FINDINGS /DECISION ' JUDICIAL (RETD.) SALEEM AKHTAR, FEDERAL TAX OMBUDSMAN.---These are four complaints relating to orders under section 122 of the Income Tax Ordinance, 2001 for the assessment years 1997-98, 1999-2000 and 2001-2002 dated 26-6-2003 and for the assessment year 1998-99 dated 30-6- 2003.
2. The facts are that the complainant company is engaged in providing security services to various clients/customers. Assessm ents for the years 1997-98 and 1998-99 were framed under section 62 of the repealed Income Tax Ordinance, 1979 on 8-6-1998 and 31-7-1999 while assessments for the years 1999-2000 and 2001-2002 were framed and under section 59(1) on 28-6-2000 and 20-4- 2002 respectively. For all the years the complainant had declared gross receipts against which various expenses had been claimed to arrive at the declared income. Subsequently notices under section 122 of the Income Tax Ordinance, 2001 were issued by the assessing officer for all the four years on 27-3-2003 on the stated grounds that the complainant's receipts were covered by the provisions of section 80C of the repealed Income Tax Ordinance, 1979 and that, therefore, the assessm ents framed under normal law were invalid. After issuance of notices under section 122 the assessing officer also sought further clarification from the Commissioner vide a letter dated 23-5- 2003 and the CIT referred the matter to the C.B.R. Who confirmed that in the light of C.B.R. Circular No,11 of 1991 the complainant's receipts fell within the presumptive tax regime viz. Section 80C. The assessing officer then proceeded to B pass the orders under section 122 of the Income Tax Ordinance, 2001 and assessed the complainant company on its presumptive income under section 80C.
3. The four complaints pertaining to the assessment years 1997-1998 to 2001-2002 are almost identical and contain lengthy arguments regarding the assessments framed under section 122 of the Income Tax Ordinance, 2001. It has been noted at the outset that all the assessment orders have been passed prior to 1st July 2002, the date when the Income Tax Ordinance, 2001 (the Ordinance) came into force, the provisions of section 122 of the 'Ordinance are inapplicable in view of the principle settled by the binding decision of Lahore High Court in the case Messrs Monnoo Industries Limited v. The Commissioner of Income Tax, Central Zone, Lahore 2001 PTD 1525 in which C.B.R. Circular No,1(48)/11-1-1979 dated 17-2-1981 conveying following clarification has been cited with approval:- "Certain queries have been made from the Board raising the following questions:---
(i) Whether the proceedings under section 34A of the repealed Act pending on 1st July, 1979 have lapsed on repealed of the said Act?
(ii) Whether it is possible to revise assessments completed after the promulgation of Income Tax Ordinance, 1979 but before the insertion of section 66A in 1980?
' The undersigned is directed to say that the principle applicable in. Such cases is given in section 6 of the General Clauses Act, according to which the repealed does not affect the proceedings already commenced unless the repealing Act otherwise intends. The repeal does not revive anything not in force or existing at the time the repeal takes effect. Hence the proceedings which were pending under the repealed Act may continue under that Act. However, if proceedings under section 34A had not been initiated when the ode Act was repealed Act (Sic). Similarly section 66A does not have retrospective application. The assessments finalized before 1st July, 1980 cannot be reopened under section 66A of the Income Tax Ordinance, 1979."
4. Without going into details of the allegations and respondent's comments thereon, maladministration, on account of initiating a process which is contrary to the principle of law enunciated in the binding decision of Lahore High Court ibid, is proved. The respondent has no jurisdiction under section 122 of the Ordinance on 10-3-2004 to issue a notice under section 122(9) to amend the assessm ent orders that have been passed prior to 30-6-2002. The process falls under the inclusive definition of maladministration provided under section 2(3)(i)(a) for being contrary to settled law and under section 2(3)(ii) of FTO Ordinance for ignorance of the respondent of the principle of law enunciated in the decision ibid as well as in the beneficial circular of the C.B.R. Ibid. The fact that the Taxation Officer has acted without jurisdiction disregarding the principles laid down in the binding judgment of the High Court amounts to malice in law and thus mala fide. Even otherwise no mala fide is required to be proved for a finding of maladministration as considered at length in the decisions on Complaints Bearing Nos.1472-L of 2003, 368 of 2004 and 329-K of 2004.
5. Any further proceedings in these cases would be an exercise in facility. It is recommended---
(i) That Member Income Tax, C.B.R. Issues a circular clarifying that assessments made prior to 1st July 2002 cannot be amended under section 122 of the Income Tax Ordinance, 2001 because it came into force after 30th June 2002.
(ii) That the Commissioner, Companies Zone, Faisalabad in discharge of his responsibility under section 122A of the Ordinance may call for the record of proceedings considered supra in which the orders ibid have been passed by the Taxation Officer working under him and proceed under subsection (2) of section 122A as he deems fit.
(iii) Compliance is reported within 45 days.