TARIQ AZIZ MALIK VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2008 P T D 975
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
TARIQ AZIZ MALIK
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.1485-L of 2003, decided on 15/05/2004.
(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---
----Ss.2(3)(i)(a)(b) & 9(2)(b)---Income Tax Ordinance (XXXI of 1979), S.62---Complaint about assessment and maladministration---Maintainability---Maladministration evident from record---Federal Tax Ombudsman would have jurisdiction in such matter.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.19, 21 & 62---Income Tax Ordinance (XLIX of 2001), S.122-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(a)(b), 9 & 11---Property jointly owned by two persons---Framing assessment in complainant's case (co-sharer in property) in status of Association of Persons on basis of enquiry report of Inspector made from tenants of property---Validity---Report mentioned refusal of tenants to give statement regarding actual rent---Revenue had failed to prove complainant to be sole proprietor of property---F.T.I. Form showed complainant' as co-sharer in property having ascertainable share, thus, assessment in his case could not be completed as sole proprietor thereof---Transfer of complainant's case from Circle, where property was located, to another Circle without inviting his objection was not proper---Such assessment was illegal, unjust, arbitrary indicating negligence, inattention, incompetence and inaptitude in discharge of duties falling within purview of maladministration as defined in S.2(3)(i)(a)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Onus to prove that there was no maladministration was on Revenue, which had not been discharged---Revenue had failed to prove that such assessment was bona fide and for valid reasons-Federal Tax Ombudsman recommended to Revenue to take action under 5.122-A of Income Tax Ordinance, 2001, revise such assessment and initiate proper inquiry to determine gross annual rental value, ownership and jurisdiction of property and complete assessment after proper service of notice and confronting complainant thereto.
PLD 1973 SC 49 ref.
(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---
----Ss. 2(3) & 9---Maladministration, allegation of---Burden of proof---Onus to prove that there was no maladministration, would lie with Revenue.
Muhammad Mushtaq, Advisor (Dealing Officer).
Latif Ahmad Qureshi for the Complainant.
Muzammal Hussain Butt, D.C.I.T. for the Revenue.
FINDINGS/DECISION
JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant alleges completion of Income Tax Assessments in his case for the assessment years 2000-2001 and 2001-2002 as a proprietor of Ikram Auto Market Badami Bagh, Lahore as illegal, arbitrary, unjust and mala fide. The brief facts are that the complainant is a member of two A.O.Ps., Messrs Ikram Auto Market and Lateef Auto Market, both situated in Badami Bagh, Lahore and deriving income from house property by renting out the shops in these two markets. The Income Tax and Wealth Tax Assessment of these two markets are being completed in the status of A.O.P. since assessment year 1993-94. Messrs Ikram Auto Market consists of two members, Mr. Tariq Aziz the complainant and Mrs. Ikram widow of Malik Abdul Lateef. Whereas A.O.P. Messrs Lateef Auto Market consists of Mr. Tariq Aziz and legal heirs of Malik Abdul Lateef. The Income Tax returns were filed in respect of the two Markets of the assessment years 2000-2001 to 2002-2003 in the status of A.O.P. under Self-Assessment Scheme in Circle 11 Zone-A Lahore as under:-
| Messrs Ikram Auto Market. | Messrs Lateef Auto Market. |
| Assessment year | Income declared | Assessment year | Income declared |
| 2000-2001 | Rs.89,657 | 2000-2001 | Rs.48,188 |
| 2001-2002 | Rs.88,590 | 2001-2002 | Rs.47,338 |
| 2002-2003 | Rs.107,600 | 2002-2003 | Rs.71,280 |
For the assessment year 1998-99 and 1999-2000, the Income Tax Assessment in the cases of the above markets have been completed under section 62 in the status of A.O.P. In the case of Messrs Ikram Auto Market income assessed was Rs.47,934 and in case of Messrs Lateef Auto Market the income assessed was Rs.43,488 for each of the above two years under section 62 of repealed Ordinance by Taxation Officer Circle 11 Zone-A, Lahore.
1.1 The complainant alleged that a notice was issued by the Taxation Officer on 24-4-2004 in the name of Malik Tariq Aziz as proprietor of Messrs Ikram Auto Market indicating that enquiries conducted through Inspector indicated that monthtly rent of Ikram Auto Market and Lateef Auto Market was Rs.97,450 whereas the complainant had declared rental income which was less than the actual rent. Reply to this notice was sent through A.R. on 6-5-2003 intimating the Taxation Officer that the complainant was not proprietor of these two markets but a member of the two A.O.Ps. and that Income Tax returns in these two cases were filed under Self-Assessment Scheme. The complainant allegedly also requested the Taxation Officer to confront him with any information contrary to the above facts so that it could be rebutted.
1.2 The complainant alleged that on 21-6-2003 he received another notice but from the Taxation Officer Circle 11 Zone-A Lahore where assessment of the above two A.O.Ps. were completed for the earlier years but from the Taxation Officer Circle 06 Zone-C Lahore. This notice, also issued in the name of the complainant as proprietor of Messrs Ikram Auto Market stated that the complainant had not declared rental income correctly and that the complainant did not attach proof of payment of property tax. The notice also contended that enquiries conducted through Inspector indicated the rent of each shop was Rs.1000 Rs.1500 but the rent declared by the complainant was very much less than the actual rent. The complainant was also requested to furnish copies of rent deeds, wealth statements, personal expenditure statements and Bank statements etc. The complainant furnished reply to this notice on 28-6-2003. The complainant also protested against the issuance of the above notice by Taxation Officer Circle 06 Zone-C Lahore as the jurisdiction of the case was changed without intimation to the complainant and without inviting his objections. The complainant also intimated the Taxation Officer that the Income Tax Returns for the assessment years 2000-2001 and 2001-2002 were filed under Self-Assessment Scheme in the status of A.O.P. The complainant pointed out that these returns fully qualified for Self-Assessment Scheme and assessments were deemed to have been completed on 30-6-2001 and 30-6-2002 for the above years. The complainant requested the Taxation Officer to confront him with the statements of tenants, if any.
1.3 The complainant declared that all the objections raised and the submissions made by him were ignored and the assessments were completed in his name as proprietor of Messrs Ikram Auto Market for the assessment year 2000-2001 and 2001-2002 at an income of Rs.400,000 for each of the above years vide a combined assessment order dated 30-6-2003 in utter disregard of facts and legal position.
1.4 The complainant alleged that the Taxation Officer Circle 06 Zone-C Lahore assumed jurisdiction over his case illegally as territorial jurisdiction of this case lay with the Taxation Officer Circle 11 Zone-A Lahore where assessments for previous years were completed and that he was not the sole proprietor of Messrs Ikram Auto Market but a member of the A.O.P. The complainant contended that the assessments completed as above were arbitrary, unjust and illegal and have been passed under the influence of a tenant, with whom the complainant was having litigation. The illegal assessments as above have caused grievance to the complainant.
2. In reply the R-C.I.T. Eastern Region Lahore raised a preliminary objection that the instant complaint related to assessment under section 62 of the repealed Ordinance for which remedy of appeal has been provided. Keeping in view the provisions of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance 2000, the complaint fell outside the jurisdiction of the Federal Tax Ombudsman, it was added.
3. On merits, it was submitted that the objection regarding jurisdiction was not correct because this case was transferred to the Taxation Officer Circle 06 Zone-C Lahore as Ikram Auto Market was situated on Pew Road, which fell in the jurisdiction Zone-C, Lahore. According to the R-C.I.T. assessment in the case was completed on the basis of enquiry report of the Inspector and after confronting the complainant with the facts of enquiry report in the notice under section 62 of the repealed Ordinance dated 21-6-2003. The R-C.I.T. pointed out that prior to notice under section 62, a notice under section 56 of the repealed ordinance was also issued to the complainant by the Taxation Officer Circle 06, Zone-C, Lahore for the assessment years 1997-98 to 2002-2003 and duly served on the complainant on 16-11-2002. But the complainant had filed Income Tax Returns for the assessment years 2000-2001 and 2001-2002 voluntarily in Circle 11, Zone-A Lahore. The R-C.I.T. argued that as per P.T.I. Form there were two owners of properties whose shares were ascertainable. Thus the respective shares of individuals were assessable under section 21 of the repealed Ordinance and it could not be considered as an A.O.P. assessable under section 19 of the repealed Ordinance. Besides, the complainant himself declared the status of individual in case of Ikrarn Auto Market for the assessment year 2000-2001. The R-C.I.T. further submitted that the returns for the assessment year 2000-2001 and 2001-2002 did not qualify for acceptance under Self-Assessment Scheme as per para. 4(j) of C.B.R's. Circular 21 of 2000 for the assessment year 2000-2001 and para. 7 (vi) of C.B.R's. Circular No.4 of 2001 dated 18-6-2001 for the assessment year 2001-2002 because of suppression of the property income.
4. Mr. Latif Ahmad Qureshi Advocate attended for the complainant and reiterated the contention made in the complaint: He pointed out that any act done without jurisdiction was mala fide as held by the Supreme Court of Pakistan in a case reported as PLD 1973 SC 49. Mr. Muzammal Hussain Butt D-CIT attended for the Revenue and reiterated the submission made by the R-CIT in his report.
5. The complainant's and respondents replies were examined and rival arguments considered. The R-C.I.T. raised a preliminary objection that the complaint related to an assessment under section 62 for which remedy of appeal has been provided hence it did not fall in the jurisdiction of the Federal Tax Ombudsman because of bar imposed by the provisions of section 9(2)(b) of the Ordinance No.XXXV of 2000. This preliminary objection raised by the respondent was not found to be correct because the complaint was not simply about assessment but also against maladministration proved beyond any shadow of doubt as would be evident from the discussion contained in paragraphs hereinafter. The preliminary objection raised by the respondent is overruled.
6. The admitted facts are that assessment in the case of Messrs Ikram Auto Market and Messrs Lateef Auto Market Badami Bagh Lahore were completed up to assessment year 1999-2000 in the status of A.O.Ps. Copies of assessment orders for the assessment years 1998-99 and 1999-2000 are placed on the record. The R-C.I.T. in his report has admitted that as per P.T.I. Form there are two owners of Messrs Ikram Auto Market whose shares are ascertainable hence assessment in. case of the owners can not be completed in the status of A.O.P. This admission by the R-C.I.T. clinches the whole issue. If the complainant is a shareholder in these properties then assessment in his case cannot be completed as a proprietor of Messrs Ikram Auto Market enquiry made through Inspector deals only with one aspect of the case i.e. monthly rent paid by the tenants. Even in this enquiry report dated Nil the Inspector has admitted that the tenants are not willing to give any statement regarding the actual rent.
6.1 The other aspect of the case is the determination of actual ownership of these markets. The Revenue Authorities have failed to prove that Mr. Aziz is the sole proprietor of Ikram Auto Market and/or Lateef Auto Market. Needless to say that P.T.I. Form as admitted by the R-C.I.T. indicates the complainant as a shareholder in Ikram Auto Market. Although assessment in the case of Messrs Ikram Auto Market has been completed holding the complaint as the sole proprietor but the Revenue Authorities have not indicated as to what action has been taken on the returns filed by Messrs Ikram Auto Market and Lateef Market in the status of A.O.P. for the assessment years 2000-2001 to 2001-2002.
6.2 The R-C.I.T. in his report has submitted that a notice under section 56 was issued in the case of complainant for the assessment years 1997-98 to 2002-2003 on 28-10-2003, which was served on the complainant properly on 16-11-2003. It is further admitted by the R-C.I.T. that the complainant had filed returns voluntarily for the assessment years 2000-2001 and 2001-2002 in Circle 11 Zone-B Lahore. The submissions made by the R-C.I.T. are incorrect and contradictory because notice under section 56 was not served on the complainant but on someone by the name of Mr. Lateef. The Revenue Authorities have failed to prove that the person on whom notice under section 56 was served was authorized by the complainant to receive such notice. Secondly, if the complainant had filed Income Tax Returns voluntarily for assessment years 2000-2001 and 2001-2002 in Circle 11 Zone-B Lahore then there was no justification of issuing notice under section 56 for these years.
6.3 Another important aspect of this complaint relates to the determination of correct jurisdiction. The Income Tax and Wealth Tax Assessment were admittedly completed in these cases upto assessment year 1999-2000 in Circle 11, Zone-A, Lahore. But in pursuance of jurisdiction order No.8 dated 1-7-2002, the case was transferred to Zone-C without inviting any objection from the complainant which is also not proper as the complainant contended that the location of the Market did not fall in the jurisdiction of Zone-C Lahore.
7. From the above facts it is quite evident that the Income Tax Assessments completed in the case of the complainant as sole proprietor of Ikram Auto Market for the assessment years 2000-2001 and 2001--2002 are illegal, unjust, arbitrary indicating negligence, inattention, incompetence and inaptitude in discharge of duties falling within the purview of maladministration as defined in sections 2(3)(i)(a) and 2(3)(i)(b) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance 2000. The Revenue Authorities have failed to prove that the assessments completed as above were bona fide and for valid reasons. The onus to prove that there was no maladministration lay with the Revenue Authorities which onus has not been discharged.
8. It is therefore recommended.
(1) The C.I.T. Zone-C Lahore to take action under section 122A of I.T. Ordinance 2001 and revise the assessments completed on 30-6-2003 in the case of the complainant Malik Tariq Aziz for the assessment year 2000-2001 and 2001-2002 as a proprietor of Ikram Auto Market.
(2) The C.I.T. institute a proper enquiry in respect of Messrs Ikram Auto Market and Lateef Market to determine the GALV, ownership and jurisdiction of these properties and complete assessment after proper service of notices in the light of enquiry report and after confronting the taxpayers involved.
3. Compliance report be submitted within 60 days of the receipt of these recommendations by the Revenue Division.
S.A.K./249/FTOOrder accordingly.