SHAMI FOOD INDUSTRIES (PVT.) LTD., LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 560 (2004)

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

----Ss.5(5), 59(1), 61 & 62---Income Tax Ordinance (XLIX of 2001), S.209 (7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.2(1) S.Asstt/2002(1) dated 27-5-2003---Jurisdiction of income tax authorities---Self assessment---Returns were filed at Lahore under Self Assessment Scheme---On receipts of notices under S.61 of the Income Tax Ordinance, 1979, assessee requested for transfer of case to Multan taking shelter under the Central Board of Revenue notification dated 27-5-2003 whereby jurisdiction in case of certain categories of Private Limited Companies was to be assigned considering their manufacturing process, and location of factory and also insisted that returns should be accepted under Self Assessment Scheme---Objection of jurisdiction was rejected by the Income Tax Officer on the ground that the return were filed in her circle and provisions of S.5(5) of the Income Tax Ordinance, 1979 stood in the way of challenging the jurisdiction which had been retained as S.209(7) of the Income Tax Ordinance, 2001 and assessment was completed---Validity---Assessing Officer did not unduly retain the case nor did she arbitrarily reject the request of the complainant/assessee but waited for the higher authorities to carry out the directions to them, as per circular---When directed by the Commissioner of Income Tax, she promptly and faithfully complied with the same---Complainant/assessee by passing Zonal Commissioner of Income Tax for delay in identifying the cases as per direction in paragraph 3 of C.B.R. Circular No.2(1) S.Asstt/2002(1) dated 27-5-2003 and the Regional Commissioner of Income Tax's failure to monitor the case for transfer had caused the Assessing Officer for "maladministration" by way of violation of Central Board of Revenue's circular and for completion of assessment under S.62 of the Income Tax Ordinance, 1979---Complaint was not well founded and the stand was hit by the provisions of S.5(5) of the Income Tax Ordinance, 1979 and S.209(7) of the Income Tax Ordinance, 2001 which specifically debared objection to the jurisdiction after filing return in a circle---Complaint was held to be devoid of merit and the same was closed, at the same time Federal Tax Ombudsman recommended that the Central Board of Revenue issue instructions for Regional Commissioners of Income Tax and Commissioners of income Tax not to neglect or side' line the specific duties assigned to them in Central Board of Revenue circular/directions; that the Central Board of. Revenue may identify as to which of the Regional Commissioners income Tax or Commissioners of Income Tax failed to carry out the task assigned to them which retarded the full enforcement of Central Board of Revenue circular of 27-5-2003 by the prescribed date (i.e. 15-7-2003) and the Central Board of Revenue to devise a mechanism to monitor compliance of instructions and tasks assigned by it to the field functionaries.

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

.---S.5(5)---Income Tax Ordinance (XLIX of 2001), S.209(7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. Circular No.2(1)S. Asstt/2002 (1) dated 27-5-2003---Jurisdiction of income tax authorities---Careful reading of Central Board of Revenue C.B.R. Circular No.2 (1) S.Asstt/2002 (1) dated 27-5-2003 disclosed that for harmonization of jurisdiction in one Circle certain criteria were prescribed which were location of the factory in the case of manufacturers/processing, and principal place of business in the case of those engaged in business other than manufacturing/ processing---On this criterion as per paragraph 3 of the Circular, the Zonal Commissioners of Income Tax were "advised to identify such companies whose location of assessment would be affected"---To ensure a smooth transfer of cases, the Regional Commissioners of Income Tax were advised to "closely monitor the whole exercise and ensure that all such cases were transferred by 15-7-2003" which clearly implied that Assessing Officers at their own initiative were neither to suspend work nor to transfer cases, unless the Commissioners of Income 'Tax identified cases for transfer to a specific Circle looking to the nature of business and location of the factory.

A. A. Zuberi, Adviser (Dealing Officer).

M. Iqbal Hashmi for the Complainant..

Ms. Amina Faiz Bhatti, (D-CIT) and M. Abid (D-CIT) for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---This complaint relates to the assessment year 2001-2002 and alleges "maladministration" by way of (i) violation of jurisdiction order issued by the C.B.R. and (ii) completion of assessment under normal law whereas Return should have been accepted under S.A.S.

2. Briefly the facts are that the Complainant-Company is a manufacturer and vendor of Breads with factory at Multan. Returns, since the very beginning were filed at Lahore indicating the address as care of the Legal Advisor. For the assessment year 2001-2002 though the Return was filed under S.A.S. notices under Section 61 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) were issued on 1-9-2003, 17-10-2003 and 10-12-2003. On receipt of the third notice the Complainant vide letter dated 30-12-2003 requested for transfer of case to Multan taking shelter under the C.B.R. Notification dated 27-5-2003 whereby jurisdiction in the case of certain categories of Private Ltd. Companies was to be assigned considering their(a) manufacturing process, and (b) location of factory. It was suggested that since the Complainant had their factory in Multan, the jurisdiction fell with Circle-34, Multan. Ignoring this request, several other notices were issued under sections 61 and 62 of the repealed Ordinance on 26-2-2004 and 10-3-2004 which were complied (firstly) by insisting that Return should be accepted under S.A.S. and (secondly) that the jurisdiction did not vest with the Taxation Officer at Lahore. The assessing officer, however, rejected these objections for the reasons recorded in the assessment and determined the Income at Rs.3,157,780 against the declared Rs.380,160. This is the cause of complaint.

3. Respondents have forwarded para-wise comments by R-CIT, Central Region, Multan denying "maladministration" by pleading that the Return did not qualify for acceptance under S.A.S. as the comparison was to be made with the assessment framed on 1-6-2000 for the assessment year 1998-99 and not with the assessment for 1999-2000 which was completed on 22-2-2000. The R-CIT has further submitted that the jurisdiction was validly ' exercised by the D-CIT at Lahore because the Return was filed in her Circle hence the provisions of subsection (5) of Section 5 of the, repealed Ordinance stood in the way of challenging the jurisdiction.

4. The learned Counsel for the Complainant explained that subsequent to the filing of complaint an appeal against the assessment has been filed with the CIT(A) at Lahore wherein his aspect of acceptance of Return under S.A.S. has been agitated. He, therefore, expressed the wish not to press the issue and confined himself to the aspect of assumption of jurisdiction and refusal to transfer the record to the jurisdiction of Circle-34, Multan to which it rightly belonged in terms of C.B.R. Circular No.2(1)S.Asstt/2002(1) dated 27-5-2003. According to the learned Counsel, since the notification was issued on 27-5-2003, the assessing officer ceased to have jurisdiction and she should have immediately transferred the record which she failed to do despite repeated requests by the Complainant, as admitted by her in the assessment order. The Counsel further pleaded that the reasoning by the D-CIT that the Circular was not relevant to the proceedings for the year 2001-2002 was not valid because on transfer of jurisdiction all pending proceedings were to be taken up by the Circle to which fresh jurisdiction was assigned. The disregard of C.B.R. instructions and paying no heed to the repeated requests for transfer of the case, was a conduct arbitrary, unreasonable and unjust falling in the definition of "maladministration" as per Clause (3)(1)(b) of Section 2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance).

5. Ms. Amna Faiz Bhatti (D-CIT) who had completed the assessment submitted that when she took up the proceedings she had no direction from her Commissioner or any superior authority to transfer the case record to any specific Circle. Therefore, she continue to enjoy the jurisdiction granted to her for this case whereas the Complainant was prohibited by law, as per subsection (5) of Section 5 of the repealed Ordinance, to challenge the jurisdiction. Consequently, she proceeded with the assessment particularly because it was getting time-barred on 30-6-2004. The DR alleged that the objection to the jurisdiction was an after-thought and was taken when the Complainant was faced with notices under Section 61 wherein they were required to submit specific documents. Therefore, finding themselves in a tight corner they attempted to switch to a different Circle taking plea about jurisdiction for the first time on 30-12-2003 whereas the proceedings had commenced on 1-9-2003. The DR denied "maladministration" and submitted that she carried out her duties faithfully in respect of the jurisdiction and the cases assigned to her.

6. The arguments from the two sides reveal considerable force in the arguments by the DR that once having filed Return in her Circle, the Complainant was debarred from challenging the jurisdiction as per the provisions of subsection (5) of Section 5 of the repealed Ordinance which has been retained as subsection (7) of Section 209 of Income Tax Ordinance, 2001 (hereinafter called the Ordinance). Again it is admitted that in the framing of assessment under Section 62, the Complainant had participated by way of partial compliance and has now contested it in appeal before a competent authority. Moreover, a careful reading of the C.B.R. Circular dated 27-5-2003 discloses that for harmonization of jurisdiction in one Circle certain criteria were prescribed. These were (a) location of the factory in the case of manufacturers/processors, and (b) principal place of business in the case of those engaged in business other than manufacturing/processing. On this criterion, as per paragraph 3 of the Circular, the Zonal CITs were "advised to identify such companies whose location of assessment would be affected". Further, to ensure a smooth transfer of cases, the R-CITs were advised to "closely monitor the whole exercise and ensure that all such cases were transferred by 15-7-2003". This clearly implied that the assessing officers at their own initiative were neither to suspend work nor to transfer cases, unless the CITs identified cases for transfer to a specific Circle looking to the nature of business and location of the factory. The record shows that on the request by the Complainant, the CIT asked the D-CIT for the first time on 31-3-2004, to "send a detailed report in this regard by 3-4-2004 positively". This was duly done whereupon she was directed "to transfer the case to the concerned Zone/Region on the point of jurisdiction". This the assessing officer complied and routed the case through proper channel which the R-CIT, Eastern Region, Lahore forwarded to his counterpart, at Multan on 5-5-2004 who in turn assigned it to Commissioner, Multan Zone on 8-5-2004. These three documents (obtained for record) establish that the assessing officer did not unduly retain the case nor did she arbitrarily reject the request of the Complainant but waited for the higher authorities to carry out the directions to them; as per the Circular. When directed by the CIT, she promptly and faithfully complied. The Complainant bypassing (i) Zonal CIT for delay (or indifference) in identifying the cases as per direction in paragraph 3 of Circular dated 27-5-2003, and (ii) the R-CIT's failure to monitor the cases for transfer by 15-7-2003, has accused the assessing officer for "maladministration" by way of violation of CBR Circular and for completion of assessment under Section 62 of the repealed Ordinance. On this "visualization the complaint does not appear to be well founded and the stand is hit by the provisions of section 5(5) of the repealed Ordinance and Section 209(7) of the Ordinance which specifically debar objection to the jurisdiction after filing Return in a Circle. On this view the complaint is held to be devoid of merit. It is, therefore, filed and the case is closed. At the same time it is recommended that---

(i) The C.B.R. issue instructions for R-CITs and CITs not to neglect or side line the specific duties assigned to them in C.B.R. Circulars/directions.

(ii) The C.B.R. may identify as to which of the R-CITs or CITs failed to carry out the task assigned them which retarded the full enforcement of C.B.R. Circular of 27-5-2003 by the prescribed date (i.e. 15-7-2003).

(iii) The C.B.R. to devise a mechanism to monitor compliance of instructions and tasks assigned by it to the field functionaries.

7. Compliance report be submitted within 30 days of receipt of this Order.

C.M.A./366/FTOOrder accordingly.