CHINIOT ENTERPRISES (PVT.) LTD., HARIPUR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2009 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1163 (2004)

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

----Ss 59, 61, 32-A & 80DD---Income Tax Rules, 1982, R.190(1)---Self-Assessment Scheme, (2000-2001), para.9(a)(ii)---Establishment of Office of Federal 'Fax Ombudsman Ordinance (XXXV of 2000), S.9---Self-Assessment Scheme---Notice for production of books---Supply of documents---Audit statement---Short document notice---Complaint was to the effect that the return filed under Self Assessment Scheme was wrongly excluded from Self-Assessment Scheme---Validity---Complainant had produced attested copies of documents which showed that the short documents notice did not contain diary number-Order sheet entry was made in the order sheet relating to previous assessment year, which was inserted afterwards---Interpolation of entries in the Order Sheet were found which established that no short document notice was issued at all---Audited account was found available in the assessment record---Allegations of the department were not substantiated---Return filed had fulfilled the condition of tax paid being higher by 10% or more---Action of the Assessing Officer excluding the complainant's return from the Self-Assessment Scheme was arbitrary', unjust, biased and oppressive which fell under the category of maladministration---Competent authority was ordered to withdraw the action taken by Taxation Officer for excluding the complainant's case from the ambit of Self-Assessment Scheme and accept the complainant's Return.

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

----Ss.2(3)(i)(b) & 9(b)---Maladministration---Remedy of appeal---Assessment---Jurisdictional remedies of appeal, review or revision were available in the relevant legislation and related only to the decisions on matters enumerated therein---No such remedy had been provided in respect of a process employed in the conduct of assessment or related proceedings---Matter related to the process employed by the respondents against which no appeal, etc. was provided in the Income Tax legislation---Provisions of S.9(2) of the Ordinance did not stand in the way of investigation by the Federal Tax Ombudsman---Complaint was held to be competent for admission---Objection of the respondent was overruled.

Muhammad Anwar, Consultant (Dealing Officer).

Zahid Hussain, ACMA, AR along with Sajid Hussain, Accountant for the Complainant.

Faheem Muhammad, DCIT Companies Zone, Peshawar for the Complainant.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Brief facts of the case are that the complainant, a private limited company, derived income from manufacture and sale of vegetable ghee and cooking oil. Return for the assessment year 2001-2002 was filed under Self Assessment Scheme (S.A.S.) declaring an income of Rs.63,139,490. The return was neither selected in computer balloting nor under para 9(a)(ii) of the S.A.S. It is stated that on attending the income tax office in response to notice under section 61 it was verbally communicated to the complainant that the case had been excluded for S.A.S. due to non-compliance of short documents notice which was allegedly never served on the complainant. The proceedings initiated under section 61 are therefore stated to be illegal. It is prayed that the return of the complainant be ordered to be accepted under Self-Assessment Scheme as all the requirements of the scheme had been fulfilled.

2. In reply the respondent has raised preliminary objection that since the remedy of appeal is available to complainant the case falls outside the jurisdiction of the Federal Tax Ombudsman.

2.1 It is stated that the return was filed without audited statement of accounts or any other details of income. The return was therefore invalid in terms of Rule 190(1) read with section 32A of the repealed Income Tax Ordinance, 1979. It is stated that notice for short documents was issued on 9-4-2002 and a detailed letter, dated 29-6-2002 was also issued explaining the reason for non-acceptance of the return under S.A.S. and this letter was acknowledged by the complainant in his reply, dated 8-7-2002.

2.2 It is further stated that even if no short do current notice was issued the return filed without audited accounts being invalid did not qualify to be accepted under S.A.S. as held by the C.I.T. (A) while disposing of the complainant's appeal for the earlier assessment year (2000-2001).

2.3 It is further stated the claim for qualification under S.A.S. was based on minimum tax paid under section 80DD and the tax payable was not calculated on the basis of declared income. The tax deducted/paid being not commensurate with income declared, the return did not qualify under Self Assessment Scheme.

3. The representatives of the both sides attended and reiterated their comments which were considered and record produced was examined. The Assessing Officer excluded the return of the complainant from Self-Assessment Scheme clue to non-compliance of short documents notice allegedly issued on 9-4-2002 for compliance by 23-4-2002.

3.1 The A.R. of the complainant has produced copies of the said notice and relevant order sheets obtained from the Department duly attested by the Taxation Officer. Perusal of these documents showed that short documents notice does not contain diary number and order sheet entry of its issuance, dated 9-4-2002 has been made in the order sheet relating to the assessment year 1999-2000. This is the second entry of the order-sheet and clearly seems to have been inserted afterwards.

3.2 The first entry of the order-sheet relates to notice under section 61 issued for assessment year 1999-2000 vide Diary No.914, dated 8-4-2002 for compliance on 15-4-2002. The next i.e. 3rd entry, dated 15-4-2000 (date of compliance) records that Mr. Sajid Hussain, A.R. attended. Requested for adjournment as details are under preparation. Case adjourned till 20-4-2002. No reply to the short documents notice provided.

3.3 The A.R. had appeared in compliance to notice under section 61 for the year 1999-2000 and sought adjournment. It was no occasion for the Assessing Officer to mention that `no reply to the short documents notice provided' because firstly the order-sheet related to the year, 1999-2000 and secondly reply to the short documents notice for 2001-2002 was to be furnished by 23-4-2002 and not by 15-4-2002. The said entry was unnecessary and seems to have been made to provide support to the earlier entry, dated 9-1-2002. These irregularities go to establish that no short documents notice was issued at all.

4. The next assertion of the respondent is that even if no short documents notice was served the return for the year 2001-2002 did not qualify for acceptance under S.A.S. as it was not a valid return for the reason that the return was filed without audited accounts.

4.1 The contention of the complainant's A.R. on the other hand is that audited accounts of the complainant company were received vide auditor's report, dated 8-12-2001 and the same were duly submitted with the return filed on 31-12-2001. In support of his contention he referred to he notice under section 61, dated 10-4-2003 whereby the complainant was asked to furnish details under different heads of accounts e.g. (i) Evidence for deposits for share made during the year, (ii) Details of advances mentioned at Note 7 of the accounts and (iii) Reasons for decrease in sales etc. This notice, the A. R. submitted proved filing of audited accounts with the return.

4.2 The D.R. on the other hand reiterated that return was filed without audited accounts' and a note to this effect was given by the Taxation Officer on the lace of the return at the top. The return was therefore invalid as observed by the CIT. (Appeals) in his order, dated 19-8-2003 relating to the assessment year 2000-2001. The audited accounts were opined by the D.R. to have been added in the record at a later stage.

4.3 The A.R of the complainant rebutted this allegation stating that the said note appears to have been recorded at some later stage because the Taxation Officer's initials under the note were undated and note was not given at the proper place at which the Assessing Officer had recorded the receipt of the return under his initials, dated 31-12-2001 on the left hand bottom corner of the return.

4.4 At the time of hearing of the complaint the audited accounts were found available in the assessment record and the D. R. could not substantiate his allegation to prove as to how and at what stage the accounts were added in the record if not filed along with the return. Since the Department has failed to establish that the return for the year 2001-2002 was filed without audited a accounts any reference to the observation of the C.I.T. (A), dated 19-8-2003 pertaining to the years 200-2001 becomes irrelevant. Further, when the return for the year 2001-2002 was filed on 31-12-2001, assessment for the year 2000-2001 was not made. The assessment was in fact made on 31-3-2003 and the appellate order came oil 19-8 2003 in which the C.I.T. (A) had ordered for the acceptance of manufacturing and trading results as declared by the complainant in spite of the fact that the return for the year 2000-2001 was filed without audited accounts which were furnished later on during the assessment proceedings.

5. In view of the facts and circumstances of the case as discussed above the return of the complainant for the year 2001-02 merited acceptance under the S.A.S. The return was filed declaring an income of Rs.62,883,633 with tax paid at Rs.32,010,874 as compared to income last declared for the year 2000-2001 at Rs-50,747,299 with lax paid at Rs.23,977,767 which fulfilled the condition of tax paid being higher by 10% or more as compared to tax paid on Inc last assessed or declared income. The action of the Assessing Officer excluding the complainant's return from the Self-Assessment Scheme was arbitrary, unjust, biased and oppressive which falls in the definition of maladministration under section 2(3)(i)(b)of the Ordinance No. XXXV of 2000.

6. Regarding the respondent's objection to the jurisdiction of the F.T.O. to entertain the complaint, the same is based on misreading of the provisions of section 9(2) of the Establishment oh the Office of Federal Tax Ombudsman Ordinance, 2000. Clause (b) of subsection (2) of section 9 relates only to the decisions on matters enumerated therein in respect of which remedies of appeal, review or revision are available in the relevant legislation itself. On the other hand, no such remedy has been provided in respect of a process employed in the conduct of assessment or related proceedings. Since the matter in the complaint-in- hand relates to the process employed by the respondent, against which no appeal (etc.) provided in the Income Tax legislation,the provisions of section 9(2) of the Ordinance do not stand in the way of investigation by the F.T.O. On this view the complaint is held to he competent foil admission, hence the objection by thee respondent is overruled.

7. It is therefore, recommended that:--

(i) The competent authority tai withdraw the action taken by the Taxation Officer for excluding the complainant's case from the ambit of' Self-Assessment Scheme and accept the complainant's return for the assessment year 2001-2002.

(ii) Compliance be reported within 30 days.

M.I./285/F.T.O.Order accordingly.