USMAN MAJEED CHOHAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2013 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 324 (2012)

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

----Ss.121, 115(3)(b) & 114(1)(vi)---Best judgment assessment---Purchase of motor vehicle---Non compliance of notice under S.114 of the Income Tax Ordinance, 2001---Ex parte assessment---Taxpayer contended that he being an orphan and below 25 years in age at the time of acquisition of motor vehicle, was not required to file return of income; and Assessing Officer unjustifiably ignored the statutory stipulation and illegally finalized assessment---Validity---Amendment in S.114(1)(vi) of the Income Tax Ordinance, 2001 required all owners of motor vehicles of 1000cc engine capacity and above to file a return of income was introduced through Finance Act, 2009 and became effective from tax year 2010 whereas the taxpayer purchased the motor vehicle in tax year 2009---Further, complainant being an orphan and less than 25 years of age on the date the motor vehicle was purchased enjoyed exemption from filing the return---Complainant was not required to file a return for tax year 2009 as he enjoyed exemption under S.115(3)(b) of the Income Tax Ordinance, 2001---Amendment in S.114(1)(vi) of the Income Tax Ordinance, 2001 was brought on the statute through Finance Act, 2009 and became effective from tax year 2010---Complainantwasnotrequiredtofileareturnintaxyear2009---Complainant was also not allowed reasonable time to respond to statutory notices---Invocation of S.121 of the Income Tax Ordinance, 2001 being against the statute and contrary to law was tantamount to maladministration under S.2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Commissioner to invoke revisionaryjurisdiction under S.122A of the Income Tax Ordinance, 2001, and decide matter afresh, as per law, after hearing the complainant.

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

----S. 2(3)---Maladministration---Opportunity of being heard---Complainant contended that he was not given reasonable time to respond to notices served on him as Federal Board of Revenue Circular/Instructions stipulated that at least 15 days be allowed for compliance whereas he was given only 12 days---Validity---Department failed to allow reasonable time to the complainant to respond to statutory notices which tantamounted to maladministration.

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

----Ss.9 & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---When maladministration was present, the Federal Tax Ombudsman exercised concurrent jurisdiction.

Writ Petition No.11545 of 2012 rel.

Muhammad Munir Qureshi, Advisor Dealing Officer.

Riaz Ahmad Raja, ITP Authorized Representative.

Muhammad Qaswar Hussain, DCIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---This complaint is against alleged illegal assessment made under section 121 of the Income Tax Ordinance, 2001 (the Ordinance) for Tax Year 2009.

2.The complainant purchased a motor vehicle (Toyota Corolla Model 2009) for Rs.12,69,000. As he did not file the required Return of Income, he was served with a notice under section 114 of the Ordinance. The notice was not complied with and so ex parte assessment was finalized under section 121 of the Ordinance. The complainant contends that as per stipulation obtaining in section 115(3)(b) of the Ordinance, he being an orphan and below 25 years in age at the time of acquisition of the motor vehicle in question, was not required to file a Return of Income. The Assessing Officer unjustifiably ignored the statutory stipulation and illegally finalized assessment under section 121 of the Ordinance. Further, he was not given reasonable time to respond to the notices served on him. He pointed out that CBR Circular instructions stipulated that at least 15 days be allowed for compliance whereas he was given only 12 days.

3.When confronted, the Deptt. filed a reply raising a preliminary objection that the Hon'ble FTO did not have jurisdiction to admit the complaint for investigation as the complainant had the remedy of filing an appeal before the first appellate authority open to him. On merits, the Deptt. said that the complainant was misconceived in his view thatsection 115(3)(b) of the Ordinance applied in his case and he was not required to file a Return.

4.Both sides have been heard and the record examined.

5.The preliminary Departmental objection has been examined and found to be misconceived for the reason that when maladministration was present the Hon'ble FTO exercised concurrent jurisdiction as held by the LHC in judgment dated 13-9-2012 (Writ Petition No.11545 of 2012). In the present case, Departmental failure to allow reasonable time to the complainant to respond to statutory notices is tantamount to maladministration). On merits, the amendment in section 114(1)(vi) of the statute requiring all owners of motor vehicles of 1000cc engine capacity and above to file a Return of Income was introduced through Finance Act, 2009 and became effective from Tax Year 2010 whereas the complainant purchased the motor vehicle in question in Tax Year 2009. Furthermore, the complainant being an orphan and less than 25 years of age on the date the motor vehicle was purchased enjoyed exemption from filing the Return.

Findings:

6.The complainant was not required to file a Return for Tax Year 2009 as he enjoyed exemption under section 115(3)(b) of the Ordinance. The amendment in section 114(1)(vi) of the Ordinance was brought on the statute through Finance Act, 2009 and became effective from Tax Year 2010. The complainant was thus not required to file a Return in Tax Year 2009. Also, the complainant was not allowed reasonable time to respond to statutory notices. Departmental invocation of section 121 of the Ordinance being against the statute and contrary to law is tantamount to maladministration under section 2(3) of the FTO Ordinance.

Recommendations:

7.FBR to direct the Commissioner to -

(i)invoke revisionary jurisdiction under section 122A of the Ordinance, and decide the matter afresh, as per law, after hearing the complainant; and

(ii)report compliance within 30 days.

CMA/194/FTOOrder accordingly.