MUHAMMAD YOUSAF VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 936 (2004)

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

----Ss.13(1)(aa) & 63---C.B.R. Circular No.19 of 2000, dated 2-8-2000 para.10(2) [Tax Amnesty Scheme]---C.B.R. Circular No.20 of 2000, dated 29-8-2000 [New Tax Amnesty Scheme]---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Unexplained investment etc., deemed to be income---Issuance of show-cause notice under S.13(1)(aa) of the Income Tax Ordinance, 1979 for making addition of unexplained amount after lapse of two years during which complainant/assessee had already filed declaration under New Tax Amnesty Scheme on account of undisclosed stock in trade and had paid tax---Validity---After a lapse of two years when the case was getting barred by time notice under S.13(1)(aa) of the Income Tax Ordinance, 1979, dated 25-6-2003 was issued for compliance within three days, which was against the principles of natural justice---Complainant/ assessee received the notice on 28-6-2003 and tried to comply with the notice on the same day to avoid any further complication---Assessing Officer finalized the assessment within two days on 30-6-2003 considering the reply unsatisfactory merely to cover up his negligence---Was proved that an unjust and unreasonable assessment was framed in complete disregard of verdict of superior Courts to the effect that ex prate assessment should be based on well considered conclusions and not dishonestly or vindictively---Entire process proved neglect, inefficiency and inaptitude in performance of duties and mala fide intention---Department should have acted in more reasonable manner as such lapses always create litigation and cause harassment---Federal Tax Ombudsman recommended that Central Board of Revenue issue directions to the Commissioner of Income Tax to accept the declaration under Tax Amnesty Scheme and withdraw the show-cause notice under Ss.13(1)(aa) and 61 and proceedings taken in pursuance thereof.

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

----S.59-D---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Tax on undisclosed income---C.B.R. Circular No.20 of 2000, dated 29-8-2000 [New Tax Amnesty Scheme]---Part-IV of the Schedule to the Income Tax Ordinance, 1979 provides that all the three conditions laid down in para 3 of Circular No.20 of 2000 were not to be fulfilled---By using the word "or" at the end of the conditions Nos.(i) and (ii) the assessee/taxpayer was permitted to fulfil any one of the conditions and not all the conditions of para.3 Part-IV for availing the benefit.

Shahida Taj, Director (Dealing Officer).

Ch. Zahoor Elahi Bhatti and Inayatullah Khan for the Complainant.

Abid Mahmood, D.C.I.T./T.O. for Respondent.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant an existing assessee of Circle-40, Attock has filed this complaint against illegal rejection of TAS declaration.

2. It is alleged that the Taxation Officer Attock issued show cause notice under section 13(1)(aa) of the Income Tax Ordinance, 1979 for making addition of Rs.600,000 as unexplained amount for which he had already filed the declaration under the new T.A.S. Scheme declaring Rs.600,000 on account of undisclosed stock in trade and paid the tax at Rs.12,000. The declaration was filed under. Circular No.20 of 2000 and Para 10(2) of C.No.19 of 2000. Fulfilling the requirement of Circular 20, a statement of annual sales less than one million dated 30-9-2000 was also filed. It is therefore pleaded that his return vide T.A.S. may be accepted and notice under 13(1)(aa) may be annulled.

3. Respondents in reply stated that according to Circular No.20 of 2000, concession was available to the complainant to file undisclosed source as the complainant does not fulfil all the conditions of para.3 of the said Circular. It is submitted that a notice in this regard was served on 31-5-2001 but as no compliance was made intimation regarding rejection of his case was sent to the complainant on 30-6-2001, with the prior approval of the C.I.T. It is further submitted that notice under section 13(1)(aa) dated 25-6-2003 was issued for compliance by 28-6-2003. The assessment was finalized when the reply was not found satisfactory after making addition of Rs.600,000 on 30-6-2003.

4. The complainant contended that he has fulfilled all the requirements laid down in Circular No.20 of 2000. by paying tax @ 2% within due date and by filing statement of annual sales as per para.3 of Circular 20 of 2000, however a show-cause notice dated 31-5-2001 and 30-6-2001 was not received by him. It has been alleged that after a lapse of two years he received show cause under section 13(1)(aa) of the Income Tax Ordinance, 1979 dated 25-6-2003 for addition of Rs.600,000 by 28-6-2003 which was received on 28-6-2003.

5. After hearing contention of both sides, and examining the record produced by the department, it appears that notices dated 31-5-2001 and 30-6-2002 for the rejection of declaration were not served on the complainant by the D.C.I.T. Although all the declaration after preliminary examination shall be accepted and declarant shall be informed latest by 30-6-2001. As per para 10(3) of the T.A.S. Scheme where any deficiency or mistake is noticed, a show-cause notice with the prior approval of Commissioner Income Tax requires to be issued to meet the deficiency. If the said deficiency is rectified within due date and declaration is acceptable declarant shall be informed accordingly. In case of acceptance declarant has to be informed within specified time. Since no such information was received by the complainant, the complainant was under the impression that his return had been accepted.

6. After a lapse of two years when the case was getting barred by time notice under section 13(1)(aa) dated 25-6-2003 was issued to the complainant for compliance within three days, which is against the principles of natural justice. The complainant received the notice on 28-6-2003, and to avoid any further complication he tried to comply the notice on the same day. The assessing officer finalized the assessment within two days on 30-6-2003, considering the reply unsatisfactory merely to cover up his negligence. It thus proves that an unjust and unreasonable assessment was framed in complete disregard of verdict of superior Court to the effect that ex parte assessment should be based on well considered conclusion and not dishonestly or vindictively.

7. Further, Department misunderstood the provisions of para.3 of Circular No.20 of 2000. In reply the department has submitted as follows:---

"According to Circular No.20 of 2000 circulated vide C.B.R. letter C.No.7(73)/Asst/2000 dated 29th August, 2000," the concession of tax rate @ 2% of stock in trade (un-disclosed) was available only to those declarants who filed their declarations by 30-9-2000 provided that:--

(i) Who are registered or enrolled under the Sales Tax Act, 1990 and file a copy of certificate of registration enrolment duly attested by the concerned authority; or

(ii) Whose sales are less than one million and file a statement to this effect; or

(iii) Whose entire sales comprise such goods that are exempt from sales tax and file a statement specifying the items claimed to be exempt from charge of sales tax.

Since the complainant was neither enrolled under the Sales Tax Act, 1990, nor his sales were exempt from sales tax, and was not fulfilling conditions at (i) & (iii) above as such he tried to avail the benefit of the scheme by claiming to be in para. (ii) disclosing sales less than one million."

8. Part IV of the schedule provides that all the three conditions laid down in para. 3 of Circular No.20 of 2000 are not to be fulfilled. In fact by using the word "Or" at the end of condition Nos. (i) and (ii) the complainant was permitted to fulfil any of the conditions and not all the conditions of para.3 Part-IV for availing the benefit.

9. The entire process proves neglect, inefficiency and ineptitude in performance of duties and. mala fide intention. The department should have acted in a more responsible manner as such lapses always create litigation and cause harassment, attracting provisions of subsection (3) of section 2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. As mala fides and violation of principles of natural justice have been proved the objection to jurisdiction is overruled.

10. It is recommended that:--

(i) The C.B.R. issue directions to the Commissioner of Income Tax to accept the declaration under Tax Amnesty Scheme.

(ii) Withdraw the show-cause notice under section 13(1)(aa) dated 25-6-2003 and section 61 and proceedings taken in pursuance thereof.

(iii) Compliance report be submitted within 30 days.

C M.A./98/F.T.O.Order accordingly.