FINDINGS /DECISION The Complainant alleges, arbitrary conduct in completion of assessment for the assessment years 2001-2002 and 2002-2003. The facts stated in the complaint briefly are, that the Complainant an individual filed Income Tax Returns for the assessment years 2001-2002 and 20022003 declaring income at Rs.160,000 and Rs.214,125 respectively for the above years. But in spite of the fact that these returns were filed under Self-Assessment Scheme, the Complainant received a notice under section 62 alongwith a notice under section 61 of the repealed Ordinance for the assessment year 2002-2003, dated 10-4-2003 for completion of assessment under the normal law. On receipt of the two notices as above the Complainant came to know that the Complainant was deprived of the benefit of Self-Assessm ent Scheme on the ground that the Complainant had not complied with a short document notice, dated 29-1-2003 although the said notice was never served on the Complainant. On inspection of the assessment record the complainant came to know that the said notice of short document was served on one Mr. Ibrar Ali who was indicated as an employee of the complainant. The notice under section 62, dated 10-4-2003 also indicated that the Complainant had allegedly refused to receive notices under sections 61 and 58 repealed Ordinance and the order, dated 14-3-2003 excluding his return from Self-Assessment Scheme although said order and notices were never received by him. The complainant submitted reply to the notice under section 62 vide his letter, dated 22-4-2003 to the Taxation Officer indicating that the notice of short document, dated 29-1-2003 was never served on the complainant and the same had not been received by him but the Taxation Officer without considering the reply of the complainant again issued notice under section 61, dated 3-9-2003 for compliance for 10-9-2003 alongwith a letter requisitioning various details. The Complainant again pointed out illegalities in the process of completion of assessm ent under the normal law. Another notice under section 61 was issued by the Taxation Officer on 17-12-2003 for 16-1-2004 which was complied with and necessary details furnished and the Taxation Officer promised to complete the assessment under Self-Assessment Scheme but the complainant was surprised to receive a combined assessment order for the assessm ent years 2001-2002 and 2002-2003 under the normal law indicating income assessed at Rs.200,000 and Rs.300,000 for the above two years. The above assessments completed were illegal because there were no proceedings conducted for the assessment year 2001-2002 and no notice excluding the return for the year, 2001-2002 from Self-Assessment Scheme was served on the complainant. Besides notices under section 61 or 62 of the repealed Ordinance were neither served on the complainant nor received by him for the assessment year 2001-2002. For the assessment year 2002-2003 the return of the complainant was excluded from Self-Assessment Scheme illegally indicating arbitrary conduct of the Taxation Officer Circle 11 Zone-A Lahore falling within the domain of maladministration. The repeated issuance of notices under section 61 of repealed Ordinance for the assessm ent year 2002-2003 also fell under maladministration causing grievance to the complainant.
2. The Respondent's reply has been forwarded by the RCIT Eastern Region Lahore wherein a preliminary objection has been raised challenging the admissibility of the instant complaint on the ground that in view of the bar imposed by the provisions of section 9(2)(b) of the Establishment of Office Of Federal Tax Ombudsman Ordinance, 2000 (hereinafter referred to as FTO Ordinance), the complaint could not be entertained because the issue involved in the complaint related to the assessm ent of income for which remedy of appeal/revision was available to the Complainant under the relevant statute.
3. On merit it has been submitted that the assessment for the year, 2002-2003 was completed under the normal law because the complainant did not respond to the short document notice issued by the Taxation Officer. The complainant also refused to receive the order, dated 14-3-2003 excluding the return from Self-Assessment Scheme and notices under section 61/58 of the repealed Ordinance sent alongwith the above order. The R-CIT has submitted that the contentions of the complainant that service of notice for short document was not valid is not correct because this notice was served on an employee of the Complainant Mr. Ibrar Ali who received the notices earlier. The reply furnished by the Complainant in response to notice under section 62 was incomplete and evasive hence assessment for the above year was completed under the normal law. For the assessm ent year 2001-2002 it has been submitted by the R-CIT that the return did not qualify for Self-Assessm ent Scheme as income declared was lesser than the income declared for the last assessm ent year i.e. 2000-2001 hence assessment for this year was also completed under the normal law.
4. Ch. Muhammad Aslam, Advocate, attended for the complainant and reiterated the contentions made in the complaint. The AR submitted that the stand taken by the Revenue Department regarding the service of notice of short document was not correct because service of any notice A had to be made keeping in view the provisions of section 154 of the repealed Ordinance read with section 27 of the General Clause Act which provisions do not envisage service of notices on an employee. The AR relied on the decision of the Federal Tax Ombudsman reported as 2004 PTD 758 wherein it was held that service of notices on an employee not authorized to receive the notices was not according to the provisions of section 154 of repealed Ordinance read with section 27 of the General #TBS PTD #TBE Clause Act. The second point emphasized by the AR was that estimates of income adopted by the Taxation Officer for the two years were bald estimates without any basis and in view of the decision of Honourable Lahore High Court reported as 2004 YLR 3100 the assessm ent order was illegal in view of the provisions of section 24A of the General Clauses Act. The DR Malik Ghulam Rasul, D-CIT, reiterated the submissions made by the R-CIT in his report.
5. The complaint and the Respondent's reply have been examined and the rival arguments considered. The preliminary objection raised on behalf of the Revenue that in view of the bar imposed by the provisions of section 9(2)(b) of the FTO Ordinance, the complaint was not admissible is not correct because the instant complaint is not only against assessment completed by the Taxation Officer in violation of the provisions of law but the procedure adopted in completion of the above two assessments is also not supported by any provisions of Self- Assessm ent Scheme resulting in arbitrary conduct of the Taxation Officer hence the preliminary objection raised by the Revenue is overruled.
6. An investigation into the facts of the case revealed that the two assessments completed are full of illegalities and leave much to be desired. Taking up the assessment for the year 2002-2003 first, the Income Tax Return for this year was filed under Self-Assessment Scheme issued by C.B.R. Vide Circular No.7 of 2002, dated 15-6-2002. The Taxation Officer was required to issue a short document notice keeping in view the. Provisions of para. 8 of the above scheme. If the taxpayer did not comply with the short document notice within 15 days of the last date of compliance of the above notice the Taxation Officer was required to exclude the return from Self-Assessment Scheme within fifteen days of the above date. The Taxation Officer could not issue any order of the exclusion of return from Self-Assessm ent Scheme after the above statutory period. The provisions of para. 8 of the above Self-Assessm ent Scheme are reproduced below.
"8. PROCESSING OF RETURNS FILED UNDER THE SCHEME (a) The Assessing Officer, will make initial scrutiny of the returns with respect of the provisions of Scheme to determine the acceptability thereof.
(b) In case of non-filing of documents as required by this Scheme, a notice shall be issued to the person indicating the deficiency .To be made up within 15 days of the receipt of such notice.
(c) In cases of non-compliance within the time so allowed, the DCIT shall exclude the case from the SAS by passing a speaking order immediately but not later than fifteen days from the expiry of prescribed time."
7. In the instant case the short document notice was issued on 29-1-2003 it was served on Mr. Ibrar Ali who was not authorized to receive the notices on behalf of the complainant. This notice was served on 1-2-2003 and was to be complied within 15 days i.e. By 16-2-2003 but allegedly there was no compliance. The Taxation Officer had to issue an order under para. 8(c) by 2-3-2003 to exclude the return from Self-Assessm ent Scheme but not later than 2-3-2003. However, no such order was issued by the above date. The order for of the return from Self-Assessment Scheme was made on 14-3-2003, which is an order without any jurisdiction. The Complainant has challenged the validity of the service of notice of short document, dated 29-1-2003. According to the Revenue this notice was served on Mr. Ibrar Ali who is said to be an employee of the complainant and also received notices on the earlier occasions. The service of any notice had to be made according to the provisions of section 154 of repealed Ordinance which provisions do not allow service of notices on a person not authorized by an assessee to receive any notice. The Revenue Authorities have failed to produce any evidence that the said Mr. Ibrar Ali was authorized to receive notices on behalf of the complainant. Thus the service of short document notice was void and superstructure built on defective service of notice and order of exclusion of the return from Self-Assessment Scheme without any jurisdiction must crumble down.
8. For the assessm ent year 2001-2002 no proceedings for assessment were conducted but still assessm ent was made. The return for this year also was filed under Self-Assessment Scheme. The Revenue Authorities have contended that this return did not qualify for S.A.S. As income declared was lesser than the income declared for last year. There is no cavil with the above proposition but it was the duty of the Taxation Officer to inform the complainant that his return could not be accepted under Self-Assessm ent Scheme and that normal assessment will be made. The most serious objection, however, is that for this year no notice under section 61 or 62 of the repealed Ordinance was issued but assessm ent was completed. The law does not provide completion of assessm ent without issuance of notice under section 61 or 62. Non-issuance of notices as above implies completion of assessm ent without allowing the complainant an opportunity of being heard which renders the assessm ent illegal. The AR of the Complainant has also agitated that the income estimated for the two years is without any basis, which G militates against the provisions of section 24A of General Clauses Act (X of 1897) which objection is also correct.
9. From the above facts maladministration falling within thelH provisions of section 2(3)(i) (a), 2(3)(i)(b) and 2(3)(ii) of the FTO Ordinance is proved beyond any shadow of doubt on account of incompetence, inefficiency and inaptitude, in performance of duty.
The Revenue Authorities have failed to prove that the above actions of Taxation Officer were bona fide and for valid reasons.
10. It is therefore recommended that:--
(i) The CIT Zone-A Lahore takes suo motu action under section 122A of Income Tax Ordinance, 2001 to revise the above two assessm ents according to law.
(ii) The CIT institutes an enquiry against the Taxation Officer concerned for mishandling the assessm ent as above and takes necessary action against the officer concerned.
(i.e) The compliance report be submitted within 45 days of receipt of these recommendations by the Revenue Division.