NASIM SABIR SYED (MEMBER).---This appeal has been filed against the impugned order dated 26- 2-1997 by virtue of which the competent Authority awarded a major penalty of reduction to lower post of Income Tax Officer B-16 from that of Assistant Commissioner of Income Tax B-17, to the appellant.
2. The brief facts of the case are that the appellant while posted as Income Tax Officer, Circle-5, Zone-A, Lahore was proceeded against departmentally under the Government Servants (E & D)
Rules, 1973 vide charge-sheet alongwith the statement of allegations dated 22-8-1994 which is reproduced hereunder:- "GOVERNMENT OF PAKISTAN CENTRAL BOARD OF REVENUE C. No, 18(151)/88-AIT. I Islamabad, the 22nd August, 1994. CHARGE-SHEET Whereas you Mr. Iftikhar Ahmad Khan, Assistant Commissioner of Income Tax while posted in Circle 05, Zone A, Lahore issued show-cause notice bearing No,1187993/05 on 25-9-1990 to Mr. Muhammad Latif, Shop No,41, Muslim Block, Azam Cloth Market, Lahore for reopening of assessment for the year 1989-90. The basis for issuance of the said notice was that the assessee had purchased Shop No,41 measuring 202 sq.ft. at Azam Cloth Market during the period relevant to assessm ent year 1989-90 and his sources investment did not correspond to the income declared.
And whereas you accepted the purchase price at Rs,1,01,250 in respect of the aforementioned shop as shown by the assessee in his Wealth Statement although the fair market value in the area at the relevant time ranged between Rs,6,000 to Rs,10,000 per sq.ft. meaning thereby that the market value of the said shop on the date of purchase by the assessee was between Rs,16,00.000 to Rs,20,00,000.
And whereas you after obtaining reply from the assessee dropped the proceedings initiated through the aforesaid notice dated 25-9-1990 by making an entry in the order sheet on 22-10-1990 without bringing the facts of the case to the knowledge of the LAC concerned and have thus caused substantial loss of revenue.
And whereas your above act amounts to misconduct' inefficiency' and corruption' on your part and renders you liable to disciplinary action under the Government Servants (Efficiency and Discipline)
Rules. 1973.
Are' Whereas it has been decided to hold an enquiry into the said narges against you under the aforesaid Rules and Mr.Asad Elahi, Joiht Secretary (Enquiry), Revenue Division, Lahore has been appointed as Enquiry Officer, under rule 6 of the Rules (ibid) to conduct enquiry into the charges.
Now, therefore, you Mr. Iftikhar Ahmad Khan are required under sub-rule (2) of rule 6 of the aforesaid Rules to pur in you written defence to the Enquiry Officer within 14 days of the receipt of this charge-sheet and also stated whether you wish to be heard in person. (Sd.) A.R. Siddiqi, Secretary, Revenue Division/Chairman, C . B. R. (Authorised Officer)" STATEMENT OF ALLEGATIONS It was found that you while posted in Circle-05, Zone-A Lahore issued show-cause notice bearing No,1187993/05 on 25-9-1990 to Mr. Muhammad Latif, Shop No,41, Muslim Block, Azam Cloth Market, Lahore for reopening of assessm ent for the year 1989-90. The basis for issuance of the said notice was that the assessee had purchased Shop No,41 measuring 202 sq.ft. at Azam Cloth Market during the period relevant to assessm ent year 1989-90 and his sources of investment did not correspond to the income declared.
That you accepted the purchase price at Rs,1,01,250 in respect of the aforementioned shop as shown by the assessee in his Wealth statement although the fair market value in the area at the relevant time ranged between Rs,6,000 to Rs,10,000 per sq.ft. meaning thereby that the market value of the said shop on the date of purchase by the assessee was between Rs,16,00,000 to Rs,20,00,000.
That you after obtaining reply from the assessee dropped the proceedings initiated through the aforesaid notice dated 25-9-1990 by making an entry in the order sheet on 22-10-1990 without bringing the facts of the case to the knowledge of the IAC concerned and has thus caused substantial loss of revenue.
That your above act amounts to ' misconduct', 'inefficiency' and 'corruption' on your part and renders you liable to disciplinary action under the Government Servants (Efficiency & Discipline)
Rules, 1973."
A written reply was sent by the appellant to this charge-sheet. The department after meeting the necessary formalities, ultimately awarded the penalty of reduction in rank to the appellant as already mentioned.
3. Learned counsel for the appellant took the plea that the penalty imposed is illegal, unjustified and not supported by the facts of the case. To make the matter clear the following necessary facts are hereby highlighted.
4. On 25-9-1990, an informal notice was issued by the appellant to Mr. Muhammad Latif, Shop No,41, Muslim Block, Azam Cloth Market, Lahore concerning assessment year 1989-90 which letter is also reproduced hereunder for ready reference because it has substantial significance in relation to the case; "Office of the Income Tax Officer, Circle-0.5, Zone-A, Lahore.
No,1187993/05, Dated 25-9-1990 To Mr. Muhammad Latif, Shop No,41, Muslim Block, Azam Cloth Market, Lahore.
Subject: Assessm ent year 1989-90: Information regarding: Whereas I have to believe that you have purchased Shop No,41 Muslim Block, Azam Cloth Market, Lahore. Sources of investment in the acquisition of the above shop do not correspond to the income declared by you.
'You are required to produce copy of the purchase deed by 29-9-1990 with the explanation of sources of investment failing which adverse inference will be drawn. (Sd.) Iftikhar Ahmad Khan, Income Tax Officer, Circle-05, Zone-A, Lhr."
5. The purchase price of Shop No,41, Muslin-1 Block, Azam Cloth Market, Lahore as per registered deed was Rs,42,000 whereas as per wealth statement it was shown as Rs,1,01,250. The appellant accepted the sale price as mentioned in the wealth statement after taking it as reasonable for the purchase of the shop. The Successor Officer issued a notice under section 65 of the Income Tax Ordinance for income escaped because he was of the view that the value declared for the shop was too low whereas it should have been in the range of Rs,16,00,000 to Rs,20,00,000. Ultimately he assessed the value of the shop at Rs,24,24,000 as per assessment under section 62/65 for the assessm ent year 1989-90 passed on 13-5-1997. The assessee went into appeal against this.
The Commissioner of Income Tax Appeals Zone-III, Lahore vide his order in Appeal No,231/C-05, dated 6-12-1995 set aside the order with the observation that the facts of the case need proper scrutiny. In the interest of justice, it is imperative that facts of the case are properly scrutinized and the contention of the appellant that his shop does not exist in Azam Cloth Market to be verified. It is desirable that value of the shops in the vicinity at material time be ascertained. After setting aside of this assessm ent under section 65 a fresh order was passed wherein the value of the shop was estimated at Rs,2,02,000 against the declared value of Rs,1,01,250. The emphasis of the departmental representative was on the fact that this value of Rs,2,02,000 was adopted in agreement with the assessee which clearly establishes that the declared value even as per wealth statement was on the lower side. The appellant on the other hand argued that he accepted this declared value of Rs,1,01,250 ar per wealth statement for the reason that it was higher than the value of Rs,40,000 as per registered deed and keeping in view its location in the Chuna Mandi which had started becoming commercial area but was not fully commercialized as the older block of the Azam Cloth Market. It was argued that actually it was the thinking of his successor that the value of shop must be above Rs,20,00,000 which was taken as basis for opening the case under section 65. It was asserted that the acceptance of the value of shop finally at Rs,2,02,000 showed that the value was erroneously adopted in the original order under section 65 at Rs,24,24,000 neglecting the relevant facts of the case including the location of the shop and the price prevailing in the area. It was insisted that even the value of Rs,2,02,000 was accepted in agreement literally under duress by the assessee because he was under extreme pressure and was fearful that the same story may not be repeated with some slight modification when adopting fresh value as was done in the original order passed under section 65 wherein the price had been estimated at Rs,24,24,000 under section 13(2) of the Income Tax Ordinance. As a result of this original order the extra demand created was more than ten lacs of rupees, whereas as per final order passed under section 65 it is only Rs,28,000. It was insisted that if the value of the original order has not been taken as Rs,24,24,000 the assessee may not have agreed even to the value proposed in the final order passed under section 65 at Rs,2,02,000. It was brought to our notice that in a case of the same area and in the vicinity of the shop under consideration, the value adopted was per sq. ft.
Rs,307.9 with the approval of the Inspecting Assistant Commissioner of Income Tax vide Letter No,2474, dated 17-6-1990 whereas the rate declared by the assessee per sq. ft. based on the value shown in the wealth statement comes to 510. It was vehemently argued that how can the declared figure be taken to be at the lower side in his case when much lower value in the other case had been accepted. Comparative data for the shop of the assessee and the parallel case is reproduced hereunder:-- "COMPARISON CHART OF PARALLEL CASES M/s. Latif & Sons NTN 05-05--1187993 Assessment year 1989-90.Muhammad Yasin C/o Ravi Cloth House ACM NTN 05-05-1184388 Assessment year 1989-90.
Property No. F-1932, Chuna Mandi, LahoreProperty No. F-1179 Chuna Mandi, Lahore Date of Purchase 26-2-1989 Date of Purchase 26-2-1989 Area 202 Sq.ft. Area 843 Sqf.
Value Rs. 1,01,250 Value Rs. 2,59,600 Rate of per Sqf. Rs. 510.2 With the approval of IAC vide Letter No. 2274, dated 17-6-1990.
Rate per Sqf. Rs. 307.9.
Date of Valuation 22-10-1990 Date of Valuation 17-6-1990."
Another argument forwarded was that in fact the appellant had confronted the assessee only about investment made for the shop under section 13(1) of the Income Tax Ordinance, 1979 and not under section 13(2). The difference between sections 13(1) and 13(2) essentially is that under section 13(1) the assessee is confronted with the declared value and any part of the value declared remaining unexplained is assessed under this subsection. Whereas under section 13(2) the position is that the declared value itself is not accepted as correct and the appellant is confronted with a higher value based on certain facts and is asked to explain this higher value. Any discrepancy remaining unexplained in the value is assessed under section 13(2). From the show-cause notice it appears that the contention of the appellant is correct. The opinion of the Inquiry Officer that proceedings were initiated by issuance of informal notice and filing the proceedings on a separate order sheet for mala fide reason is not of much legal consequence. In the order sheet normally maintained, the entries are made date-wise for different assessment years and there is not enough space left for inserting any fresh entries under the space reserved for that year. To avoid the jumbling up of the new entries with the old entries it is sometimes preferred to start on a new order sheet so that no such jumbling up is there, and the progress can be watched from day to day. Another thing seriously noticed by the Inquiry Officer was that the matter had been closed with undue haste as is apparent from the order sheet entries. It is apparent that the show-cause notice was issued on 25-9-1990 whereas the proceedings were dropped on 22-10-1990 after getting the reply of Mr. Zafar, Advocate who was the authorised representative of the assessee. An Income Tax Officer is expected to dispose of fairly a large number of cases during a month and we fail to understand as to how it can said that the case was decided in undue haste when the proceedings took almost a month and which according to the thinking of the appellant was infructuous. Coming to the tearing off of the order sheet on which the entries were made for the notice issued and proceedings dropped, one cannot rationally accuse the appellant of this because never through the proceedings he took the plea that he had not made these entries. The record was with his successor, nay with the record keeper of the office and only they could explain who had torn off the order sheet. All the same this having no material bearing on the inquiry made, the same is treated as irrelevant as far as the matter under inquiry was concerned.
3. To sum up the whole thing, we are of the considered view that the Inquiry Officer has been oblivious of certain important facts of the case. The most important thing is the recovery of legitimate State revenue without harassing the assessee in any way. The Officer who passed the first order under section 65 was certainly guilty of harassing the assessee as he assessed the value of asset at Rs,24,24,000 when ultimately it had been accepted at Rs,2,02,000. Secondly, it was not based on any material facts. Nobody has bothered to take action against him because it only caused unbearable pain to the assessee. So much for the rights of common citizens of Pakistan.
One can ask as the question who made a more serious error i,e, the appellant or the Officer passing the first order under section 65. Obviously, it is the latter because the figure adopted by him can be said to be astronomically high as compared to that finally assessed. The observation of the Inquiry Officer that as far as the issue of following the prices fixed by the District authorities are concerned the Circular was issued in 1993 i,e, much after the passing of the contentious order in this case. The values fixed by the District authorities were always taken as having some evidentially value unless there was definite evidence to show that the asset was of a higher value.
The issuance of this Circular was only a clarification of the criterion which was to be followed in the absence of any solid material. The District authorities are specialized agencies whose daily business is dealing with the prices of the properties and the value fixed by them is not in thin air but based on solid material available to them as Field Officers. The Inquiry Officer has failed to appreciate this aspect of the case. This shows the extent to which an Officer can misuse his powers and cause grievous harassm ent to an assessee. Now what is to be decided is the extent of guilt of each Officer. There is the appellant who has enough evidence to show that the value declared by the assessee as per wealth statement which was almost two and a half time of that declared in the registered deed was quite reasonable. He even went to the extent to confront the department to bring forth any case in the area in which the value had been assessed at a higher figure than that accepted by him in that area. There is another officer who assesses the value of the shop at thirteen times than that assessed finally with agreement of the assessee. Then there is a third Officer who estimates the value at Rs,2,02,000 in agreement with the assessee. The repeated assertion by the department that this acceptance of the value by the appellant was ample proof that the value declared is low cannot be accepted under the circumstances when an additional demand of nearly Rs,10,00,000 had been created in the first order passed under section 65 which was mercifully for the assessee, set aside by the Appellate Commissioner. One has to realize that appeal proceedings cause a lot of hassle and cost and bring worries in the sense that during the period when the case is pending one is naturally worried as to the outcome of the appeal. The arguments of the learned counsel for the appellant that this agreement was more under duress than based on actual facts seems of considerable evidentiary value. As a matter of fact powers under section 13 of the Income Tax Ordinance give vast discretionary powers to the Assessing Officer more particularly so under section 13(2) where it is a question of estimates. When making such estimates there is always more margin of error and even such an error can be there during normal performance of duties, without any mens rea or guilty intention, which has to be treated as a legitimate mistake under the established Administrative law. Inference by the department that by accepting the declared value the Officer must have indulged in corruption is rather far-fetched and based on presumptions. It could be there if value adopted had been as confronted in the notice under section 13(2) or near about that when the possible loss of revenue was going to run into lacs of rupees. But as the said loss had only been of Rs,28,000 on the finally assessed income, the drawing of such an inference without any solid proof does not meet the requirement of justice and fairplay. We are of the opinion that the acceptance of the value of the shop as per wealth statement had been done in good faith which has the protection of section 162 of the Income Tax Ordinance, 1979 which is reproduced below:-- "Section 162.---No*suit shall be brought in any Civil Court against any order made under this Ordinance and no prosecution, suit or other proceedings shall lie against any person for anything in good faith done or intended to be done under this Ordinance."
Perusal of three allegations discussed earlier and the conclusion of the Inquiry Officer does not indicate any misconduct, inefficiency and corruption on the part of the appellant. This having been done in good faith calls for no penalty.
4. Consequently, the impugned order dated 26-2-1997 by virtue of which the appellant had been reduced in rank is hereby set aside. We will also like to observe that this reduction in rank was without mentioning any time period which also makes this order void. The appellant stands restored to his rank of Assistant Commissioner of Income Tax B-17 from the date of the impugned order.
5. No order as to costs. Parties be informed.