FAKHR-E-ALAM VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 668 (2004)

Wealth Tax Act (XV of 1963)---

----Ss.14(2), 16(2) &. 17---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Ex parte Assessment--Notices---Maladministration---Service of any statutory notices issued by the Assessing Officer was not proved---Entire process of issue and service of various notices was found bogus and fictitious exercise---Assessment order framed without service of statutory notices was arbitrary, capricious, baseless, against facts of the case and contrary to law---Maladministration was proved---Objection as to the jurisdiction of Federal Tax Ombudsman to entertain a complaint was based on misreading of section 9(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Order passed without service of show-cause notice was void, contrary to law and without jurisdiction---Federal Tax Ombudsman had jurisdiction to investigate such cases---Federal Tax Ombudsman recommended to revise the assessment order and to assess the complainant to the extent of his interest the property and other taxable assets.

Muhammad Anwar, Consultant, Dealing Officer.

Abdul Malik Khan for the Complainant.

Ashfaq Masood, Taxation Officer for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Brief facts of the case are that the complainant alongwith two other persons acquired a piece of land measuring 30 marlas from the Auqaf Department on a 30 years lease vide lease agreement, dated 15-4-1996 and paid a sum of Rs.2,880,000 to the said department wherein the complainant's share amounted to Rs.960,000.

2. The plaza known as Sona Tower was constructed on the land acquired from Auqaf during the period relevant to the assessment year 2000-2001 and wealth tax return for the said year was voluntary which was assessed , on 24-3-2003. Later on the complainant received a consolidated ex parte assessment order, dated 28-6-2003 for the preceding three assessment years (1997-98 to 1999-2000) raising wealth tax demand of Rs.24,200 for the assessment year 1997-98 whereas proceedings for the years, 1998-1999 and 1999-2000 were filed for the reason that assets of the complainant were covered by foreign remittances.

3. The assessment order is alleged to be arbitrary and contrary to law mainly on the following grounds:--

(i) The alleged notices under sections 14(2) and 16(2) of the Wealth Tax Act were neither served on the complainant nor any of his co-owner or any authorized person.

(ii) After the annulment of Wealth Tax Act through Finance Ordinance, 2000, the Taxation Officer had no jurisdiction to issue notice under section 4(2) in case of new taxpayers and in case he was authorized to obtain the return for any earlier year he could do so through notice under section 17 and not under section 14(2) and that too before 30th June, 2000.

(iii) The Taxation Officers who acquired jurisdiction over the complainant on 3-3-2003 should have issued fresh notices under section 14(2).

(iv) The value of premium (advance) paid to the Auqaf Department has been wrongly assessed in the years 1997-1998 and 1998-1999 as no payment was made during these years. It was during the assessment year 1999-2000 in which the complainant had 1/3rd share.

(v) The value of plot at Rs.3,000,000 (complainant's share 1,000,000) has wrongly been assessed in the hand of the complainant because the plot is owned by the Auqaf Department.

It is prayed that the wealth tax assessment order, dated 28-6-2003 be declared unlawful and be vacated.

4. In reply the respondent has stated that no maladministration had been committed and since the remedy of appeal was available to the complainant the case falls outside the jurisdiction of the Honourable F.T.O.

4.1 It is stated that notices under sections 17 and 16(2) of the Wealth Tax Act were served upon the complainant and for non-compliance of these notices the assessment was made ex parte on the basis of material available on record.

4.2 It is further stated that the complainant's allegation that on attaining jurisdiction over the case the succeeding Assessing Officer should have issued fresh notices was not tenable because as provided in section 11 of the Wealth Tax Act wherever an officer is succeeded by another the successor would continue proceedings from the stage at which these were left by the predecessor.

4.3 Regarding assessment of property in the hands of the complainant it is stated that the complainant had himself declared himself as owner of the property as per lease deed dated 15-4-1996. The complaint is prayed to be rejected.

5. The representatives of the both sides attended and reiterated their contentions which were considered and record produced was examined.

5.1 The complainant along with two other persons obtained a plot of land from Auqaf department on 30 years lease extendable for further such period(s) at the option of the Chairman of the Board vide lease agreement, dated 15-4-1996. According to the agreement the lessees were to construct a building and the entire expenditure on construction was to be borne by them and by venture of this investment they were not entitled to any compensation, adjustment in rent or any other right over the property.

5.2 The lessees were to pay monthly rent of Rs.30,000 commencing from the completion of building or on expiry of 3 years from the date of agreement which was earlier.

5.3 A consolidated notice under section 14(2) was issued for the assessment years 1997-1998 to 2000-2001 on 16-10-2002. This bears signatures of Gul Khan Chawkidar. The date of service is not indicated and the mode of service is also not known as it does not bear the signatures of the process server of the department. It was not served on the complainant.

5.4 Notice under section 16(2) issued on 19-3-2003 for compliance on 25-3-2003 and served by the process server on 20-3-2003. The name of the receiver of the notice could not be deciphered from the signatures.

The service of notices under sections 14(2) and 16(2) was altogether denied by the AR of the complainant.

6. In view of the facts as discussed above the complainant has been illegally assessed to wealth tax in respect of the property which is not owned by him. The land and the building (although constructed by lessees) belong to the Auqaf department for which the lessees are paying monthly rent of Rs.30,000 and are therefore enjoying rental income received over and above Rs.30,000 per month. The complainant can be legally assessed to wealth tax in respect of his share of premium paid to the Auqaf Department and the amount invested by him in the construction of the property along with other assets, if any.

6.1 The service of any statutory notices issued by the Assessing Officer is not proved either on the complainant or on any of his partners. The entire process of issue and service of various notices as mentioned above is wholly bogus and fictitious exercise which speaks of inefficiency on the part of the Assessing Officer. The assessment order framed without service of statutory notices is arbitrary, capricious, baseless, against the facts of the case and contrary to law. Maladministration on the part of the Assessing Officer is thus proved.

7. The contention of the complainant that the Assessing Officer could not initiate wealth tax assessment proceedings after 30-6-2000 is not tenable. According to the amendment made in section 3 of the Wealth Tax Act vide Finance. Ordinance, 2000 it was provided that wealth tax shall not be chargeable in respect of any assessment year commencing on or after first July, 2001 i.e. assessment year 2001-2002. The assessment of earlier years was to continue as usual. The Wealth Tax Act was repealed vide Finance Act, 2003 which also provided that this repeal shall not affect the liability of any person to pay wealth tax, penalty etc. in respect of assessment year ending on or before 30-6-2001 and all legal proceedings will continue including appointment and jurisdiction of the wealth tax authorities as if the said Act had not been repealed.

8. Regarding the respondent's objection to the jurisdiction of the F.T.O. to entertain the complaint, the same is based on misreading of the provisions of section 9(2) of the Ordinance No.XXXV of 2000. Where any order is passed without serving a show-cause notice on the assessee as required by law, it is void, contrary to law and without jurisdiction. It may be noted that in this case the process adopted by the Wealth Tax Officer to arrive at a decision was contrary to law which made the entire proceeding void and without jurisdiction. The Federal Tax Ombudsman has jurisdiction to investigate in such cases. The objection of the respondent is therefore overruled.

9. In view of the facts and circumstances of the case as discussed above it is recommended that:

(i) The Commissioner to revise the assessment orders for the assessment years 1997-98 to 1999-2000 under section 25 of the Wealth Tax Act so that the complainant is assessed to tax to respect of his interest in the said property along with other taxable assets, if any, owned by him.

(ii) Compliance be reported within 30 days.

M.I./291/FTOOrder accordingly.