been pleaded that the order framed is not a properly drafted and adequately substantiated order. The Circle office does not contain any information regarding closure of fertilizer business during the year 2001-2002. In the return itself it has been declared as fertilizer and grain commission agent. It has been further stated that the assessment framed at income of Rs.5,50,000 on the basis of notice issued under section 62 and properly served on the assessee, which remained unresponded. It has been denied the no opportunity was provided to the assessee. The learned RCIT stated as follows:-

"The assessment framed has been found to be not properly substantiated and the concerned Commissioner is being directed to take action under section 122A of the Income Tax Ordinance, 2001. The Assessing Officer who had framed this assessment was called by me and personally reprimanded, he expressed his regrets and admitted that due to inexperience, he could not pass a well worded and adequately supported assessment order and altogether relied upon the notice under section 62 of the Income Tax ordinance, 1979 issued by his predecessor which had been properly served upon the assessee/complainant who had not bothered to respond. The officer has earnestly committed to be careful in future.

The Commissioner concerned is being directed to ensure that proper reassessment is made in this case under the law and strictly in accordance with facts of the case after providing the complainant assessee adequate opportunity of being heard."

3. The representative of the parties have appeared and addressed arguments. Mr. Jonejo stated that on the directions of RCIT the Commissioner has passed order under section 122A of the Income Tax Ordinance 2001 dated 15-1-2004, which reads as follows:--

"By this order under section 122A of Income Tax Ordinance, 2001, cognizance is hereby taken, in respect of assessment order passed under section 63, for the assessment year, 2001-2002 by the Assessing Officer Tando Adam Circle.

Examination of record of proceedings in the subject case reveals that assessment order was passed ex parte on account of non-compliance of statutory notices issued under section 61 of repealed Income Tax Ordinance 1979, and after confronting the terms of proposed assessment to the assessee vide notice issued under section 62 of the said Ordinance.

It has been noted that quantum of income assessed by the Assessing Officer, was in gross deviation of the history of assessment in the case. No specific basis was evolved by Assessing Officer to pitch the income of the assessee, disproportionately to such an extent. No formal enquiries were conducted either. Even no information from the fertilizer companies was obtained by the Circle Officer, which could have provided him some basis for computation of income of the assessee in a certain manner, instead, the officer chose to go for a guesstimate, not based on facts and unsubstantible under the law. I, therefore, deem it appropriate to set aside the assessment for the charge year, 2001-2002 and direct the Assessing Officer to compute the income in accordance with the provisions of law, after conducting fresh and proper enquiry, and by providing reasonable opportunity of being heard to the assessee.

Copy of the order be distributed to all concerned."

4. From the aforesaid stated action it means that the process adopted by the Assessing Officer was improper, arbitrary, baseless and without any foundation. This being the situation the Federal Tax Ombudsman had the jurisdiction to look into the maladministration committed during the process of arriving at an assessment. The learned Regional Commissioner of Income has taken notice of this fact and on his direction the Commissioner has passed the above order. The complainant is satisfied with the relief granted to it.

5. I must place on record high appreciation to the manner in which the learned Regional Commissioner of Income Tax Karachi has dealt with this matter by examining the case himself and not only providing justice to the party immediately and without any loss of time but also taking disciplinary action against the tax official. Such actions if followed by other officials as well will create a better and healthy image of the department and will also help in building confidence in the tax officials. These remarks be placed in the personal file of the learned R.C.I.T.

6. It is noteworthy that the Regional Commissioner of Income Tax has not only taken note of the arbitrary and baseless assessment but given the assessing officer warning personally which is bound to create positive effect and also bring discipline amongst the officers leading to their efficiency.

7. With these remarks the case is closed.

C.M.A./100/FTOOrder accordingly.