SHAHZAD KAJ OVERLOCK VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 908 (2003)

Income Tax Ordinance (XXXI of 1979)---

----Ss.154, 56 & 58---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---General Clauses Act (X of 1897), S.27---Service of notice---Assessments of three years were finalized on the basis of notice under S.56 of the Income Tax Ordinance, 1979 served on the complainant/assessee's brother and also mentioning only one assessment year---Department admitted that "due to clerical mistake" only one assessment year was mentioned in the notice although notice under S.58 of the Income Tax Ordinance, 1979 intended to mention all the three assessment years---Validity---Notice was casually prepared mentioning only one year whereas the consolidated ex parte assessment was framed for three years and the mistake was attributed to a clerical lapse although preparation and issuance of statutory notices which were to be made foundation for assessment had to be strictly in accordance with law---Service of notice was not made in the manner prescribed by law i.e. S.154 of the Income Tax Ordinance, 1979 read with S.27 of the General Clauses Act, 1897---Assessment had been framed on a cyclostyled printed form adopting the same figures for each year without caring to find out the extent and volume of business with reference to the number of machines installed, the number of employees, the location of shop, the rates charged etc.---Neglect and indifference with which the notices were issued and assessment framed reflected an arbitrary and unreasonable conduct coupled with neglect, inattention, inefficiency and inaptitude which fell in the definition of maladministration---Federal Tax Ombudsman recommended that the consolidated ex parte assessment framed on 5-6-2003 for the assessment years 2000-2001 to 2002-2003 be cancelled by resorting to S.122-A of the Income Tax Ordinance, 2001; concerned, Income Tax Officer, who framed the assessment be subjected to `counselling' and his performance monitored; all those involved in the preparation of parawise comments whereby the assessment had been justified should be advised to fresh up their knowledge of law as respects preparation/service of notices and framing of assessments; it should be reported as to what corrective/ preventive steps were taken when the mistake allegedly committed by the Peshi Clerk was discovered and since returns were not voluntarily filed appropriate notices, adhering to law and rules, be issued to frame assessment after due enquiry and giving proper opportunity of hearing.

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

M. Ijaz Bhatti for the Complainant.

Dr. Muhammad Idrees (D.C.I.T.) for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---This complaint brings to notice arbitrary conduct in the framing of consolidated ex parte assessment for the years 2000-2001, 2001-2002 and 2002-2003 passed on 5-6-2003.

2. Briefly the facts are that the Complainant-.Individual provides services of over-locking buttonholes. No books of accounts are said to have been maintained. Return was not voluntarily filed and the case had come to the notice of the Department through a Survey conducted in collaboration with, the Army in the year 2000. A notice said to have been issued under section 56 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) was responded. Statutory notices under sections 61 and 62 were then issued and finally ex parte consolidated assessment was framed on 5-6-2003 as under:-

With this the complainant is aggrieved.

3. The respondent has forwarded parawise comments by R-C.I.T., Eastern Region, Lahore which in addition to questioning the competence of the complaint for admission in view of the bar under section 9(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the F.T.O. Ordinance), deny "maladministration". It is explained by the R-C.I.T. that the Survey Profile reported Receipts at Rs.500,000. As respects the service of the notices, the R-C.I.T. conveys: notices "were served on the complainant's brother and it was a proper service." The R-C.I.T. has, however, admitted that in the section 56 notice of 27-3-2003 he mentioned only one assessment year (i.e. 2000-2001) "due to clerical mistake" although a notice under section 58, which followed on 27-3-2003, mentioned all the three assessment years.

4. Mr. M. Ijaz Bhatti (Advocate) appearing for the complainant submitted that the survey form has not been signed by the complainant and bears the signature of one Mr. Muhammad Arif and, therefore, reliance was wrongly placed on this document. An argument was developed to canvass that notice under section 56 was neither served on the complainant nor on his A.R. and, therefore, the assessment was ab initio void moreso when there was no notice summoning returns for the years 2001-2002 and 2002-2003 as already admitted by the R-C.I.T. by attributing it a mistake by the Peshi Clerk. Emphasis was laid down by the A.R., on the contradiction that the office copy showed service of notice on Mr. Muhammad Nadeem who was mentioned (in bracket) as `brother' of complainant but another copy of notice shows Mr. Nadeem a s/o Mr. Abdul Khaliq, whereas the name of complainant's father, as obtaining in the National Identity Card, is Mr. Shahab-ud-Din. The entire service processes of notice, was thus fraudulent. The A.R. also drew particular attention to the fact that the assessment order is a printed pro forma on which blanks relating to the complainant have been filled in, thus exposing a summary dispensation without conscious application of mind.

5. Dr. Muhammad Idrees (D-C.I.T.) appearing for the revenue repeated the arguments as conveyed by the R-C.I.T. in his para-wise comments and submitted that the treatment was lenient inasmuch as in each of the three years, receipts were taken as Rs.500,000 although the survey team had reported this quantum in the year 2000 relating to the assessment year 2000-2001. Keeping in mind the inflationary trend and gradual growth of business, higher estimate could be made, yet the estimate was kept uniform by tampering it with moderation. The D.R. pleaded that when a Notice Server visits a business premises, documents are handed over to the persons available there and whatever relationship/ status they claim 'is truthfully noted on the office copy because the official has no means to verify antecedents nor any authority to demand Identity Card to determine the identity of the person receiving the notice. However, the fact that persons who received the notices were available on the business premises indicated that they were associated with the business either as employees or relatives/partners/Members and, therefore, the notice should have been responded.

6. After hearing arguments from the both the sides the conclusion is inescapable that:-

(i) The notice was casually prepared mentioning only one year whereas the consolidated ex parte assessment was framed for three years and the mistake is now attributed to a clerical lapse although preparation and issuance of statutory notices which are to be made foundation for assessment has to be strictly in accordance with law.

(ii) The service of notice was not made in the manner prescribed by law i.e. section 154 of the repealed Ordinance read with section 27 of the General Clauses Act.

(iii) Assessment has been framed on a cyclostyle. printed form adopting the same figures for each year without caring to find out the extent and volume of business with reference to the number of machines installed, the number of employees, the location of shop, the rates charged etc.

The neglect and indifference with which the notices were issued and assessment framed reflect an arbitrary, unreasonable conduct coupled with neglect, inattention, inefficiency and inaptitude which fall in the definition of "maladministration" as per clause (3) of section 2 of the F.T.O. Ordinance. It is, therefore, recommended that:---

(a) The consolidated ex parte assessment framed on 5-6-2003 for the assessment years 2000-2001 to 2002-2003 be cancelled by resort to section 122A of the Income Tax Ordinance, 2001.

(b) Mr. Muhammad Rafique, Income Tax Officer who framed the assessment be subjected to `counselling' and his performance monitored.

(c) All those involved in the preparation of parawise comments whereby the assessment has been justified should be advised to fresh up their knowledge of law as respects preparation/service of notices and framing of assessments.

(d) It should be reported as to what corrective/preventive steps were taken when the mistake allegedly committed by the Peshi Clerk was discovered.

(e) Since returns were not voluntarily filed appropriate notices, adhering to law and rules, be issued to frame assessments after due enquiry and proper opportunity of hearing.

7. Compliance be reported within 30 days of the receipt of this order.

C.M.A./92/F.T.O.Order accordingly.