FINDINGS /DECISION ' The complainant a Public Limited Company derives income from transmission, purification, supply of natural gas and manufacturing of gas meters. The complainant company is an existing income, tax assessee on National Tax Number 34-01-6712242 of Large Taxpayers Unit, Karachi.
2. The complainant has challenged the initiation of proceedings under section 122 of the Income Tax Ordinance, 2001 by the Additional Commissioner of Income Tax/TO-B, Audit Division, Large, Taxpayers Unit, Karachi relating to the assessment year, 1998-99. The facts of the case are briefly stated as under:--
3. The complainant company had filed return of income for the assessment year, 1998-99 under section 55 of the repealed Income Tax Ordinance, 1979 declaring loss of Rs,686,563,752 which was assessed under section 62 of the aforesaid Ordinance vide order, dated 29th May, 1999 at an income of Rs, 527,050,446 which included dividend income of Rs,6,00,000. The assessment order was subsequently rectified under section 156 of the repealed Income Tax Ordinance, 1979 on 16-6- 1999 resulting in determination of assessed income to Rs,383,114,446. The company filed an appeal before the Commissioner of Income Tax (Appeals-V), Kafachi which was decided vide appellate order, dated 31-7-1999 and as a result thereof a loss of Rs,207,551,393 was assessed vide order passed under section 132 of the repealed Income Tax Ordinance, 1979, dated 18-1-2000.
4. The department preferred an appeal before the Income Tax Appellate Tribunal, which was decided, vide order No, ITA 663/KB of 1999-2000, dated May 20,2000. The departmental appeal was dismissed by the learned Income Tax Appellate Tribunal. Thereafter the order passed under sections 62, 156 and 132 of the repealed Income Tax Ordinance, was revised under section 66A of the said Ordinance by the then Inspecting Additional Commissioner, Range-I, Special Zone, Karachi vide his order, dated 18-12-2000 which resulted in redetermination of loss from 207, 551, 393 to 201, 037, 393 and after addition of the brought forward loss of 1997-98 of Rs,243, 743, 161 the loss for the year under consideration was determined at Rs,444, 780, 554. The complainant company filed an appeal before the Income Tax Appellate Tribunal against the order under section 66A of the repealed Income Tax Ordinance, 1979. The appeal was decided vide order I.T.A. No, 1102/KB of 2000- 2001, dated 27-3-2002. The learned Income Tax Appellate Tribunal rejected the appeal for the year under consideration.
5. The complainant has alleged that the Additional Commissioner of Income Tax/TO-B, Large Taxpayers Unit, Karachi has unlawfully invoked the provision of section 122 of the Income Tax Ordinance, 2001 as the said section authorizes the Commissioner or any other officer to whom the powers are delegated to amend the order passed under sections 59, 59A, 62, 63 or 65 of the repealed Ordinance and does not include the orders passed under sections 66A, 132 and 135 of the said Ordinance. It is stated that the aforesaid submissions are further verified from the restriction specified in Clause (a) of subsection 5 of section 122 of the Income Tax Ordinance, 2001 as the application of the said section has been restricted to assessments completed "under this Ordinance" and the words "or the Repealed Ordinance" were inserted through S.R.O. 633(I)/2002, dated September 14, 2002 wherein the application has been restricted for making any assessment for the year beginning on the 1st of day of July, 2002. The assessment for the assessment year, 1998-99 had been finalized under section 62 on May 29, 1999 which merged with the order passed under section 66A and Appellate Orders under sections 132 and 135 of the repealed Ordinance prior to June 30, 2002. Hence the provision of section 122 could not be invoked in this case. It is alleged that the action of the Additional Commissioner of Income-tax initiated under section 122 of the Income Tax Ordinance, 2001 is a process which is contrary to law, rules and regulation. The issuance of notice under section 122 of the Income Tax Ordinance, 2001 without taking into consideration the provision of law is arbitrary, perverse, unreasonable mala fide, oppressive and unlawful and amounts to maladministration. The complainant has prayed for issuance of directions to restrain the respondents from passing any order in pursuance to the notice issued under section 122 of the Income Tax Ordinance, 2001, dated 11-7-2003.
6. The respondents have filed parawise comments stating therein that the CIT(Appeals) vide his order No, 1470/V, dated 31-7-1999 allowed the two claims agitated by the complainant company i,e, financial charges on account of late payment of Gas Development Surcharge and Gas purchased bills as an admissible expenditure. Subsequently the loss was further, reduced to Rs,456,460,554 vide order under sections 132/156 of the repealed Income Tax Ordinance, 1979, dated 5-6-2000 due to revision of Brought Forward loss for the assessment year 1997-98. The order was again rectified under section 156 on 20-12-2000 and the loss for the year was determined at Rs,531,912,554 due to appeal effect for the assessment year, 1997-98. It is further stated that the learned Income Tax Appellate Tribunal vide his order, dated 20-5-2000 confirmed the order of CIT(Appeals). It is also reported that the IAC Range-1 Special Zone, Karachi vide his order under section 66A of the repealed Ordinance, dated 18-12-2000 modified the order of the Assessing Officer by making addition under section 24(i) of Repealed Income Tax Ordinance. It is also stated that the learned Income Tax Appellate Tribunal in its consolidated order including order bearing I.T.A. No, 1102/KB of 2000-2001 (assessment year, 1998-99) cancelled the order on the point of jurisdiction without giving any finding on merits of the case.
7. It is pleaded that in the order under section 66A, dated 18-12-2000 addition was made under section 24(i) of the repealed Ordinance and the same was cancelled on the point of jurisdiction by the Income Tax Appellate Tribunal. The notice under section 122 of the Income Tax Ordinance, 2001 has now been issued on a different issue. Thus the issue taken up now is not related with the issue taken up earlier under, section 66A of the repealed Income Tax Ordinance, 1979. Moreover, the notice under section 66A issued on 7-3-2002 did not culminate into passing the assessment order and therefore, no adverse inference could be drawn in this behalf. The assessment for the year, 1998-99 was finalized on May 29,1999 and the same was not merged in the order passed under section 66A of the repealed Ordinance and the appellate orders passed under sections 132 and 135 of the repealed Income Tax Ordinance, 1979 prior to June, 30, 2002. It is reiterated that since the issue agitated under section 66A of the repealed Income Tax Ordinance, 1979 was different from the issue agitated under section 122 of the Income Tax Ordinance, 2001 which were never subject matter of the order passed under section 132 or 135 of the repealed Income Tax Ordinance, 1979. It is further, stated that the Income Tax Ordinance, 2001 is not included in the "Relevant Legislation" in section 2(b) of the Federal Tax Ombudsman 2000, therefore, the plea taken was not entertainable by the Honourbal Federal Tax Ombudsman. The B respondents have reiterated that action initiated under section 122 was proper and in accordance with law and therefore no maladministration was committed by the taxation officer.
9. The arguments of both the sides have been considered. The records of the case produced by the Departmental Representative have also been examined. The Authorised Representative of the complainant argued that subsection 1 of section 122 of the Income Tax Ordinance, 2001 authorized the Commissioner of Income Tax to amend the order passed under the specific sections of the repealed Income Tax Ordinance, 1979 i,e, Sections 59, 59A, 62, 63 or 65 only. This does not include the order passed under section 66A/.132 and 135 of the said Ordinance. He referred to the decision made by this forum on this issue in Complaints Nos.487, 488, 489, 490 & 491-K/2003 wherein it has been held that the legislature has specifically excluded the assessment made under section 66A of the repealed Ordinance from the ambit of section 122 of the Income Tax Ordinance.
10. The Authorised Representative of the complainant further, argued that the assessment order passed under section 62 of the repealed Income Tax Ordinance, 1979 on 29-5-1999 did not exist anymore as the same has been merged with the orders passed under sections 66A, 132 and 135 of the Income Tax Ordinance 1979. The order therefore, could not be amended under section 122 of the Income Tax Ordinance, 2001. He has cited the following reported decisions in support of his arguments in this behalf:-- "1992 SCM R 523 Re:-Commissioner of Income Tax v. Farrukh Chemical Industries, 1992 PTD 932 Re: Glaxo Laboratories Limited v. Inspecting Additional Commissioner of Income-tax 1992 SCM R 663 = 1992 PTD 545 Re: A & B Food Industries Limited v. Commissioner of Income-tax. 2002 PTD 150 Re:-- Messrs Sui Southern Gas Company v. Federation of Pakistan."
' The complainant's A.R. During the course of hearing pointed out that the Inspecting Additional Commissioner of Income Tax Special Zone, Karachi had issued a show-cause notice under section 66A vide No, 175, dated 7-3-2002 exactly on the same issues which have now been raised in the notice under section 122, dated 11-7-2003. The complainant company furnished the detailed reply in response to aforesaid show-cause notice vide letter Re. No, DGMF(TF)SSGC-2002, dated 20th March 2002 whereby objections raised in the said notice were rebutted. The Additional Commissioner in his notice, dated 11-7-2003 has also referred to the reply submitted by the complainant vide letter, dated 20-3-2002. It is stated after submission of reply, dated 20-3-2002 no action was taken and the matter was barred by limitation of tithe on 29th May, 2003 in terms of subsection 2 of section 66A of the repealed Income Tax Ordinance, 1979. It is pleaded that the issuance of notice under section 122 of the Inc6me Tax Ordinance, 2001 is without lawful authority and falls within the definition of maladministration as defined in subsection 3 of section 2 of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. The A.R. Has furnished photocopy of the decision of Honourable High Court of Sindh in Constitution Petition No, D-1876 of 1994 in support of his arguments that the action initiated through notice, dated 7-3-2002 was hit by limitation of time on 29th May, 2003.
12. The Departmental representative pleaded that since the Income Tax Ordinance, 2001 was not included in the "relevant legislation" in section 2(6) of the Federal Tax Ombudsman Ordinance, 2000 the complaint is not entertainable. He also reiterated the plea taken in the parawise comments of the respondents.
13. The objection regarding jurisdiction in terms of section 2(6) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 raised in the parawise comments and emphasized by the Departmental Representative during the course of hearing is misconceived and misplaced.
This has nothing to do with the jurisdiction of this forum. Rather it negates/repudiates the usual objection taken by the respondents regarding jurisdiction in terms of section 9(2)(b) of the Federal Tax 'Ombudsman Ordinance, 2000. This contention supports the view that section 9(2)(b) is no bar to the jurisdiction of the Federal Tax Ombudsman. Because it bars jurisdiction into matters which relate to assessm ent in respect of which appeal, review or revision are available under the Relevant Legislation. As according to the department Income Tax Ordinance, 2001 is not included in the list of Relevant Legislation the bar will not apply. Further the complaint relates to notice under section 122 and the assessm ent which is without jurisdiction. Where any order passed process initiated or action taken is without jurisdiction it cannot be said to relate to the subject-matter it purports to cover. It will be traversty of justice if it accepted that although the impugned order/action is without jurisdiction but as it relates or affects assessment the federal Tax Ombudsman cannot investigate. Furthermore no appeal is provided against an action taken under section 122 for reopening the case.
14. A perusal of section 122 of the Income Tax Ordinance, 2001 makes it clear that it does not authorize the Commissioner or any authority to amend the assessments which have been framed under section 66A of the repealed Ordinance. The said section specifically provides that only assessm ent made or treated to be issued under section 120 or issued under section 121 of the Income Tax Ordinance, E 2001 or issued under sections 59, 59A, 62, 63 or 65 of the repealed Ordinance can be amended. There is no mention of sections 66A, 132 and 135 of the repealed Ordinance. The arguments of the complainant's A.R. In this regard are quite cogent and well founded. The notice issued by the Additional Commissioner, dated 11-7-2003 is without jurisdiction, contrary to law and therefore, tainted with maladministration. As already discussed above, the respondents have laid extra ordinary emphasis in the parawise comments on the fact that impugned notice under section 122 has now been issued on absolutely different issues which were not considered in the orders earlier passed under section 66A, 132 or 135 of the repealed Income Tax Ordinance, 1979. The departmental representative has also reiterated this point in his arguments during the course of hearing of complaint.
15. It is pertinent to point out that the respondents had already confronted the complainant company on the same issue through show-cause notice issued under section 66A, dated 7-3- 2002. The facts obtaining on record also confirmed that no further action was taken in this regard after receipt of complainant's reply, dated 20-3-2002. The departmental representative has failed to produce the relevant order sheet, which could show as to how and when the proceedings initiated under section 66A were concluded.
16. The above facts clearly establish harassment, neglect, inattention incompetence, and ineptitude exercised by the taxation officer and fall in the definition of maladministration,
17. In view of the above it is recommended as under:--
(i) The notice issued under section 122 of the Income Tax Ordinance, 2001, dated 11-7-2003 relating to the assessm ent year, 1998-99 be withdrawn and cancelled.
(i1) The compliance be made within 30 days.