SHAKEEL CONSTRUCTION COMPANY through Masood Ahmed Abbasi, Karachi VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2011 P T D 1175
[Federal Tax Ombudsman]
Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman
Messrs SHAKEEL CONSTRUCTION COMPANY through Masood Ahmed Abbasi, Karachi
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 88/KH/IT (23)/469/2010, decided on 14/07/2010.
Income Tax Ordinance (XLIX of 2001)---
---Ss. 12, 122(5-A), 124, 153 & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3), 9 & 10---Amendment of assessment---Complainant being a sole proprietary enterprise was engaged in transporting hard waste and garbage---Complainant was being assessed to tax as a service provider and transporter of goods---Additional Commissioner, initiating suo motu action under S.122(5-A) of Income Tax Ordinance, 2001, categorized complainant's receipts as of a contractor---Additional Commissioner, had failed to explain as to how the complainant could be treated as a contractor covered by clause 'C' of subsection(1) of S.153 of Income Tax Ordinance, 2001, when he was actually covered by the exception provided in said clause---Order of Additional Commissioner was arbitrary and unlawful, tantamounting to maladministration in terms of S.2(3)(i) of Establishment of Officeof Federal Tax Ombudsman Ordinance, 2000---Recommendations were made to Federal Board of Revenue to direct the Chief Commissioner to take action under S.122-A of Income Tax Ordinance, 2001 as per law and issue refund due within 21 days; to ask the Additional Commissioner, to explain within 15 days as to why disciplinary action could not be recommended against him; and also whether he would like to be heard in person; to examine the desirability how an order set aside by the Commissioner (Appeals), was re-opened under S.122(5-A) of Income Tax Ordinance, 2001 by Additional Commissioner, an officer junior to the Commissioner (Appeals) and to report compliance within 30 days. ?
Mumtaz Ahmed, Advisor, Dealing Officer.
Masood Ahmed Abbasi, Authorized Representative.
Muhammad Saeed Nashir Additional Commissioner (IRS), Departmental Representative.
FINDINGS/RECOMMENDATIONS
DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---The Complainant being a sole proprietary enterprise is engaged in transporting hard waste and garbage from different parts of Karachi to the dumping sites. According to the AR, the Complainant was being assessed to tax as a service provider and transporter of goods (and not as construction contractor or a contractor for works) up to the tax year 2005. For the tax year 2006, the return of income was initially accepted under section 120 of the Income Tax Ordinance; 2001 (hereinafter "the Ordinance") and refund of excess amount of tax deducted at Rs.1,175,193 for the tax year was allowed under section 170(3) by treating the enterprise as transporter of goods. According to the AR, the tax deducted was treated as having been covered under FTR and refund claim was rejected by passing order under section 170(4). However, on appeal the CIT (A) set aside that order, and accordingly the DCIR passed order under section 170(3), giving appeal effect under section 124. The AR contended that for reason best known to the Additional Commissioner IR, he initiated suo motu action under subsection (5A) of section 122, and, categorising the Complainant's receipts as of a janitorial contractor, made an ex parte order once again treating tax deducted at source as full and final discharge of tax liability. The AR termed the Additional Commissioner's order under section 122(5A) not only. biased and arbitrary, but also coram non judice, as he did not have jurisdiction over the cases of the transporters.
2. The AR further alleged that maladministration was committed on several counts: by not providing opportunity of hearing, by deviating from past treatment, and by misapplication of relevant provisions of law. He termed, the order under section 122 (5A) as oppressive and capricious.
3. During the hearing of the complaint, the Additional Commis?sioner pleaded that he exercised the powers under section 122(5A) to amend the assessment as it was found to be erroneous and prejudicial to the interest of revenue. He, however,. failed to explain as to how the Complainant could be treated as a contractor covered by clause (c) of subsection (1) of section 153, when he was actually covered by the exception provided in the clause.
4. The pleadings have been considered and record perused. The following four issues have emerged as a result of the discussion:
(i)???????? no proper opportunity was provided before finalizing the assessment;
(ii)??????? there were no proper grounds for deviation from the treatment given in the past;
(iii)?????? during the hearing the Additional Commissioner conceded that the Complainant was not a janitorial contractor; and
(iv)?????? the order passed by the DCIR was not erroneous in law as it was passed by way of giving appeal effect to the order passed by CIT(A).
Findings:
5. In view of above mentioned reasons, the Additional Commissioner's order is arbitrary and unlawful, tantamounting to maladministration in terms of section 2(3)(i) of FTO Ordinance.
Recommendations:
6. F.B.R. to direct the Chief Commissioner to
(i)???????? take action under section 122A, as per law, and issue refund due within 21 days;
(ii)??????? ask the Additional Commissioner, who passed order under section 122(5A) apparently without any bona fide reasons, to explain within 15 days as to why disciplinary action may not be recommended against him, and also whether he would like to be heard in person;
(iii)?????? examine the desirability how an order set aside by the Commissioner Appeals was re-opened under section 122(5A) by Additional Commissioner, an officer junior to the Commissioner Appeals, so as to enable the F.B.R. to take appropriate measures for ensuring due decorum in the IRS; and
(iv)?????? report compliance within 30 days.
H.B.T./114/FTO????????????????????????????????????????????????????????????????????????????????? Order accordingly.