UMER SHAHID Proprietor U.S. Motors, Lahore VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2012 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 463 (2011)

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Assessment of income was not the moot point in the complaint---Arbitrary, whimsical and capricious exercise of discretion by the Assessing Officer had been assailed, which was tantamount to maladministration.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.121 & 122---Establishment of the Office of Federal Tax Ombudsman Ordinance, (XXXV of 2000)---Best judgment assessment---Taxpayer contended that amended order passed under S.122(1) of the Income Tax Ordinance, 2001 was, in reality, an ex parte order as it was passed unilaterally on a date other than that cited in the notice---Validity---Amendment of assessment was actually finalized ex parte as envisaged under S.121 of the Income Tax Ordinance, 2001 but was wrongly cited by the Assessing Officer as a regular amendment under S.122 of the Income Tax Ordinance, 2001.

1975 PTD 58 (LHC); 1981 PTD 210 and 1995 PTD (Trib.) 1159 ref.

(c) Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Adjournment---Refusal to allow adjournment for the first time on the ground that it was sought without assigning any reason was patently unreasonable and an improper exercise of discretion by the Assessing Officer.

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(9) & 121---Amendment of assessment---Refusal of adjournment---Proceedings unilaterally on a single default---Validity---Refusal of adjournment sought was not conveyed to the taxpayer in time---Courier Service record confirmed that Assessing Officer's letter intimating refusal of adjournment was received by the complainant on 8-9-2011 when the due date for compliance of notice issued under S.122(9) of the Income Tax Ordinance, 2001 was 27-8-2011---Assessing Officer stated that he issued the refusal letter on 29-8-2011 but even that was two days after the due date---Assessing Officer had no plausible explanation for the delayed receipt of his refusal letter by the complainant---Decision to proceed unilaterally on a single default and on a date later than that specified in the notice was both arbitrary and legally untenable---Assessing Officer failed to take cognizance of alleged default by the complainant on the due date; and there was no order sheet entry for that date---Acts of omission and commission were tantamount to gross maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue to direct the Commissioner to vacate the order dated 30-8-2011 passed under S.122(1) of the Income Tax Ordinance, 2001 (Tax Year 2010) by invoking his reversionary jurisdiction under S.122A of the Income Tax Ordinance, 2001 and issue a fresh order, as per law, after giving opportunity of hearing to the complainant.

Muhammad Munir Qureshi, Advisor for Dealing Officer.

Rana Munir Hussain for Authorized Representative.

Usman Ahmad Khan, ACIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---This complaint is against illegal resort to amendment under section 122(1) of the Ordinance.

2.The Deptt on 22-7-2011 issued statutory notice for 28-7-2011under section 122(9) of the Income Tax Ordinance, 2001 (the Ordinance), for amendment of the complainant's income for Tax year 2010. The said notice could not be complied with as the time allowed was too short. The Deptt issue a reminder notice under section 122(9) of the Ordinance on 6-8-2011 for 20-8-2011, followed by another reminder notice under section 122(9) issued on 18-8-2011 for 27-8-2011.

3.The complainant filed an adjournment application on 22-8-2011 that was duly received but no order was passed by the ACIR. A second adjournment application was filed by the complainant on 27-8-2011 for 10-9-2011, but its receipt is denied by the Deptt. The complainant however has proof that it was received in the Taxpayer Facilitation Center (TFC) on 27-8-2011.

4.An amendment order under section 122(1) of the Ordinance was passed by the ACIR for Tax Year 2010 on 30-8-2011. On 8-9-2011, the complainant received a letter from the Deptt. intimating refusal of the adjournment sought by him on 22-8-2011forthehearingfixedfor27-8-2011. TCS Courier Service record shows that the cited refusal letter from the Deptt. was received by the Courier service on 7-9-2011.

5.The complainant contends that the following actions of the ACIR tantamount to maladministration under the FTO Ordinance:--

(a)repetitive issuance of statutory notices under section 122(9) of the Ordinance for Tax Year 2010 on 22-7-2011, 6-8-2011 and 18-8-2011;

(b)refusal of adjournment sought on 22-8-2011 and 27-8-2011; and

(c)amendment made on 30-8-2011 when the due date for compliance was 27-8-2011.

The above actions of the ACIR are assailed as perverse, arbitrary, oppressive, unreasonable, unjust, biased and a departure from established practice, procedure and principles laid down in the statute and in the judgments of the superior courts.

6.When confronted, the Deptt. filed a reply in which preliminary objection was taken to the exercise of jurisdiction by the Hon'ble FTO to take up for disposal a matter pertaining to assessment of income. On merits, it was denied that there had been any violation of law or procedure in the matter pertaining to amendment of complainant's income for Tax Year 2010. Rather, it was asserted that reasonable opportunitywasgivenforcomplianceofthenoticesissuedundersection 122(9) of the Ordinance.

7.The ACIR who issued the notices and passed the amendment order stated that in the face of continuing default of statutory notices issued by him he was left with no option but to finalize assessment on the basis of information available on record on 30-8-2011. He pointed out that from the date that the first notice under section 122(9) was issued on 22-7-2011tillthedatethattheamendmentorderwaspassedon30-8-2011, a total of 39 days had elapsed and the complainant had failed to respond to any of the three notices issued. As for the refusal of adjournment sought on 22-8-2011, the ACIR said that he had exercised his discretion under the law and rightly refused adjournment as the complainant was delaying compliance unnecessarily. The officer insisted that he had received only one adjournment application on 22-8-2011. With regard to passing the amendment order on 30-8-2011 when the due date for compliance was 27-8-2011, the ACIR explained that he had waited for three days after the due date, thereby allowing the complainant additional time for compliance but to no avail.

8.The AR of complainant deposed that although the amendment order was ostensibly passed under section 122(1), in reality this was an ex parte order as it was passed unilaterally on a date other than that cited in the notice. He referred to judgments cited as 1975 PTD 58 (LHC), 1981PTD210and1995PTD(Trib.)1159inwhichitwasheldthatan ex parte assessment finalized not on the day fixed for hearing but on a subsequent date for which the assessee had no notice was not tenable.

9.The preliminary objection raised by the Deptt. in their reply on the complaint has been examined and found to be misconceived as assessment of income is not the moot point in the complaint before the Hon'ble Federal Tax Ombudsman. Rather, the arbitrary, whimsical and capricious exercise of discretion by the ACIR has been assailed, which is tantamount to maladministration under the FTO Ordinance.

10.Therecanbenodoubtthatthenoticeshavebeenissuedbythe ACIR in an incoherent, slipshod manner thereby causing grave prejudice tothecomplainant. TheARofcomplainantrightlyarguedthat the amendment was actually finalized ex parte as envisaged under section 121 of the Ordinance but was wrongly cited by the ACIR as a regular amendment under section 122(1). Refusal to allow adjournment the first time that it was sought without assigning any reason was patently unreasonable and an improper exercise of discretion by the ACIR. Moreover, the ACIR's refusal of adjournment sought was not conveyed to the complainant in time. The TCS Courier service record confirmed that the ACIR's letter intimating refusal of adjournment was received by the complainant on 8-9-2011 when the due date for compliance of notice issued under section 122(9) was 27-8-2011. The ACIR stated that he issued the refusal letter on 29-8-2011 but even that was two days after the due date. The ACIR had no plausible explanation for the delayed receipt of his refusal letter by the complainant. The decision to proceed unilaterally on a single default and on a date later than that specified in the notice was both arbitrary and legally untenable. Examination of the assessment record confirmed that the ACIR had failed to take cognizance of alleged default by the complainant on the due date, that is 27-8-2011, and there was no order sheet entry for that date.

Findings:

11.The acts of omission and commission detailed above are tantamount to gross maladministration under section 2(3) of the FTO Ordinance.

Recommendations:

12.F.B.R. to direct the Commissioner to -

(i)vacate the order dated 30-8-2011 passed under section 122(1) of the Ordinance (Tax Year 2010) by invoking his revisionary jurisdiction under section 122A of the Ordinance;

(ii)issue a fresh order, as per law, after giving opportunity of hearing to the complainant; and

(iii)report compliance within 30 days.

C.M.A./267/FTOOrder accordingly.