FINDINGS /DECISION ' Maladministration is alleged in the instant complaint on the part of Taxation Officer Circle 25 Zone-A, Lahore for arbitrarily re-opening the Income Tax assessment under section 122 of the Income Tax Ordinance, 2001 for the assessment year, 2000-2001.
2. The Complainant in this case is an individual earning his income from sale of shoes. For the assessm ent year 2000-2001 Income Tax Return was filed by the Complainant under Self- Assessm ent Scheme declaring income at Rs,1,96,000. The Income Tax assessment was completed under section 59(1) of repealed Ordinance, 1979 vide order, dated 24-3-2001. Subsequently a show- cause notice was issued by the Taxation Officer Circle 25 Zone-A, Lahore under section 122 of the Income Tax Ordinance, 2001 indicating his intention of reopening the above assessment on the following ground:-- "Perusal of your assessm ent record reveals that you claimed P/L expenses at Rs,96,125 under the electricity whereas you paid expenses to the tune of Rs,9,107 from the declared expenses Rs,87,018.
Moreover, as per survey form you owned Motor Vehicle No, LXG 6926 but no expense shown in Part- V of the return for the assessm ent year 2000-2001. It is therefore, established that you have filed inaccurate particulars in respect of actual income and expenses and your income was incorrectly assessed under section 59(1). I intend to amend this assessment under section 122(1) read with section 122(5) of the Income Tax Ordinance, 2001".
3. The Complainant furnished explanation vide his letter, dated 22-4-2003 explaining that the assessee claimed an expenditure under the head "Electricity" at Rs, 96,125 against which he enclosed electricity chart issued by the Revenue Officer, Rang Mahal Division; that being a no account case, the assessee was entitled to claim expenditure on estimated figures as per Circular No,21, dated 11-9-2000 (Paragraph 3(ii) of the Self-Assessment Scheme). The Assessing Officer applied his mind while finalizing assessment under section 59(1) of the I.T. Ordinance, 1979 therefore action under section 122 of the I.T. Ordinance, 2001 was inappropriate and illegal. It tantamount to change of opinion as the assessee has filed the electricity chart with the Income Tax Return and the electricity chart was available at the time of original assessment. And furthermore the preparation of computation chart on estimate basis was allowed in SAS as per circular of the scheme. However, explanation filed by the complainant was allegedly, ignored and Income Tax assessm ent already made under section 59(1) was reopened by the Taxation Officer Circle 08 Zone-A, Lahore vide his letter, dated 24-4-2003. It is alleged that proceedings have been initiated without considering the facts of the case and in total disregard of the provisions of law. Thishas caused grievance to the Complainant.
4. In reply the Respondent has taken a preliminary objection that this complaint relates to assessm ent proceedings which is a quasi-judicial function hence it does not fall in the jurisdiction of the Federal Tax Ombudsman and that the Complainant had failed to establish any maladministration in this case. On merits he has reiterated the reasons that the complainant was confronted with in the show-cause notice. The Respondent has submitted that the assessee overstated his expenses under the head "electricity" to reduce his net income. Further the assessee had declared in the return expenses of Rs,6,000 on maintenance of Motor Vehicle No, LXH 2323.
However, in the next year's return i,e, 2001-2002 the assessee had declared motor vehicle bearing Registration No, LXG 6926. The assessee was confronted that he did not claim expenses for Vehicle No, LXG 6926. Despite providing proper opportunity of being heard the assessee did not come up with any explanation in his reply, dated 22-4-2003 in response to show-cause notice under section 122 and did not disclose the factual position.
5. Sh. Muhammad Akram, Advocate attended for the complainant. Dr. Khalid Malik DCIT attended for the Respondent. The complaint and Respondent's reply have been examined and arguments of the two sides have been considered. An investigation into facts of this case reveals that against the electricity expenses claimed at Rs,96,125 the information received from WAPDA authorities suggest that the aggregate of bills for the year amounts to Rs,104,765 including an amount of Rs,8,112 in respect of Income Tax collected along with electricity bills; thus leaving the balance amount of Rs,96,125 as electricity charges. Out of this amount the Complainant did not pay Rs,9,107 for the month of August, 1999. The actual amount paid by the Complainant was, Rs,87,018 whereas the Complainant claimed electricity expenses at Rs,96,125. The car bearing Registration No, LXG 6926 was purchased after 30th June, 2000 as per evidence available on record.
6. The foregoing findings of fact prove the allegation that the Commissioner neither had any definite information enough to satisfy him A that (i) any income chargeable to tax has escaped assessm ent; or (ii) that total income has been underassessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or (iii) that any amount under a head of income has been misclassified, nor had any valid reason to believe that the assessment order passed in complainant's case was erroneous insofar as it was prejudicial to the interest of Revenue.
7. Maladministration on the part of Taxation Officer, exercising powers of Commissioner under section 122 is proved on account of initiating the process under section 122 of the Income Tax Ordinance, 2001 for which he had failed to offer any valid reason. Section 2(3)(i)(a) of the FTO Ordinance provides that a decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations or is a departure from established practice or procedure falls under the ambit of maladministration unless it is bona fide and for valid reasons.
8. Thus according to the qualifying clause in the provision of sub-clause (a) of clause (i); "unless it is bona fide and for valid reasons", it is for the respondent to prove the bona fide and validity of his actions. The onus does not lie on the complainant.
9. The observation of the President of Pakistan in his decision, dated 8-11-2003 on C.B.R.'s Representation C. No, 4(823) TO-I/2002,. Dated 27-11-2002 that "The CIT's reply to the complaint does not set out the material and the ground on which the Assessing Officer has initiated proceedings" under section 65 supports the view supra. Honourable President has further observed that "The Reply that "the notice under section 65 has been issued on valid grounds and issuance of notice is quite justified" is a mere formalism. The case does not seem to be plain assessment proceedings". Honourable President, therefore, has held that "The recommendation of the Federal Tax Ombudsman ought not be interfered with". This takes care of respondent's preliminary objection to the jurisdiction of Federal Tax Ombudsman over the complaint.
10. It is now recommended.
(i) That the Commissioner directs the Taxation Officer to drop the proceedings initiated under section 122 which do not meet the preconditions envisaged under subsection (5) of the said section.
(ii) That in case any order has been passed in pursuance of the aforesaid process ab initio void in law, the Commissioner invokes his jurisdiction under section 122A keeping in view the foregoing findings of investigation and passes an order of revision as he deems fit in accordance with law and facts.