Malik SHAKEEL AHMED VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2009 P T D 1184
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
Malik SHAKEEL AHMED
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.587 of 2003, decided on 03/11/2003.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment of sales based on the estimates of survey team which were allegedly made on gun-point and .without apprising the Complainant/assessee of the figure that would be put in after obtaining his signatures---Validity---Some credence had to be given to the estimates of the survey team provided they were valid and according to law---If a person objected to the estimates of the team he should file his objections within a reasonable time---Was difficult to verify the complainant/assessee's contention that he was unaware of the estimates of the survey team or any coercion was used in obtaining his signatures---Sales estimated adopted for the year 2000-2001 on the basis of survey estimates could hardly be considered as harsh---First Appellate Authority had also confirmed the sales estimate---No intervention was called for by the Federal Tax Ombudsman as for as the assessment year 2000-2001 was concerned.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Estimation of sales---Sales were assessed. at Rs.16,00,000 for the assessment year 2002-2003 as against the sales estimated by the survey team at Rs.12,00,000 in the assessment year 2000-2001---Validity---Estimate of total sales at Rs.16,00,000 did not appear to be based on any valid grounds because even if it was assumed that the estimates of the survey team were reasonable it did not follow that the sales would have increased by Rs.4,00,000 in the year 2002-2003---Order was arbitrary which suffers from administrative excess and involves exercise of power for improper motives---Fresh enquiries need to be made in the light of the complainant/assessee's contention that his business was on a very small scale----Federal Tax Ombudsman recommended that enquiry be made regarding the extent of the complainant's business and if it is found that the estimate of sales adopted in the year 2002-2003 is excessive, necessary action be taken under S.122A of the Income Tax Ordinance, 2001 to reduce the Complainant's sales and income to the appropriate level.
Mirza Muhammad Wasim, Adviser (Dealing Officer).
Nasir Nawaz Mufti, ITP, AR for the Complainant.
Muhammad Saleem, DCIT Circle 17, Sargodha for Respondent.
FINDINGS/DECISION
JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---These are two complaints regarding the income tax assessments for the assessment years 2000-2001 and 2002-2003 made in the case. The two complaints are being decided under a common complaint number as the points in the complaints are almost identical.
2. The facts are that the complainant is a manufacturer of the local confectionary known as "revri". For the assessment year 2000-2001 sales on account of manufacturing were declared at Rs.4,00,000 and other sales were shown at Rs.370,000 against which a combined GP of Rs.135,000 were declared and after claiming expenses of Rs.75,000 income was declared at Rs.60,000. In the assessment order under section 62 of the repealed Income Tax Ordinance, 1979 the Assessing Officer observed that during the documentation of economy survey the complainant's sales were estimated at Rs. 12,00,000. On this basis he estimated manufacturing and other sales at Rs.6,00,000 each to which the respective GP rates of 25% and 15% were applied and after partly allowing the claimed expenses income was worked out at Rs. 192,172. The complainant filed an appeal before the C.I.T. (Appeals) who upheld the estimate of sales bases on survey and allowed only some minor relief with regard to disallowed expenses. As regards the assessment year 2002-2003 the declared income was again Rs.60,000. In the order under section 62 it was observed that time complainant's business was located in the heart of the city and that last year (actually assessment year 2000-2001) income had been assessed at Rs. 192,17.1 against which no appeal had been filed. With these observations, sales of manufactured goods and other sales were estimated at Rs.8,00,000 each with gross Profit rates of 25% and 15% respectively and after allowing expenses income was assessed at Rs.240,000.
3. In the complaints for the two years it is contended that the assessments are based on the estimates of survey team which, however, were allegedly made on gun-point and without apprising the complainant of the figure that would be put in after obtaining his signatures. It is also contended that the Assessing Officer was not justified in curtailing the expenses claimed by the complainant. In the complaint for the assessment year 2000-2001 it is further stated that C.I.T. (Appeals) was not justified in allowing only a minor relief to the complainant. In the respondent's reply the assessment for the two years have been defended. It is stated that there is no truth in the allegation that the complainant's signatures were obtained on gun-point by the survey team and in fact the complainant had agreed to the turn over estimated by the team. It is contended that the two assessments are thus quite valid and if the complainant had any grievance he should have filed appeals before the relevant appellate authorities.
4. During the hearing both sides reiterated their positions. The complainant's A.R. also stated that the estimates of the survey teams were not sacrosanct and referred the orders of the Income Tax Appellate Tribunal, dated 6-5-2003 in I.T.A. No. 194/IB/2002 in which the sales were estimated at Rs.750,000 on the basis of survey but the estimate was reduced to Rs.550,000 by the Tribunal. Reference was also made to the assessment order, dated 28-7-2003 in the case assessed at NTN 20-02-0411559 in which the sales were estimated at Rs.2,30,000 by the survey team but in the assessment for the year 2002-2003 these were assessed at Rs.1,600,000 by the Assessing Officer himself. The representative of the respondent, however, reiterated that since the complainant had himself agreed to the estimate of sales by the survey team the assessments were quite valid. With regard to the assessment year 2000-2001 it was also contended that if the complainant was not satisfied with the order of the C.I.T. (Appeals) he should have filed an appeal before the Tribunal.
5. The contentions of the two sides have been considered. It can hardly be denied that some credence has to be given to the estimates of the survey teams provided they are valid and according to law. It has also been held in a number of findings/decisions that if a person objected to the estimates of the team he should file his objections within a reasonable time. The complainant has, of course, contended that he was not aware of the estimates recorded by the survey team. In the present circumstances it is difficult to verify the complainant's contention that he was unaware of the estimates of the survey team or any coercion was used in obtaining his signatures. Thus the sales estimates adopted for the year, 2000-2001 on the basis of the survey estimates can hardly be considered as harsh. The appeal for the said year has also been decided by the C.I.T. (Appeals) confirming the sales estimate. In the circumstances of the case no intervention is found to be called for as far as the assessment year 2000-2001 is concerned.
6. As regards the assessment for the year 2002-2003, however, the estimate of total sales at Rs.1,600,000 does not appear to be based on any valid grounds because even if it is assumed that the estimates of the survey team were reasonable it does not follow that the sales would have increased by Rs.4,00,000 in the year 2002-2003. The order is arbitrary. It suffers from administrative excess and thus involves exercise of power for improper motives as defined in clause (3)(i)(d) of section 2 of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. In the context of the assessment year 2002-2003 therefore, fresh enquiries need to be made in the light of the complainant's contention that his business is on a very small scale.
7. In the light of the above it is recommended that:---
(i) Inquiry be made regarding the extent of the complainant's business and if it is found that the estimate of sales adopted in the year 2002-2003 is excessive, necessary action be taken under section 122A of the Income Tax Ordinance, 2001 to reduce the complainant's sales and income to the appropriate level.
(ii) Compliance be reported within 45 days.
C.M.A./32/F.T.O.Order accordingly.