FINDINGS /DECISION This complaint alleges delay in issuance of reward for furnishing information about tax evasion.
2. Briefly, the facts are, that the Complainant is a registered informer with the Income Tax Department having a code number. The Complainant furnished information on 25-11-1999 abbut one Mr. Muhammad Shakeel who was dealing in cloth in shop No.28 of Abu Bakar Block, Pakistan Market, Lahore. This was followed by further information on 4-1-2000 about the Bank Account maintained by Mr. Shakeel, in United Bank Ltd. Masjid Wazir Khan Branch, Lahore, Mr. Shakeel, till then did not exist on NTN of the Department hence he was registered at NTN 5-8-TR-17305 and proceedings initiated which revealed that Mr. Shakeel was deriving income from commission on sale of cloth and also held an agency for State Life Insurance Corporation.
Statutory notices were issued under sections 56, 61, 62 and 68 etc. Of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) resulting in a consolidated assessment for the years, 1996-97 to 1999-2000 framed under section 62 of the repealed Ordinance on 26-11-2001 determining Income as under:-- Year Declared Assessed 1996-97 Rs.20,000 Rs.250,000 1997-98 Rs.25,000 Rs.200,000 1998-99 Rs.30,000 Rs.125,000 1999-2000 Rs.35,000 Rs.100,000 The total tax demand for the assessment years 1996-97 to 1999-2000 as per demand notice, dated 26-11-2001 came to Rs.83,050 in addition to which Rs.22,000 was deposited under TAS-2000 by declaring cash A relevant to the assessment year 1998-99 at Rs.200,000. The Complainant now claims reward on aggregate tax of Rs.105,050 (=Rs.83,051 + 22,000).
3. The Respondent have forwarded para-were comments by R-CIT, Eastern Region, Lahore which (i) admit receipt of the information from the Complainant, (ii) framing of assessment for the years 1996-97 to 1999-2000, and (i.e)' agree that "concealment of unexplained investment of capital was established for the assessm ent years, 1996-97 and 1997-98 and to the tune of Rs.100,000 in both the years". The RCIT is of the view that the reward at 25% of the tax on concealed income for the years 1996-97 and 1997-98 comes to Rs.7,600 but the recovery has been made to the extent of Rs.5,000 only. Quoting the Reward Rules, the. RCIT has conveyed that reward becomes payable when the tax sought to be evaded has been recovered at least to the extent of the reward to be paid. It is further asserted by the RCIT that as per C.B.R. Circular C. No.63(88) IT.IV/75/PT, dated 30- 3-1980 no reward is admissible in respect of information relating to understatement of Stock-in- trade and understatement of cost/value of any asset declared by the assessee in a statement filed by him. The RCIT has concluded by submitting - "concealment in the instant case is related to capital on the basis of peak credit entry".
4. The Complainant, who appeared personally, submitted that the RCIT now concedes that information supplied by him resulted in establishing concealment and the framing of assessment raising demand of Rs.80,050 in addition to Rs.22,000 having been received as tax under TAS-2000, still his applications for reward moved on 11-10-2003, 27-3-2003 and 22-7-2003 were not responded. The Complainant agreed that reward is not due on understatement of stock-in-trade and on understatement of cost and value of assets but insisted that the above Circular referred to such declaration as were made by taxpayer voluntarily. Since the tax evader, in the present case, had not voluntarily declared any stock-in-trade or cost/value of any assets, this aspect was not at all relevant. It was insisted by the Complainant that tax evader was brought on the NTN as a consequence of the information furnished by him and, therefore, whatever tax has come to the offers of the Government was due to his efforts in digging out. The Bank Account of the evader of tax and reporting his business adventures. The Complainant referred to Reward Rules of 27-3-1980 which prescribe that 25% of the tax raised should be paid as Ad hoc award on finalization of assessm ent, another 25 % when the assessment is confirmed at the first appellate stage, and the remaining after decision by the Appellate Tribunal. Therefore, 25% of Rs.105,050 should be disbursed to him immediately as assessm ent has admittedly been finalized and tax recovery at Rs.27,000 (Rs.5,000 + Rs.22,000) is higher than his entitlement of 25% reward.
5. The DR appearing for the Revenue admitted that the record clearly shows that the tax evader was brought on the NTN as a result of enquiry initiated on the basis of information furnished by the Complainant. He, however, supported the stand taken by the R-CIT in the para-were comments and submitted that the tax paid to avail Amnesty should not be taken in the calculation which should be restricted to unexplained capital established in the year, 1996-97 and 1997-98.
6. Mr. Shahid Jamil Khan (Advocate) the Legal Advisor of the Income Tax Department was initially not present at the hearing of the complaint. He appeared after the close of hearing and requested that either the case may be re-heard or he be allowed to file written arguments. He was allowed to submit these arguments after receipt of which it was thought prudent to extend opportunity of rebuttal to the Complainant also. The case was, therefore, re-heard.
7. The learned Legal Advisor (LA) took up the legal position as respects jurisdiction of the Federal Tax Ombudsman to entertain an application in respect of reward to a non-official Informer. He explained that such rewards are administered under C.B.R.,No. C. No, 63(88)ITIV/75-Pt, dated 27-3- 1980 which is not an S.R.O. And was not issued through any notification or rule-making authority of the C.B.R. Therefore, "the order can at best be termed an offer made to the nonofficial Informer to give information for detecting the evaded tax". Consequently, the person furnishing such information, by conduct, accepts the offer and has to fulfill the terms and conditions stipulated in the 'order' for eligibility/entitlement to get the reward. The learned ARIL was emphatic that the relationship between the Informer and the Government is thus 'contractual' and hence only a civil Court has jurisdiction to enforce the contract. It was elaborated by the learned LA that the primary jurisdiction for adjudication of disputes is section 9 of the Civil Procedure Code of which the provisos curtail the jurisdiction for specific purposes. Since the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance) does not vest the jurisdiction as respect the enforcement of contracts between the Informers and the Tax Department, the present complaint is not competent for admission. Reference was made to section 9(2) of the FTO Ordinance to canvass that it could adjudicate complaints relating to "relevant legislation" as defined in Clause
(6) of section 2 of the FTO Ordinance. The 'relevant legislation' refers to such other laws as have nexus with taxation and have been specified to be `relevant legislation', for the purpose of FTO Ordinance. The AR concluded by submitting that the "order for grant of reward to nonofficial Informers issued on 27-3-1980 is neither a rule, regulation and notification as mentioned in sub-Clause (a) of Clause (6) of the Section 2 of the FTO Ordinance". The learned counsel then repeated the same arguments as respects facts of the case and the eligibility for regard as advanced by the DR at an earlier hearing.
8. The arguments by the learned Legal Advisor appeared interesting at the first hearing but a closer scrutiny brings out that:--
(i) The office of the FTO has been created inter alia "to redress and rectify any injustice done to a person through maladministration by tax functionaries administering tax laws". The expression used is injustice done to a 'person' and not only to a taxpayer or an assessee. Consequently, if a non-official Informer is subjected to "maladministration" by functionaries administering tax laws, the matter would fall within the jurisdiction of FTO.
(ii) Moreover "maladministration", as defined in Clause (3) of section 2 of the FTO Ordinance, includes an "act of omission or commission which (b) .............. Is unjust, biased, oppressive or discriminatory". It is significant that the "acts of omission or commission" have not been restricted to the operation or enforcement of tax laws, and (i.e) Again, 'maladministration' has been defined to include "neglect, inattention, delay, incompetence, inefficiency and inaptitude in the administration or discharge of duties or responsibilities". Here also there is no reference to duties and responsibilities, only in relation to the administration of tax laws.
(iv) It is a decades old practice that the Government is dealing granting and paying reward to non official informers in terms of C.B.R order, dated 27-3-1980 which was issued in supersession of all previous rules, instructions/orders on the subject. The orders and instructions issued by C.B.R. Are binding on tax authorities and administrators. The contention that the Reward Order is an offer and hence the Federal Tax Ombudsman has no jurisdiction is misconceived. Where C.B.R. Or any tax authority takes any decision, adopts any process or makes any recommendation, which is a departure from established practice unless it is bona fide and for valid reason, it will amount to maladministration.
The Department has not proved bona fides and any valid reason for departing from the practice of following the Reward Order. The plea raised to avoid the duty cast on the Department/C.B.R.
Reflects its mala fides with a view to defeat the claim. Further more no appeal or revision is provided against the impugned action/decision of the respondent.
The conclusion, therefore, is inescapable that the conduct of the 'tax functionaries' is to be made more transparent, and accountable towards not only taxpayers but towards all those coming in contact with the 'tax functionaries' in connection with their administrative or quasi-judicial functions. It also to be remembered that FTO Ordinance is a beneficial legislation warranting a more benevolent and purposive interpretation so as to disseminate justice and rectify injustice to any person. In view of the above discussion the plea bout the competence of the complaint is rejected.
9. The arguments from bath the sides have been considered. It is conceded by the Department that the reward is due as the assessm ent was a result of information furnished by the Complainant about the business activity of the tax evader and the Bank Account maintained by him. Since the Rules are clear that 25% of the award should be allowed on completion of assessment, though on ad hoc basis, the Department should not grudge disbursing entitled reward as per rules.
10. It is Recommended that:--
(i) the reward, as prescribed in the C.B.R. Order, dated 27-3-1980, be issued to the Complainant on ad hoc basis.
(ii) Compliance be reported within 30 days of the receipt of this recommendation/finding.