PLAYWAY NURSERY & PRIMARY SCHOOL, KARACHI VS SECRETARY, REVENUE DIVISION, CENTRAL BOARD of REVENUE, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 797 (2003)

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

----S. 61---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 11---Ex parte assessment by making additions in income of assessee---Department alleged to have completed such assessment due to non-compliance of statutory notice and non-filing of balance sheet by assessee---Validity---Assessee along with complaint had filed certified copy of balance sheet obtained by him from department---Copies of balance sheet and statement of accounts were available on record---Such plea of department was not established from record---Additions had been made without providing opportunity to assessee to present her case---Maladministration stood established---Wrong statement with regard to non-filing of balance sheet and effecting of proper service of notice had proved mala fide---Federal Tax Ombudsman recommended to Commissioner of Income Tax to set aside impugned assessment under S.122-A of Income Tax Ordinance, 2001 with directions to Taxation Officer to complete same afresh after providing reasonable opportunity to assessee to present her case.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 2(3) & 9---Jurisdiction of Federal Tax Ombudsman---Scope---Where impugned action was arbitrary, violative of principles of natural justice or in excess of authority or result of arbitrary exercise of power without observing pre-condition, then Ombudsman would have jurisdiction---Ombudsman would have jurisdiction to investigate allegation of complaint, where maladministration was proved.

S. Asghar Abbas, Consultant (Dealing Officer).

Aminuddin Ansari for the Complainant.

Ms. Naheed Azhar, I.A.C., along with Saadullah ITO for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant an individual derives income from running a school and is an existing assessee of Circle 04-, Companies-V, Karachi on National Tax Number 33-04-1254031.

2. The complainant is aggrieved by the arbitrary additions made by the assessing officer in determining the income of the school for the assessment year 2002-2003.

3. The complainant filed return of income for the assessment year 2002-2003 declaring income of Rs.1,54,322 the return was accompanied by copies of balance sheet, profit and loss account and receipt and expenses statement. In response to notice under section 61 of the repealed Income Tax Ordinance 1979 the Authorized Representative of the complainant appeared before the taxation officer, and furnished certain other details including details of salaries of teaching and non-teaching staff etc. It is alleged that the taxation officer in the presence of all the requisite details regarding number of students and fee received during the year and salaries paid to staff etc. arbitrary made addition in the tuition fees at Rs.66,300 and curtailed salary expenses by Rs.41,880. The assessment was made on net income of Rs.2,76,998 against declared income of Rs.1,54,322. It is further alleged that the aforesaid additions were made without issuing notice to the complainant. The complainant has therefore, prayed for issuance of directions to the taxation officer to correct the irregularities committed by him and accept the declared income.

4. The respondents have filed para-wise comments raising therein the preliminary objection of jurisdiction in terms of section 9(2) of the Federal Tax, Ombudsman Ordinance 2000. It is stated that the complainant's claim of filing the balance sheet along with the return was totally wrong. Only head-wise expenses were shown in the profit and loss account without proper evidence and support. It is pleaded that the additions were made by the taxation officer for valid reasons as discussed in the assessment order. The additions were made after issuing the requisition letter to the complainant for filing supporting evidence/documents and since she failed to make compliance, suitable additions were made. It is pleaded that the demand created at Rs.14,193 was quite nominal and established the fact that the additions made were very lenient and reasonable.

5. The Authorized Representative of the complainant Mr. Aminullah Ansari, Advocate rebutted the observations of the respondents that the balance sheet was not filed along with the return and stated that he obtained an attested copy of the balance sheet from the department which has been filed along with the present complaint. The examination of record produced by the Departmental Representative has confirmed his contention. The copies of balance sheet and other statements of account as referred above were filed along with the return and are available on record.

6. The departmental representative, however argued that the additions out of expenses "claimed were made while completing the assessment for the year 2002-2003 as the complainant failed to comply with the requisition letter dated 6-5-2003 whereby certain details were called for before completing the assessment. The photocopy of the letter dated 6-5-2003 furnished by the D.R. does not show that it was properly served on the complainant or her A.R.

7. The examination of record produced by the Departmental Representative shows that notice under section 61 was issued for compliance on 14-5-2003. Mr. Naimatullah, the A.R. of the complainant attended on his request case was adjourned to 26-5-2003. The following entry was made on the Order Sheet on 26-5-2003:-

"Mr. Naimatullah A.R. of the assessee attended and furnished relevant details. Case discussed,"

The respondent's objection that the additions were made while completing the impugned assessment due to non compliance of the statutory notices remains unsubstantiated from the record of the case.

8. It is also established from the record that the additions were made without providing opportunity to the complainant to present the case. Maladministration is therefore established.

9. Therespondent's objection regarding jurisdiction is misconceived and misplaced. It has been held repeatedly in a number of complaints that where maladministration is established the Federal Tax Ombudsman has jurisdiction to investigate the allegation of complaint. The issue has been elaborately discussed in complaint No.1438 of 2002. It may be pointed out that where impugned action is arbitrary, violates principles of natural justice, arbitrary, exercise of power without observing the precondition and in excess of authority, the Federal Tax Ombudsman has jurisdiction. The fact that wrong statement was made that balance sheet was not filed and service of notice was effected properly proves mala fide.

10. In view of the above it is recommended as under:-

(i) The Commissioner of Income Tax to set aside the impugned assessment under section 122A of the Income Tax Ordinance 2001, with the directions to the taxation officer to complete the same afresh after providing reasonable opportunity to the complainant to present her case.

(ii) The compliance be made within 30 days of the receipt of this order and reported within a week thereafter.

S.A.K./192/F. T.O.Order accordingly.