MUHAMMAD SHOAIB VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 770 (2003)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13 & 63---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 11---Best judgment assessment on basis of Inspector's report without confronting assessee with its facts and details---Validity---While framing such assessment, Assessing Officer had not made proper inquiries, but had finalized same in a slipshod, haphazard and careless manner without following law in its elementary form---Assessment order suffered from gross illegality and was tainted with procedural flaws for being perverse, biased, arbitrary and unjust falling within ambit of "maladministration"---Revenue had already sought explanation from Assessing Officer and directed Commissioner of Income tax concerned to examine case afresh under S.122-A of Income Tax Ordinance, 2001---Federal Tax Ombudsman recommended to Revenue not to give assessment powers to Assessment Officer till completion of inquiry against him and determination of his suitability for assessment work; and that evaluation report of performance of Inspector concerned be sent to office of Ombudsman within specified time.

S.A. Nasser (Dealing Officer).

Udha Ram Rajput for the Complainant.

Sultan Wazir, I.A.C. Larkana Range, Larkana for Respondent.

DECISION/FINDING

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant is aggrieved by ex parte assessment under section 63 of the Income Tax Ordinance, 1979 (repealed). It is alleged that the demand notice served on the assessee is not in the prescribed form. The basis of the assessment order is Inspector's report which is fabricated. It is further alleged that addition of Rs.4 million under section 13 of the Income Tax Ordinance, 1979 is without any lawful authority.

2. The brief facts of the case are that Mr. Muhammad Shoaib is the proprietor of M/s. Shoaib Petroleum Service and is being assessed in Jacobabad Circle, Jacobabad. The first assessment pertains to the assessment year 2002-2003. The assessment was completed ex parte under section 63 of the Income Tax Ordinance, 1979 on the, basis of the report by the Inspector of the Circle, and the complainant was not confronted with the facts and details of the Inspector's report. The complainant had filed statement under section 143B of the Income Tax Ordinance, 1979 according to which taxes were paid at Rs.119,326 as full and final discharge of his tax liability. This statement was filed on 30-9-2002 which was duly received in the office of the C.I.T., Sukkur Zone and bears the stamp and signature of the office. Notices under section 58 was issued on 7-9-2002 which was in the name of Dr. Muhammad Azam Khoso father of the complainant and not the complainant himself. Dr. Muhammad Azam Khoso denied that there was any petrol pump in his name and he addressed a letter in this behalf to the Taxation Officer, Circle Jacobabad which is dated 30-10-2002. The records revealed that the letter was duly received in the Circle. Notice under section 56 was not issued and served to the assessee. The assessment was based purely on Inspector's report.

3. The respondent in his parawise comments dated 6-11-2003 has admitted that the "assessment suffers from many factual and procedural defects". This calls for appropriate action against the Assessing Officer. After obtaining his explanation for which directions are being issued to the Commissioner concerned". The respondent has further stated that the concerned Commissioner of Income Tax is also being directed to examine the case in the context and applicability of section 122A of the Income Tax Ordinance, 2001. In view of the admitted position the assessment order suffers from gross illegality and is tainted with procedural flaws. The Assessing Officer in complete disregard of legal and procedural requirements finalized the assessment under section 63 of the Income Tax Ordinance, 1979. No proper inquiries/investigations appear to be made while framing the assessment. The report of the Inspector was only relied upon. The details revealed in the report were not shown to the assessee and he was never provided an opportunity to explain his position. The assessment order is beset with all illegalities and factual infirmities. The Assessing Officer has finalized the assessment in a very slipshod, haphazard and carelessness manner. The C.I.T., Sukkur Zone, Sukkur under his No. Jud-C.I.T./(SZ)/1437/2003-04 dated 27-10-2003 has correctly observed that the Assessing Officer has not applied his mind and has relied only on the inquiry report of the Circle Inspector while estimating cost of the two petrol pumps. He has further held that correct law has not been applied and the assessment order under review is an example of his inefficiency and lack of knowledge. He has sought explanation from the Assessing Officer for the reasons slated above.

4. There can be no better example of misuse of authority and power. The Assessing Officer has not followed law in its eliminatory form the order passed is perverse, biased, arbitrary and unjust. This falls within the definition of the maladministration under section 2(3) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.

5. It is, however, satisfying to note that the R.C.I.T., Southern Region, Karachi and C.I.T., Sukkur Zone are fully seized of the situation and have taken necessary steps to rectify the situation. As a measure of further precaution the concerned Special Officer should not be given assessment powers. Assessment framed by him in other cases be duly examined and looked into and hecessary remedial measures be taken to redress genuine grievances of the assessees of Jacobabad Circle, Jacobabad, if they suffer from similar legal infirmities and procedural flaws.

6. It is recommended that:

(i) The concerned Special Officer should not be given assessment powers unless proper inquiries against him are completed and his suitability for assessment work is determined.

(ii) Necessary compliance be reported to this office within 45 days of the receipt of this order

(iii) The Inspector concerned be carefully watched and his performance evaluated. An Evaluation Report of his performance be also sent to this office within 45 days of the receipt of this order. In the meantime he should not be entrusted with enquiry work.

S.A.K./196/F.T.O.Order accordingly.