DECISION Maladministration is alleged in the instant complaint against the DCIT, Circle 8, Faisalabad, Mr. Asif Rasool, precisely for initiating arbitrary and perverse proceedings and making an unjust additional assessm ent based on irrelevant grounds, under section 65 of the Income Tax Ordinance, 1979 hereinafter called the Ordinance.
2. Other objections that the order passed under section 65 was barred by time and that there was no assessm ent order in the field prior to initiation of proceedings under section 65 are found without any substances. An order under section 59(1) was deemed to have been passed under the Self-Assessm ent Scheme for 1995-96, the moment an acknowledgment of filing of return was issued by the Department. Similarly, it is found that notice under section 65 was served on 7-12- 1999 while the order under section 65 was passed on 24-1-2002. Delay in service of the order under section 65 till 13-5-2002 is maladministration but allegation of manipulation in the date of passing the order by the incumbent officer on 13-5-2002 is incomprehensible because he was not in charge of the Circle when the proceedings would have become time-barred had the order not been passed on 24-1-2001.
3. Preliminary objection taken on behalf of the respondent is that the matter relates to assessment of income and interpretation of law relating to such assessment in respect of which legal remedies of appeal and revision are available under the Ordinance; hence Federal Tax Ombudsman has no jurisdiction to investigate or inquire into it as provided under subsection (2) of section 9 of the Ordinance XXXV of 2000.
4. Responding to the objection the counsel of the complainant has submitted that the matter, that the Federal Tax Ombudsman is prayed to investigate, relates to maladministration involved in initiating the proceedings under section 65 as well as in making the additional assessment.
5. It is submitted on behalf of the complainant that no definite information, in respect of sales and purchases, made by the assessee, of any goods, and any information regarding acquisition, possession or transfer, by the assessee, of any money, asset or valuable article, or any investment made or expenditure incurred by him; had come into the possession of the DCIT on the basis of which he could have any reason to conclude that:-
(a) any income chargeable to tax under the Ordinance has escaped assessment; or
(b) the total income of the complainant has been under assessed, or assessed at too low a rate, or has been the subject jo excessive relief or refund under the Ordinance.
6. The only information that had come into the possession of DCIT, as confronted by him in his notice and as mentioned in the consequent order passed under section 65, was that the complainant incurred an expenditure of Rs,5,500 on account of social security but did not claim in the statement of account.
7. The counsel has submitted on behalf of the complainant that, without prejudice to the fact that omission to claim an expenditure neither causes any income to escape assessment nor causes under assessm ent of assessee's total income or its assessment at too low a rate of tax or causes the total income to be the subject of excessive relief or refund under the Ordinance. He further submitted that it was explained to DCIT that the amount of Rs,5,500 was part of the aggregate miscellaneous expenditure amounting to Rs,10,729 as under:---{{TABLE}} "Miscellaneous expenses Rs, 10,729 Entertainment Rs, 3,600 Social Security Rs, 5,500 Other expenses Rs, 1,629 Total:-- RS.10,729"
8. The counsel has placed reliance, in support of the view canvassed by 'him, upon the decision of the Tribunal reported in 2000 PTD (Trib.) 2905 wherein the Tribunal recorded:-- "Brief facts on record are that assessee was accepted under Self-Assessment Scheme. Later it appeared that assessee had claimed expenses amounting to Rs,10,188 on account of electricity while his actual bills were Rs,15,758. It was considered to be a piece of evidence amounting to definite information and the case was re-opened and subs equinity assessed. The assessee argument before first Appellate Authority and before us with lessor claim of an expenditure .May be a piece of evidence but it did not give the impression that the income of the assessee has either been underassessed or escaped assessment in any manner. If the assessee had claimed more expenses, income would have been reduced. He, therefore, placed reliance upon 1988 PTD (Trib.)
973 and I.T.A, No, 1726/B of 1998 order, dated 5-12-1995 wherein the Tribunal has held that such an information is surely a piece of evidence which results in decreasing income be a certain amount and thus, it does not give justification for reopening of assessment."
The Tribunal, therefore, held:--- "The law requires a piece of information covered under the term definite information which leads to believe that the income of the assessee has either escaped or under assessed. Had the assessee claimed more expenses the result would have been decrease in income and not enhancement.
This situation is not covered under section 65. The result of above discussion is that the ,re-opening is considered without legal justification. The same is, therefore, cancelled."
9. The DCIT Mr. Muhammad Saleem has invited attention to an unreported decision of the Tribunal in I.T.A. No,3414/LB/1998, dated 30-5-1999 relied upon by the DCIT in his order where a contrary view has been upheld. Since the unreported decision has been announced without considering the decision reported in 1988 PTD (Trib.) 973 which has been re-affirmed in another decision reported in 2000 PTD (Trib.) 2905, reliance placed on it is untenable.
10. The initiation of proceedings under section 65, therefore, is against the law and maladministration is proved.
11. It is recommended that:--
(i) The CIT, Faisalabad Zone takes suo motu cognizance of the case and annuls the order based on proceedings under section 65 that are ab initio void in law.
(ii) Compliance to be reported within 45 days of this order.