Syed GHAZANFAR ALI SHERAZI VS SECRETARY, REVENUE DIVISION ISLAMABAD, 2013 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 243 (2012)

(a) Civil Procedure Code (V of 1908)---

----O.XLI, R.23---Remand order---Effect---Such order would determine parameters of subsequent adjudication.

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

----S.2(3)---Maladministration---Scope---Ex parte order by tax authorities, passing of---Validity---Failure to pass a judicious orderand passing of repetitive ex parte order without proof of service of notice upon assessee for being arbitrary would tantamount to maladministration.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Syed Ali Imran Rizvi, Authorized Representative.

Ms. Fauzia Adil, DCIR and Talat Chaudhry, DCIR Departmental Representatives.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---This complaint is against alleged victimization of the complainant by Departmental functionaries at the behest of outside elements through arbitrary assessment of income, raising illegal tax demand against him.

2.The complainant, a practicing lawyer, was assessed to income tax vide amended assessment order dated 30-11-2011 passed under sections 122(1)/122(5) of the Income Tax Ordinance 2001 (the Ordinance), determining Total Income at Rs.7,760,000, with resultant taxliabilityofRs.l,940,000.Theassessmentorderinvolvedanaddition of Rs.7,580,000 as unexplained income brought to tax under section 111(1)(b) of the Ordinance. The amount in question was claimed by the complainant to have been loaned to one Al Haaj Hisam-ud-Din, since deceased (8-2-2009). Mr. Hisam-ud-Din had executed a promissory note on receipt of the amount and after his death the complainant sought to recover the amount from the legal heirs. He filed a suit before the Additional District Judge, Lahore, and obtained a decree in his favour. Mr. Adnan Khan, son of the deceased, resident of the United Kingdon filed a complaint before Mr. Mustafa Ashraf, Chief Commissioner, Inland Revenue, alleging massive income tax evasion by the complainant as he had no ostensible means to generate funds amounting to Rs.7,580,000. The Deptt. conducted an investigation and probed the sources identified by the complainant to explain mobilization of Rs.7,580,000. After evaluating the complainant's explanation, the Deptt. held the amount to be unexplained as to source and brought the same to tax under section 111 of the Ordinance.

3.The assessment order was contested in first appeal by the complainant and disposed of by the Commissioner IR(Appeals) vide Order No.18 dated 20-2-2012 remanding the matter back to the Assessing Officer for de-novo proceedings after giving the complainant proper opportunity of hearing. While remanding the assessment the first appellate authority accepted the complainant's explanation regarding the following amounts:--

The complainant filed second appeal against the order of the CIR (Appeals) before the ATIR. He also requested the DCIR to wait till the disposal of the complainant's second appeal before the Tribunal. The Deptt. did not file appeal against the order passed by the CIR (Appeals).

4.The DCIR, Ms. Fauzia Adil, did not wait for the disposal of complainant's second appeal by the Tribunal and fixed the case for hearing. She contends that when the complainant did not respond to any of the three notices issued by her, she had no option but to finalize re-assessment ex parte vide order dated 20-6-2012. The re-assessment was made in exactly the same manner as done in the earlier order of assessment.

5.The complainant submits that he did not receive any notice claimed to have been issued by the DCIR and alleges that the Assessing Officer had blindly repeated the earlier treatment. She had even ignored the sources of investment accepted by the CIR (Appeals), giving no credit to the complainant in her computation of his Total Income for the amounts involved. The complainant alleges that the DCIR did so simply to please the CCIR and failed to appraise the evidence on record judiciously and paid no heed to the acceptance of his explanation regarding two sources of investment by the CIR(Appeals). According to the complainant, at the very least his explanation to the extent of amount of Rs.5,766,673 should have been accepted by the DCIR and her failure to do so is clear evidence that she acted arbitrarily and whimsically.

6.When confronted, the Deptt filed a reply affirming propriety of the treatment accorded by the DCIR in re-assessment.

7.Both sides have been heard and the record perused.

8.It is established law that a remand order determines the parameters of the subsequent adjudication. In this case the DCIR was required to hear the complainant and pass a judicious order in the light of the facts discussed, namely, the credits received by the complainant.

Findings:

9.Failure to pass a judicious order, and, the passing of a repetitive order ex parte, without any proof of service of any notice upon him, being arbitrary is tantamount to maladministration.

Recommendations:

10.FBR to direct the Commissioner to---

(i)exercise revisionary jurisdiction under section 122A of the Ordinance to revisit the re-assessment order dated 20-6-2012, as per law; and

(ii)report compliance within 30 days.

SAK/196/FTOOrder accordingly.