DECISION /FINDINGS Brief facts of the case are that the complainant, an AOP, is a property builder/developer. For the assessm ent years 2000-2001, 2001-2002 and 2002-2003 returns were originally filed declaring 'NILincome which were later on revised on 23-1-2003 to declare losses of Rs,36,57,.147, Rs,3,67,576 and Rs,25,44,668. It is stated, that proceedings were initiated for normal assessment which were fully complied with and the complainant provided each and every possible detail at its own or as required. Thus by 10th February, 2003 the proceedings stood ripe but the assessments remained pending till June, 2003 when again notices were issued asking for further explanation/detail/ document, which were duly filed. On 23rd of June, 2003 the Taxation Officer, (Additional Commissioner) during the course of hearing showed his intention to impose Rs,10.00 (M) as tax which the complainant was to deposit immediately because as per Assessing Officer there was shortfall in his revenue collection. The A.R. Of the complainant opposed the levy of such huge tax without any justification. The Taxation Officer however remained adamant and put forward the proposal that the assessee should make an agreement and pay an amount of Rs,4.00 (M) as tax, and then he would make the assessment accordingly. The complainant and the Taxation Officer (Additional Commissioner) Mr. Abdul Shakoor allegedly arrived at the following verbal agreement:- -
(a) That gross booking receipts shall be estimated at Rs,45,000,000. Rs,50,000,000 and Rs,55,000,000 for the assessm ent years 2000-2001, 2001-2002 and 2002-2003 respectively.
(b) G.P. Rate shall be applied at 10%.
(c) The profit and loss expenses shall be allowed for each year at Rs,1,000,000 with the right to the assessee to agitate the matter in appeal against disallowance of necessaryexpenses.
(d) The agreement shall be effective if the assessee pays Rs,4.00 (M) by 30-6-2003 on the income thus arrived at.
The complainant filed revised returns to declare agreed gross booking receipts; G.P. @ 10% and P/L expenses as those were to be claimed. The returns were handed over by the A.R. Of the complainant to the Taxation Officer on 25-6-2003 who after scrutinizing the same placed them on record and raised no objection. The complainant also paid the agreed tax at above Rs,4.00 (M) on 30-6-2003 as per challans issued and validated by the Taxation Officer Sardar Muhammad Taj under his signature and official stamp. Later on, the complainant received a consolidated assessm ent order, dated 30-6-2003 passed by the Additional. Commissioner whereby the complainant was assessed at income of Rs,5,788,389, Rs,7,200,065 and Rs,7,103,573 for the respective years with total tax demand of over Rs,7.00 (M). It is stated that the Assessing Officer has taken wrong stand in the assessm ent order that the complainant did not perform his part of agreement as he did not revise the returns to show net income at Rs,3,500,000 Rs,4,000,000 and Rs,4,500,000 which according to the complainant was not agreed upon. The Assessing Officer has adopted the gross receipts declared in the revised returns but applied G.P rate of 15% instead of agreed rate of 10% and discarded the P/L expenses claimed in revised returns and instead made the P/L expenses declared in earlier returns as the basis. The Assessing Officer adopted the attitude of pick and choose what favoured him and discarded what did not suit him. It is stated that the verbal agreement, dated 23-6-2003 was arbitrarily violated by the Taxation Officer whereas the complainant had performed his part. It is prayed that the agreement be ordered to be performed by the Taxation Officer or the assessm ents be ordered to be framed on the basis of original returns and appropriate action be taken against the Taxation Officer for shaking the trust of the taxpayer and of the legal advisor reposed in him.
2. In reply the respondent has raised preliminary objection that the right of appeal was available to the complainant and thus the case fell outside the jurisdiction of the Federal Tax Ombudsman. It is further stated that during the course of assessment proceedings the complainant offered to revise the returns and deposit tax of Rs,4.00 (M) for the assessment years, 2000-2001 to 2002-2003. The complainant paid the tax of Rs,4.00 (M) and also filed revised returns but failed to declare income accordingly despite repeated verbal requests of the Additional Commissioner (Assessing Officer) reflecting the complainant's intention of challenging these assessments in appeals even if the, tax deposited was admitted to be correct tax on agreed basis. It is further stated that since all the terms and conditions of the agreement were not fulfilled by the complainant, the Taxation Officer was left with no option but to make normal assessments. The receipts were estimated on the basis of complainant's revised returns, The G.P. Rate was applied at 15% in. View of the parallel case and P&L expenses were allowed to the extent of their verifiability. No maladministration is stated to be involved.
3. The representatives of the both sides attended and reiterated their contentions. The AR of the complainant submitted that maladministration was the only cause of action against which the complaint was lodged. The Taxation Officer acted highhandedly bymisusing his authority in not fulfilling the agreement on his part and where the complainant alleges maladministration as in the instant case the Hon'ble Federal Tax Ombudsman will have the jurisdiction. He further submitted that the respondent (RCIT) has admitted that there was an agreement but failed to provide reply to the full facts. Of the complaint. He also contended that the respondent erred in his comments to state that the complainant was apprised of the defects and discrepancies in the declared results while the fact was that after receipt of revised returns on 25-6-2003 the Taxation Officer did not object either verbally or in writing till the finalization of the assessment which was totally against the terms of the agreement. The respondent's representative submitted that there existed no written agreement and as such the complainant cannot substantiate his viewpoint. He further submitted that according to the C.B.R.'s Circular No,17 of 1990, dated 20-12-1990 an agreement was required to be written and signed by the ITO, IAC, CIT and the assessee where income involved exceeded Rs,200,000. The AR of the complainant contended that it was the duty of the Assessing Officer to have followed the circular instructions and by not doing so he -acted beyond lawful authority and deceived the complainant which constituted an act of sheer maladministration.
4. The contentions and arguments of the both sides were considered and relevant record was examined. In reply the respondent has admitted that there was an agreement, though vebal, between the Assessing Officer and the complainant as is also evident from the assessment order and the reply of the respondent. The contention of the Department is that during assessment proceedings the AR of the complainant tad agreed to payment of tax at Rs, 40 Lacs for all the three years on the agreed income of Rs,3,500,000, Rs, 4,000,000 and R.4,500,000 based on the offered estimation of receipts at Rs,45,000,000 Rs,50,000,000 and Rs,55,000,000 and application of G.P. Rate of 10%. The complainant had filed revised returns on 25-6-2003 declaring the following results:- Year Receipts G P a 10% Less Expenses as claimedIncome 2000- 0145,000,0004,500,000Rs,5,037,949 (537949)
2001- 0250,000,00050,00,000Rs,1,715,399 3284601 2002- 0355,000,0005,500,000Rs,2,544,668 2955332 As according to the Department the complainant did not revise the income according to the agreement, the assessm ent was made under normal law in the following manner;-- 2000-01 2001-02 2002-03 Receipts Rs,45,000,000Rs,50,000,000Rs,55,000,000 G.P. CQ 15% being declared/applied in parallel cases.Rs,6,750,000 Rs,7,500,000 Rs,8,250,000 Less expenses claimed. Rs,3.657 147 Rs,3,092,853Rs,367,576 Rs .7,132 ,424Rs,2,544,668 Rs,8,250,000 P&L Additions Rs,2,695 536 Rs,67 641 Rs . 1,398,240 Total income Rs,5 788,387 Rs,7,200,065 Rs 7103 573 Perusal of above data shows that for assessment purpose the receipts have been adopted as declared by the complainant in he revised returns but the G.P. Rate .Has been applied at 15% against agreed rate of 10%. The expenses claimed under the profit and loss account had been adopted for the assessm ent years 2000-200 1 and 2001-2002 as declared in the returns filed earlier on 23-1-2003 instead of those claimed in the revised returns filed on 26-5-2003 and after making add backs income was assessed at Rs,5788387, Rs,7200065, Rs,1103573 against allegedly agreed income of Rs,3,500,000 Rs,4,000,000 and Rs,4,500,000 for the respective years. The contention of the complainant on the other hand is that he was not supposed to revise the , figures of income but he had to claim actual expenses which exceeded Rs,1,000,000 for each year and were to be allowed by the Assessing Officer at Rs,1,000,000 and determine the income at agreed figures fcr which the complainant was given challans for payment of tax. The contention of the complainant that challans for payment of specific tax demand of Rs,1,191,300, Rs,1,383,800 and Rs,1,450,500 for the respective years were issued on the basis of income agreed to be assessed by the Taxation Officer carries force. The Department has failed to explain why after issuing challans of certain amounts assessm ent was made creating a further demand. The entire proceeding by the Assessing Officer lacks bona fide and amounts to fraud on the statute as well as the complainant and the assessm ent was made in violation of the alleged agreement by picking up gross receipt from the latest revised returns while the expenses claimed in the returns filed much earlier were considered.
The contention of the complainant that as per agreement the expenses were to be allowed at Rs,10,000,000 per year while in respect of disallowances over and above Rs,10,000,000 he was to exercise his right of appeal seems plausible because the expenses claimed in the latest revised returns much exceeded Rs,10,000,000 for each year which were to capacitate both the Assessing Officer and the complainant to exercise their respective agreed options. The Assessing Officer also acted in violation of the C.B.R.'s Circular instructions on the subject of agreed assessment and created such a bad situation. The complainant was first fraudulently trapped by the Assessing Officer to immediately enhance his tax collection and then deceived. The action of the Assessing Officer is arbitrary, unjust, oppressive and lacks bona fide. Maladministration is thus established. In the circumstances the Federal Tax Ombudsman has jurisdiction. The Assessing Officer has acted in a mala fide manner by adopting a process which suffered from malice, ulterior motive to meet the target by misrepresentation and fraudulent manner.
5. It is recommended than--
(i) The Commissioner to reconsider the facts and circumstances of the case by invoking his jurisdiction under section 122A of the Income Tax Ordinance, 2001 and pass necessary order in accordance with the agreement made by the Additional Commissioner/Taxation Officer with the complainant, dated 23-6-2003.
(ii) The Assessing Officer be subjected to counseling and kept under observation for six months and a periodical report after every three months be submitted to the Registrar.
(iii) Compliance be reported regarding para(i) within 30 days and after every three months with regard to para (ii).