FINDINGS/DECISION Maladministration is alleged in the instant complaint on the part of the Special Officer of Income Tax, Circle 2G, Gojra fer making an arbitrary, unreasonable, unjust, biased, perverse, oppressive and discriminatory decision to estimate complainant's receipts, from eight power looms for a period of 48 days, at Rs,700,000 against declared receipts of Rs,345,500 and assessing net income from this source at Rs,110,000 against declared business income for 48 days at Rs,33,900.
2. Written reply submitted by the RCIT, Central Region, Multan in response to notice under section 10(4) of Ordinance XXXV of 2000 has been perused and the submissions made on behalf of the two sides are considered. It transpires that return of income for assessment year 2001-2002 was filed declaring income from two sources as under:- Own business No. of looms Net business income Lease period Gross/Net Lease Income 1-7-2000 to 18-8- 2000 (1 month & 18 days)8 33,900 22-7-2000 to 30-6- 2001 (10 months & 10 days)49,280
3. The. Assessing Officer has accepted the income from lease rent as well as the fact that the complainant operated the 8 looms only for 48 days during the year. Admittedly no books of account were maintained and no details of purchases and sales could be filed. The Assessing Officer further recorded in his order that assessee filed her wealth statement but he did not find any asset requiring any explanation about its source. He further recorded that gross profit declared at Rs,70,900 @ 20% of receipts was fair and reasonable. However, in view of the fact that receipts were unverifiable in the absence of any bills or invoices he inferred that the receipts were understated. He discarded the declared version and assessed the business income based on following estimates:-- Receipts are estimated at Rs.700,000 G.P. @ 20% Rs.1,40,000 Less expenses on estimate basis Rs.30,000 Balance income Rs.1,10,000
4. The assessee, as per record of assessment proceedings produced during the investigation, submitted reply to notice issued under section 62 of the Income Tax Ordinance, 1979. Stating therein, inter alia, that the consumption of electricity amounted to Rs,90,627 only during 48 days and as such her declared receipts as well as the income earned is better than parallel cases e.g. Case at NTN: 20-20-0435490 where declared income was Rs,112,000 for the whole year from 16 cotton power looms. The counsel of the complainant further submitted copies of assessment order in six other cases of cotton power looms that are summarised hereunder:-- S.No. Assessment Year NTN/TR Number of Power LoomsIncome Assessed
1. 2000-2001 20-20-0435490 16 1,12,000
2. 2000-2001 20-20-TR 18050 32 1,40,000
3. 2001-2002 20-20-Z295463 NTN changed32 1,50,000
4. 2000-2001 20-20TR 18055 20 1,10,000
5. 2001-2002 20-20-Z295507 due to change of NTN20 1,20,000
6. 2000-2001 20-20-TR 18073 16 1,12,000
5. The Counsel submitted that the foregoing facts were enough to support his allegations of arbitrariness, unreasonability, bias and discrimination. He placed reliance on the decision of Federal Tax Ombudsman in Complaint No,1292 of 2001 reported in 2002 PTD 1828 in support of his contention.
6. Chaudhry Mohammad Saleem, DCIT representing the Respondent during the course of investigation could not show any plausible basis either placed on record or mentioned in the assessm ent order for enhancing the declared receipts. He only repeated the, following counter productive argument submitted in the written reply of the RCIT: "The income of the assessee from own business was estimated keeping in view the facts of the case. It is admitted that the assessee did not conduct the business for whole of the year but he himself declared more receipts for a period of one month and 18 days as compared with the receipts for the preceding year. Thus the declared results for the last year did not constitute a reliable guide for estimating the sales for the period under consideration."
7. The arbitrariness of the Assessing Officer is evident from his .Decision, which is biased and discriminatory as well. The maladministration as defined in sub-clause (b) of clause (i) of subsection (3) of section 2 of Ordinance XXXV of 2000 is proved.
8. It is recommended that:--
(i) C.B.R. To direct exclusion of return from the list of cases selected under Para 9(a)(ii) for audit and for its acceptance under Self-Assessment Scheme.
(ii) Compliance to be reported within thirty days of this order.