DECISION DECISIONS/FINDINGS JUSTICE (RETD.) SALEEM AKHTAR.-- The complainant Mr. Muhammad Issa is doing business as Fruit Commission Agent in Shahdadpur, District Sanghar and is an existing assessee of Tando Adam Circle on NTN 08-33-0250171. He is aggrieved by the arbitrary and , harsh estimate of his income at Rs.800,000/- relating to the Assessm ent Year 2000- 2001 by the ACIT against declared income of Rs. 60,000/-. The facts of the case are briefly stated as under:-
2. The assessm ents for the years 1999-2000 and T998-99 were completed under the Self- Assessm ent Scheme on declared income of Rs.67,000/- for each year. The assessment for the year 1997-98 was also completed under the Self-Assessment Scheme and the declared income of Rs.51,250/- was accepted. The last assessment completed u/S. 62 of the Repealed Income Tax Ordinance, 1979 was for the year 1989-90 on the net income of Rs.33,000/- against declared income of Rs.29,000/-. It is stated that due to decline in business during the period relevant to the Assessm ent Year 2000-2001, return was filed declaring income of Rs.60,POO/-. The total commission receipts were declared at 128,000/-. It is further stated that notices u/S. 61 and 62 of the repealed Ordinance dated 25.5.2001 were received from the ITO whereby the complainant was confronted that his commission receipt during the year amounted to Rs. 10,00,000/- and after allowing estimated expenses of Rs.200,000/-, his net profit worked out to Rs.800,000/-. He was required to furnish his explanation by 4.6.2001. The complainant's AR furnished the required explanation on the stipulated date i.e. 4.6.2001. It was pointed out therein that the complainant was doing business on small scale and the alleged commission receipts at Rs. 10,00,000/- were not substantiated by any [Vol.IX evidence. No enquiries were made by the Inspector of the Circle regarding the extent of business of the complainant. . Similarly estimated expenses at Rs.200,000/- were also without any basis.
3. It is alleged that the ITO did not bother to consider his explanation and completed the assessm ent ex parte u/S. 63 of the Repealed Income Tax Ordinance, 1979 despite proper compliance of the notices. The net income has been arbitrary estimated at Rs.800,000/- resulting in tax demand of Rs. 165,000/-.
4. It is further stated that an appeal was filed on 8.8.2001 before the CIT (Appeal), Hyderabad against the assessm ent order for the year 2000-2001. On the date of hearing of appeal, the learned CIT (Appeal) asked the complainant and his AR to deposit 15% of the tax demand amounting to Rs.24,750/- otherwise his appeal would be dismissed. Since the complainant could not deposit the tax demand due to financial problems, his appeal was dismissed vide order dated 30.12.-2002. The complainant has prayed for redressal of his grievances and remission of unlawful demand created against him by the Assessing Officer.
5. The respondents have filed para were comments stating therein that the complainant did not make compliance of the statutory notices issued u/Ss. 61 and 62 of the Repealed Ordinance which resulted in completion of assessm ent ex parte u/S. 63 of the Ordinance. The first notice u/S. 61 was issued on 12.4.2001 for compliance on 24.4.2001 which was served on 17.4.2001. The second notice u/S. 61 along with notice u/S. 62 was served upon the assessee on 29.5.2001 for compliance on 4.6.2001. The complainant did not' make compliance^ of the said notices, It is further stated that the assessm ent was completed on the basis of Inspector's report but this fact has not been mentioned in the assessm ent order. The RCIT concerned has conceded that the assessment made by the ITO is apparently harsh, excessive and against the history of the case. He has directed the CIT concerned to obtain the explanation of the Assessing Officer and take further, action accordingly, It is also reported that the complainant's appeal was dismissed due to non-fulfillment of mandatory requirement.
6. The case has been discussed with the complainant as well as the departmental representative.
The assessm ent records produced by the DR have also been examined, It is stated by the complainant that in compliance to the first notice issued u/S. 61 of the Repealed Ordinance, he personally appeared before the Assessing Officer on 24.4.2001. However, In the relevant order sheet non-compliance of the said notice has been recorded on 24.4.2001 and ITI was asked to report. The Inspector was not authorized to make enquiries as provided by Section 146 of the Repealed Income Tax Ordinance, 1979. The relevant order sheet further shows that the ITI filed his report after a lapse of one month on 25.5.2001. Notices u/Ss. 62 and 61 were issued on 25.5.2001 for compliance on 4.6.2001. No reference to any enquiry report was made in the notice u/S. 62 as correctly pointed out by the complainant. The Assessing Officer made the following entry on the order sheet on 4.6.2001. "none attended nor any application for adjournment received. Assessment u/S. 63 as per notice u/S. 62 at Rs.800,000/-. Issue D notice, challan and IT-30 and assessment order accordingly."
8. The complainant has vehemently contended during the course of hearing of the complaint that compliance of statutory notice was duly made and explanation was filed by his AR on the stipulated date i. e. 4.6.2001. He has furnished the copy of the said explanation which bears the office stamp of the DCIT, documentary evidence there is no reason to doubt the statement of the complainant in this regard.
9. The copy of ITI's report furnished by the DR shows that his estimate of income is not supported by any evidence. His report is too sketchy to be of any significance. He even failed to contact the complainant or collect any information from his employee during a period of one month, It is also established from record that copy of the ITI's report was neither supplied to the complainant nor any reference of the report has been made in the assessment order. These facts lend support to the allegation of the complainant that no enquiries were made by the Inspector before the assessm ent was completed and the report has been obtained from him later on to justify the estimate of income made of the assessment year under consideration, It has also been noted that as per order sheet entry the ex parte assessment was completed on 4.6.2001 but this was entered in Demand and Collection register on 30.6.2001 vide No. 2392/130. This is an established practice that the entry in the DCR is made on the same date the assessment is completed. The D.R. Has not been able to offer any satisfactory explanation in this regard.
10. It is apparent from the facts stated above that the whole assessment proceedings are tainted with maladministration. The assessment made by the ACIT for the year 2000-2001 is perverse, arbitrary, unreasonable and oppressive, It is, however, gratifying to note that the RCIT, Southern Region, Karachi has taken cognizance of the irregularities committed by the Assessing Officer and has directed the Commissioner concerned to call for the explanation of the Assessing Officer and take necessary action against him. It is also evident that the appeal filed by the complainant was dismissed by the CIT (Appeal) on technical ground only as he did not deposit 15% of tax demand as provided u/S. 129(2) of repealed Income Tax Ordinance, 1979. The grounds of appeal were not adjudicated.
11. In view of the above, it is recommended as under:-
(i) The Zonal Commissioner be asked to set aside the assessment u/S. 122 of the Income Tax Ordinance, 1979 made for the year 2000-2001 and issue directions to Taxation Officer to reframe the assessm ent after making proper enquiries within 30 days of the receipt of this order.
(ii) Disciplinary proceedings be initiated against the Assessing Officer and the Inspector and finalized within 60 days of the receipt of this order.
(i.e) The compliance be reported within a week after implementing the above recommendations.