FINDINGS /DECISION ' This complaint has been filed to agitate against initiation of action under section 122 of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance) to 'amend' assessment for the assessm ent year, 2001-2002 framed by "agreement" on 30-6-2002.
2. Briefly the facts are that the Complainant-AOP acts as a Jewllers. Return for the assessment year, 2001-2002 was filed declaring Income at Rs,628,000 on which assessment was framed under section 62 (agreed basis) on 30-6-2002 'at an Income of Rs,3.5 (M) which is said to have the approval of the C1T and the IAC Range-I, Zone-B, Lahore. On 9-5-2003 the complainant was served a notice under section 122 showing intention to 'amend' the assessment for the reasons that---
(a) The AL3essing Officer had finalized the assessment in a summary manner on the basis of Complainant's Nen'
(b) Expenditure claimed for the year has been inflated to suppress the profit and the expenditure claimed under various heads is hit by the provisions of sections 24 OD and 24(fff).
(c) The assessm ent had been framed without asking for production of record.
(d) The wealth statement of partner had not been obtained.
' This show-cause notice was issued by the IAC Range-I, Zone-B, Lahore who claimed in the notice that the jurisdiction over the case had been assigned to him by the Commissioner on 7-5-2003.
This is the cause of grievance.
3. The Respondent have forwarded parawise comments by the R CIT Eastern Region, Lahore which besides questioning the competence of the complaint for admission in view of the bar in section 9(2) of the Establishment of the Office of. Federal Tax Ombudsman Ordinance, 2000 (hereinafter called the FTO Ordinance), deny "maladministration" contending that-
(i) It is required to be seen as to whether, there had been any agreement for assessment and whether the so-called agreement was supervised by the Commissioner and Additional Commissioner.
(ii) The term agreed assessm ent is not a statutory term nor they phenomena of agreed assessm ent has been notified through any regulatory order. It is a product of practice accepted an acknowledged by the departmental head which in the present case is C.B.R.
(iii) The quantum of Income assessed by the agreement related to sales that were declared with the Sales Tax Department and claim under P&L were accepted with documentary evidence.
' It is asserted by the RCIT that had the taxpayer seriously believed that Income rightly stood assessed through agreement at Rs,3.5 (M), they were bound to declare higher income in the Return for the succeeding year, 2002-2003, to qualify for SAS.
4. The .Learned counsel for the Complainant, Mr. M. Siddique Chaudhry (Advocate), assailed the show-cause notice by submitting that it clearly proclaimed that jurisdiction was assigned to the IAC to proceed under section 122 implying thereby, that even before the issuance of show-cause notice and without considering the explanation to be offered in this behalf, the Commissioner had already made up his mind that the assessment would be amended. It was further pleaded that the R-CIT went wrong in reporting that the Assessing Officer had not obtained the approval of the Commissioner and the IAC because the Assessing Officer categorically proclaimed this factum in the body of the assessm ent order---Hence the legal presumption that all the actions performed in the normal course of duties are treated to be legally valid. The learned counsel emphasized on the sanctity of the 'agreement' and referred to the decisions reported as (1989) 60 Tax 160 (Trib.), 1990 PTD (Trib.) 694 and 1987 PTD (-Trib.) 646 to canvass that an "agreed assessment" on the one hand restricts a taxpayer from filing an appeal against such order and on the other the Department also stands divested of the authority to amend/alter that assessment.
5. Mr. Bashir Ahmad Shad (Additional Commissioner) appearing for the Revenue on his turn placed reliance on decisions reported as (1991) 64 Tax 73 (Kar.) and 2002 PTD 750 to support the reopening of an agreed assessm ent. It was pleaded that the developments arising between the date of assessm ent and date of notice are to be considered. It was submitted by the DR that the agreed assessm ent was finalized keeping in view the facts and circumstances of the case at the material time but later a Bank Statement come to the knowledge of the Department, after the completion of the assessm ent, warranting amendment of the same. It was pleaded that the notice was issued in accordance with law to .Which no exception could be taken. The DR placed reliance on the two reported decisions (ibid) to argue that even an agreed assessment can be reopened for amendment on the basis of "definite information" and that "a blanket protection to an agreed assessm ent....Can neither be in accordance with law nor public policy "..
6. The investigation in the light of rival arguments by the two sides does reveal that as per Order Sheet entry of 4-6-2002. "the case was discussed at length", "the assessee submitted supporting vouchers for each head of account which were examined and found to be in order", "during the course of discussion the assessee offered to be taxed at a total Income of Rs,3,500,000The offer was accepted in the interest of revenue" which was approved by the CIT "subject to the payment of tax within the current month".
' To this the AR of the Complainant had added: "I agree to be assessed at an Income Rs,3,500,000 and Sales according to the Sales Tax record". This Order Sheet entry clearly erodes the very basis made out in the show-cause notice, dated 9-5-2003 that the assessment was framed in a summary manner without examining record= or details of Overhead expenses (etc).. It is significant that whereas the show-cause notice blames the Assessing Officer for several lapses, and the parawise comments go to -the extent of expressing doubt that approval of CIT/IAC was at all obtained; still admittedly no disciplinary action for the alleged neglect has so for been taken (or initiated nor even contemplated) against her.
7. It needs no reminding that an agreed assessment is nothing but a contract consisting of an 'offer' which is 'accepted' coupled with `consideration'. In the case-in-hand, the 'offer and acceptance' are clearly established from Order Sheet entry , dated 4-6-2002 and consequential order passed on 30-6-2002. As far as the 'consideration' is concerned, it also is proved by the fact that the CIT concurred it "in the A' interest of revenue" and for prompt payment of tax. Thus there exist all the ingredients of a valid contract i,e, offer, acceptance and consideration. In the normal course, such an agreement deserves to be honoure both by, the Department as also by the taxpayer because any deviation will erode the credibility of "tax functionaries". Still there can be no quarrel with the proposition,' as held in 2002 PI'D 750 in re: Arshad Awan and Co. Relied upon by the DR, that "a blanket protection to, an agreed assessment....Can neither be in accordance with' law nor public policy" 'and that ,"an Assessing Officer framing an agreed assessment- can always' make a case, to avoid the agreement if he can prove that' the same was colored by wrong declaration, even innocent misrepresentation or fraud". This important subtlety at once brings to memory -the' verdict 'by the. Supreme Court that an assessment can be subjected to reopening for additional assessm ent (now called: amendment) only when some definite information comes in the possession of the Assessing Officer subsequent to the framing of the 'original assessment.
This test is as Much applicable to an agreed assessment as to any other assessment. Looking at from this angle it is noticed that in the case in hand no new evidence or definite information has been made a basis for resort to section 122 of the Ordinance. Although the R-CIT in his parawise comments (concluding lines of para.7) under the head of On Merits observed:-- "The present proceedings under section 122 have been initiated on irrefutable evidence coming to the possession of department after completion of assessment and such evidence invariably warranted for amendment of assessment. The precise information is not disclosed here for the sake of secrecy and shall be placed before the Hon'ble Federal Tax Ombudsman in person."
' Surprisingly this so-called "irrefutable evidence" was not presented at the hearing by Mr. Bashir Ahmad Shad (Addl. Commissioner/DR) even when specifically asked, although at an earlier hearing held on 8-8-2003 Mr. Shad had sought adjournment for presentation of this document.
More importantly there is no mention of this so-called "irrefutable/ evidence" in the show-cause notice issued to the Complainant on 7-5-2003 so as to lay down a solid legal foundation. Moreover, Mr. Shad could not rebut the assertion by the Complainant's Counsel that the declared Sales have not been interfered with by the Sales Tax Department. The conclusion thus emerges that the pre- conditions prescribed by law to reopen a completed assessment, as affirmed by the superior Courts in decisions reported as 1989 PTD 1141 and PLD 1990 SC 399 (etc.), remain unfulfilled thus rendering the exercise as arbitrary, oppressive and discriminatory falling in the realm of "maladministration" as defined in clause (3) of section 2 of the Establishment of. The Office of Federal Tax Ombudsman Ordinance, 2000.
7. It may be pointed out that the complainant has .Challenged the notice undel- section 122 for reopening the assessm ent against which no appeal or revision is proVided._In view of the facts discussed the notice and the process ,from the very beginning' suffers from: administrative excess and improper 'motive, which is contrary to law. The complaint can, be entertained and investigated. The objection to jurisdiction is overruled.
8. It is recommended:
(1) Show-cause notice issued by the IAC, Range-I, Zone-B, Lahore on 9-5-2003 he cancelled/withdrawn.
(2) Assessm ent as framed on agreed basis on 30-6-2002 be allowed to remain good.
9. Compliance be reported Within 30 days of the receipt of this order.