Malik TANVEER ALI VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 920 (2003)

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

----Ss.154 & 65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Service of notice---Complainant/assessee denied service of notice under S.65 of the Income Tax Ordinance, 1979 especially pointing out that whereas on the Returns and on all other correspondence, the signatures of the complainant/assessee were in Urdu, the signatures on the notice were in English and in a `pacca' writing---Validity---Forging of signature on notice under S.65 of the Income Tax Ordinance, 1979 seemed to have been manoeuvred with bad and improper motive which frustrated the entire proceedings---Such fraudulent act robs the entire proceedings of legitimacy and validity---Entire action suffered from malice, bad faith and mala fides---As fraud in service of notice was established, the proceedings became nullity and the Federal Tax Ombudsman had jurisdiction to investigate and provide relief according to law---Federal Tax Ombudsman recommended that Commissioner by resort to section 122-A of the Income Tax Ordinance, 2001 cancel the consolidate Additional Assessment order in respect of the assessment years 1999-2000 and 2000-2001 and disciplinary action against Notice Server be initiated for forging signatures of a person different from the complainant though earlier notices were served by him on the complainant, revealing that he knew and recognized the complainant personally.

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

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional assessment---Definite informa tion---Observation in the Additional assessment order that the discrepancies were discovered when "assessment record was perused" was an unequivocal admission that on definite information was acquired after the completion of assessments and the information already existing on record was made a basis for initiation of action under S.65 of the Income Tax Ordinance, 1979.

1996 PTD 186 rel. C.No.849-K/2001 ref.

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

----S.154---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Service of notice---Forged service---Notice bore the signature in English as acknowledgement of receipts, whereas even signatures in Urdu, available on the Return and other documents, showed that the complainant/assessee was hardly literate and service was clearly forged.

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

----S.2(3)---Income Tax Ordinance (XXXI of 1979) S.65---Maladministration---Forged signature---Fraud---Act of forging signature on the notice under S.65 of the Income Tax Ordinance, 1979 by the functionaries of tax department amounted to fraud on the complainant and the statute.

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

Safdar Hussain Nagra for the Complainant.

Muzammil Hussain (D.C.I.T.) for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---This complaint alleges exercise of arbitrary authority falling in the realm of "maladministration" in the reopening of assessments for the years 1999-2000 and 2000-2001 resulting in a consolidated additional assessment order on 30-6-2003 framed under sections 65/62 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance).

2. Briefly the facts are that the complainant-Individual earns commission on Rice purchases/sales for others and also has his own dealing in rice. No books of accounts are said to have maintained. Return for the assessment year 1999-2000 was filed on 30-9-1999 declaring income at Rs.55,000 under Universal Self-Assessment Scheme which is said to have been accepted by operation of law under section 59(1) of the repealed Ordinance. Return for the year 2000-2001 was tiled on 30-9-2000 under S.A.S. declaring Income at Rs.80,000. A notice for short documents was complied on 12-2-2001 and assessment in supposed to have been accepted under section 59(1) of the repealed Ordinance by operation of law but no order has since been served. Subsequently, proceedings were initiated through a notice under sections 61/65 dated 3-2-2003 and another notice of similar nature issued on 15-4-2003. In response to these the complainant enquired as td the basis for initiation of proceedings vide his letter dated 26-4-2003 of which copy was endorsed to I.A.C. and C.I.T. The C.I.T. informed on 30-6-2003 that action under section 65 of the repealed Ordinance was initiated "under legal authority". Thereafter, a consolidated Additional Assessment was made on 30-6-2003, as under:--

With this the complainant is aggrieved.

3. The respondent have forwarded parawise comments by the R-C.I.T., Eastern Region, Lahore which, in addition to questioning the competence of the complaint for admission in view of bar as per 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 contended that "there was positive evidence available on record to believe that the complainant had purchased motor vehicle and made investment in all aggregating at Rs.1,002,000 .". It is further informed that the complaint was confronted through letters dated 30-5-2002 and 3-6-2003 of the proposed action and that the initiation of proceedings as also the additions under section 13 of the repealed Ordinance were made after due approval by the competent authority.

4. Mr. Safdar Hussain Nagra (Adv) appearing for the complainant assailed that the initiation of the proceedings under section 65 of the repealed Ordinance by pointing out the observation by the assessing officer in the second paragraph of the impugned order are read as under: --

"Assessment record perused and certain discrepancies were confronted to the assessee. "

This, according to the learned counsel, clearly meant that no new information subsequent to the framing of the assessment was discovered to justify action under section 65 of the repealed Ordinance. He recalled that along with the return for the assessment year 2000-2001 a statement of Assets & Liabilities as on 30-6-2000 was filed in which total assets were declared at Rs.1,967,000 including (i) a car worth: Rs.350,000, (ii) cash and prize bonds of: Rs.585,000 in addition to (iii) Business capital at Rs.350,000, and (iv) Other Immoveable properties at Rs.250,000. Therefore, initiation of proceedings by characterizing, these disproportionate to the declared Income, could at best attract the provisions of section 66A of the repealed Ordinance but not the section 65. For the assertion reliance was placed on decision reported 1996 PTD 186 and F.T.O. Findings/Decision on C.No.849-K/2001 dated 24-1-2001. The learned counsel pleaded that in addition to this legal lacuna, the service of notice under section 65 of the repealed Ordinance was defective. The A.R. elaborated this argument by bringing on record photocopies of notices issued on 3-2-2003 and 26-4-2003 both of which are under section 61 and by pencil words "65 (99-2000 to 2000-2001" has been noted. He denied receipt of notice under section 65 of the repealed Ordinance dated 20-5-2002 which is obtaining on department's record especially pointing out that whereas on the returns and on all other (past and subsequent) correspondence, the signatures of the complainant are in Urdu, the signatures on this notice were in English and in a `pacca' writing.

5. Mr. Muzammil Hussain (D-C.I.T.) appearing for the revenue defended the assessment by pointing out that a mandatory notice under section 65 on prescribed I.T. Form-191, was issued on 20-5-2002 and subsequent letters by the complainant dated 26-4-2003 proved that it was in his knowledge that action under section 65 had been initiated of which he desired to know the reasons. The D.R. summarized by submitting that the complainant was duly confronted and the Additional Assessment was made after due opportunity - hence there was no "maladministration" which could be taken cognizance under clause (3) of section 2 of the F.T.O. Ordinance.

6. Arguments were heard and record scrutinized. A copy of the statement of Assets & Liabilities filed as on 30-6-2000 along with the return for the assessment year 2000-2003 has been obtained and placed on record. This clearly discloses possession of assets like business capital, non-agricultural immovable property, cars, scooters besides cash and prize bonds aggregating at Rs.1,967,000. The discrepancies as were confronted to the complainant related to these very assets. Moreover, the observation in the Additional Assessment order that the discrepancies were discovered when "assessment record was perused" is an unequivocal admission that no definite information was acquired after, the completion of assessments and the information already existing on record was made a basis for initiation of action under section 65. This is against the law, as held in innumerable decisions such as the one quoted by the A.R. e.g. (1996)73 Tax 134 (Kar.).

7. The record reveals that prior to the initiation of Additional Assessment proceedings on 14-5-2002, the complainant had filed a declaration under the Tax Amnesty Scheme 2000 on 20-10-2000 disclosing untaxed Income at Rs.1,350,000. The aggregated addition vide impugned consolidated assessment comes to the same figure which supports the assertion that the very amount for which `amnesty' was sought by paying the prescribed tax, has been subjected to tax once again.

8. The objection by the learned counsel for the complainant about the non-service of the prescribed notice under section 65 of the repealed Ordinance also carries weight because the notice bears the signatures in English as acknowledgment of receipts, whereas even signatures in Urdu, available on the return and other documents, show that the complainant is hardly literate. The service is, therefore, clearly forged. It is pertinent to note that earlier notices were served by the same notice server (Mr. Ali Bahadur) on the complaint and thus he must have known the complainant.

9. From examination of the facts on record it is clear that in order to legalize the proceeding initiated under section 65 complainant's signature was forged. Such act of the functionaries of tax department, amounts to fraud on the complainant and the statute. It means to have been manoeuvred with bad and improper motive which frustrates the entire proceedings. Such fraudulent act robs the entire proceedings of legitimacy and validity. The entire action suppers from malice bad faith and mala fides. In these circumstances the contention that as the matter relates to assessment, jurisdiction is barred seems to be misconceived. For argument sake if the contention is accepted, it is pertinent to note that the assessment proceeding should relate to bona fide action taken according to law. As fraud in service of notice is established, the proceedings become nullity and the Federal Tax Ombudsman has jurisdiction to investigate and provide relief according to law.

10. It is, therefore, recommended that:-

(i) Commissioner by resort to section 122A of the Income Tax Ordinance, 2001 cancel the consolidated Additional Assessment order dated 30-6-2003 in respect of the assessment years 1999-2000 and 2000-2001.

(ii) Disciplinary action against Mr. Ali Bahadur, Notice Server be initiated for forging signatures of a person different from the complainant though earlier notices were served by him on the complainant, Malik Tanveer Ali, revealing that he knew and recognized the complainant personally.'

(iii) Compliance be reported within 30 days of the receipt of this order.

C.M.A./93/F.T.O.Order accordingly.