2002 PLP 2603 (PTD)
FAKIR S. AYAZUDDIN, PARAMOUNT AVIATION (PVT.) LTD., KARACHI Versus COMMISSIONER OF INCOME-TAX, COMPANIES-I, KARACHI and another
| Citation | 2002 PLP 2603 (PTD) |
| Forum / Court | Federal Tax Ombudsman |
| Bench Members | Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman |
| Parties | FAKIR S. AYAZUDDIN, PARAMOUNT AVIATION (PVT.) LTD., KARACHI Versus COMMISSIONER OF INCOME-TAX, COMPANIES-I, KARACHI and another |
| Primary Law | (a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), (b) Income Tax Ordinance (XXXI of 1979) |
Q1: What are the key laws and sections cited in 2002 PLP 2603 (PTD)?
This judgment primarily cites: (a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), (b) Income Tax Ordinance (XXXI of 1979) as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 2002 PLP 2603 (PTD)?
The case was heard and decided by the Federal Tax Ombudsman bench comprising: Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 2002 PLP 2603 (PTD) (FAKIR S. AYAZUDDIN, PARAMOUNT AVIATION (PVT.) LTD., KARACHI Versus COMMISSIONER OF INCOME-TAX, COMPANIES-I, KARACHI and another). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Representation
- ----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Additional assessment---Definite information---Suit for recovery of amount of sale of Air tickets against complainant---Assessing Officer, on such information, issued notice under S.65 of the Income Tax Ordinance, 1979 alleging that commission had been received on such amount---Complainant contended that cheques were neither. encashed nor credited to his account but were returned to the Airline to be subsequently managed for deposit, withdrawal and get it remitted through General Sales Agent i.e. the company---Assessing Officer, however, made addition in the income of the complainant---Validity---Evidence on which proceedings under S.65 of the Income Tax Ordinance, 1979 were initiated related to income alleged to have been received through cheque---No proof existed to show that the cheques were encashed and the proceeds were received by the complainant---Only a presumption was available that the cheques were received by the complainant and were encashed in USA which could hardly be treated a "definite information" ---Assessing Officer added income on the basis of photocopy of cheques alone which was not a sound basis or evidence for such treatment---Department had rightly commented that the remittance could not be held as income, unless it was proved that it was encashed or appropriated by General Sale Agent---No such proof was available on record---Federal Tax Ombudsman appreciated the frank and honest opinion expressed by he Commissioner---Before any action was taken against the complainant, it should have been established that he had received the alleged amount in his personal capacity and appropriated the same---Any amount received on behalf of company should not be treated as his personal income---No enquiry seemed to have been made in that regard as well---Patent illegality in the entire proceeding was clear and obvious on the face of the record---No definite information was found on record to justify action under S.65 of the Income Tax Ordinance, 1979---Such illegality was neither noticed nor a proper investigation was made to bring the case within the four corners of the provision of S.65 of Indian Income Tax Ordinance, 1979---Absence of jurisdictional facts rendered the entire proceedings null and void---Impugned proceedings taken under S.65 of the Income Tax Ordinance, 1979 and orders made by the Commissioner and Assessing Officer were arbitrary, illegal and with no evidence on record---Proper course for the Department should. have been to wait for the final judgment of the High Court wherein the rights and liabilities of the complainant and the Airline were to be decided---Mistake being apparent from record, Federal Tax Ombudsman recommended the Commissioner to rectify the impugned order in the light of the aforestated observations; all proceedings, orders leading to the order passed by the Commissioner of Income-tax under S.138 of the Income Tax Ordinance, 1979 being arbitrary, illegal, null and void could not be enforced against the complainant and fresh proceedings if permissible under law may be initiated in the light of the final judgment in the suit pending before the High Court.
- ‑‑‑‑S.65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Additional assessment‑‑‑Definite information‑‑‑Suit for recovery of amount of sale of Air tickets against complainant‑‑‑Assessing Officer, on such information, issued notice under S.65 of the Income Tax Ordinance, 1979 alleging that commission had been received on such amount‑‑‑Complainant contended that cheques were neither. encashed nor credited to his account but were returned to the Airline to be subsequently managed for deposit, withdrawal and get it remitted through General Sales Agent i.e. the company‑‑‑Assessing Officer, however, made addition in the income of the complainant‑‑‑Validity‑‑‑Evidence on which proceedings under S.65 of the Income Tax Ordinance, 1979 were initiated related to income alleged to have been received through cheque‑‑‑No proof existed to show that the cheques were encashed and the proceeds were received by the complainant‑‑‑Only a presumption was available that the cheques were received by the complainant and were encashed in USA which could hardly be treated a "definite information" ‑‑‑Assessing Officer added income on the basis of photocopy of cheques alone which was not a sound basis or evidence for such treatment‑‑‑Department had rightly commented that the remittance could not be held as income, unless it was proved that it was encashed or appropriated by General Sale Agent‑‑‑No such proof was available on record‑‑‑Federal Tax Ombudsman appreciated the frank and honest opinion expressed by he Commissioner‑‑‑Before any action was taken against the complainant, it should have been established that he had received the alleged amount in his personal capacity and appropriated the same‑‑‑Any amount received on behalf of company should not be treated as his personal income‑‑‑No enquiry seemed to have been made in that regard as well‑‑‑Patent illegality in the entire proceeding was clear and obvious on the face of the record‑‑‑No definite information was found on record to justify action under S.65 of the Income Tax Ordinance, 1979‑‑‑Such illegality was neither noticed nor a proper investigation was made to bring the case within the four corners of the provision of S.65 of Indian Income Tax Ordinance, 1979‑‑‑Absence of jurisdictional facts rendered the entire proceedings null and void‑‑‑Impugned proceedings taken under S.65 of the Income Tax Ordinance, 1979 and orders made by the Commissioner and Assessing Officer were arbitrary, illegal and with no evidence on record‑‑‑Proper course for the Department should. have been to wait for the final judgment of the High Court wherein the rights and liabilities of the complainant and the Airline were to be decided‑‑‑Mistake being apparent from record, Federal Tax Ombudsman recommended the Commissioner to rectify the impugned order in the light of the aforestated observations; all proceedings, orders leading to the order passed by the Commissioner of Income‑tax under S.138 of the Income Tax Ordinance, 1979 being arbitrary, illegal, null and void could not be enforced against the complainant and fresh proceedings if permissible under law may be initiated in the light of the final judgment in the suit pending before the High Court.
- 8. The patent illegality in the entire proceedings is clear and obvious on the face of the record. As pointed out by the Department in reply there is no definite information on record to justify action under section 65. This illegality was neither noticed nor a proper investigation was made to bring the case within the four corners of this provision. The absence of jurisdictional facts renders the entire proceedings null and void. The impugned proceedings under section 65 of the Income Tax Ordinance taken and orders made by the Commissioner and Deputy Commissioner Income Tax are arbitrary, illegal and on no evidence on record. The proper course for the Department should be to wait for the final judgment of the High Court in which the rights and liabilities of the complainant, Paramount (Pvt.) Ltd. and the Airline, will be decided.
Headnotes / Summary
Ss.9(2)(b) & 2(3)
Income Tax Ordinance (XXXI of 1979), S.138--Jurisdiction
Jurisdiction was ousted in respect of matters which related to assessment of income in respect of which legal remedies of appeal, revision or review were available-- Complaint in the present case related to an order passed under S.138 of the Income Tax Ordinance, 1979 against which no such remedy was available
Where allegations of maladministration had been made the Federal Tax Ombudsman will have the jurisdiction to investigate into the allegations of maladministration independent of the proceedings relating to assessment
Maladministration had not only been established but impliedly admitted by the Department complaint in circumstances, could be entertained and investigated-- Objection in respect of jurisdiction was thus overruled by the Federal Tax Ombudsman. Athar Saeed for the Complainant. Basharat Ahmed Qureshi, I.A.C. Dr. Nasir Gunjua, DCIT.
Judgment & Decree
3. In reply the Department has submitted that Messrs Paramount Aviation (Pvt.) Ltd. was General Sales Agent of non‑resident airline, and was allowed 12% commission on sales of tickets according to IATA Rules. However, in order to be competitive higher discounts were allowed to the customers, resulting in substantial difference between the face value of the ticket and the sale price. The IATA and State Bank of Pakistan require that face value of ticket minus 12% commission be remitted to Manila through State Bank of Pakistan. Since actual sales proceeds fell much shorter than required remittances the GSA. of the Airline arranged for the funds to be remitted. This is an admitted, position that such funds were arranged by the Airline itself and cheques to the tune of 1.5 million Dollars amounting to Rs.39,592,634 were handed over to the complainant which was admitted by him but contended that he did not cash them into his account but returned back to the Airline to be subsequently managed for deposit, withdrawal and get it remitted through GSA i.e. the company. It was pleaded that this statement is self‑contradictory as in his affidavit filed in the, High Court he admitted to receive the cheque but not to have returned back because the matter was time‑barred. According to the Airline the said amount was deducted by GSA and inadvertently the accountant of the Airline issued cheques thus making double payment for the difference. In reply statement the Department has stated as follows: "(4) The issue before the Assessing Officer was that cheques were issued in the name of Mr. Fakir S. Ayazuddin. Initially the receipt of cheques was accepted, but encashment was delayed, rather it was submitted that the cheques were returned back. At the same time it was admitted that these cheques were encashed and transferred to Pakistan and remitted back to Manila. In all previous remittance statement the signature is of Mr. Fakir S. Ayazuddin. The Assessing Officer held it as income on the basis of photocopies of cheques alone. This was perhaps not a very sound basis or evidence for such treatment. As records of Paramount Aviation do not show___________a commission earned, nor any effort was made to establish as commission in the assessment order, at the same time the balance‑sheet does not show any amount receivable from the Philippine Airline as commission. Since the Airline had stopped its operations, closed its offices, there was no representative to answer the question as to why the amount was remitted and for what, but the invoices enclosed with the cheques show it as_________which is the Aviation Terminology for Discount and Kickbacks. Question, therefore, arises whether compensation, allowance, whatever name it is given on account of discounts allowed could be held as income, particularly when such compensation had not been retained but remitted out to the Airline. (6) The simple case is, therefore, that Airline remitted certain amount in Pakistan and took it back to its own account in Manila. Such remittance could not ordinarily be held as income unless it was proved that it was encashed or appropriated by the GSA of the Airline." (The omission in the above passage as indicated have occurred as copy of the reply supplied by C.B.R. is blurred, at places blank and illegible). The Department has also objected to the jurisdiction to entertain this petition in view of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.
4. Mr. Muhammad Ather Saeed has contended that there was no definite information to initiate action under section 65 of the Ordinance and further, that the amount added to the income of the complainant is under litigation between the company and complainant and the Philippine Airline. So far the claims of either the complainant or the Airline have not been determined. The learned counsel further contended that objection regarding jurisdiction cannot be entertained.
5. The jurisdiction is ousted in respect of matters which relate to assessment of income in respect of which legal remedies of appeal, revision of review are available. Firstly the complaint relates to an order passed under section 138 of the Income Tax Ordinance against which no such remedy is available. Secondly where allegations of maladministration have been made the Federal Tax Ombudsman will have the jurisdiction to investigate into the allegations of maladministration independent of the proceedings relating to assessment. In the present case as it will be seen in the following discussion, maladministration has not only been established but impliedly admitted by the Department. In these circumstances the complaint can be entertained and investigated. The objection is thus overruled.
6. Mr. Basharat Ahmad Qureshi has contended that in the facts and circumstances of the case it would have been proper if protective assessment had been made leaving the execution after the judgment of the High Court in the pending suit. This is one aspect of the case but where the proceeding is initiated under section 65 of the Income Tax Ordinance it is necessary that it should be based on a definite information. The evidence on which proceeding under section 65 was initiated relate to income alleged to have been received through cheques as discussed above. On quarry Mr. Basharat Qureshi the learned representative stated that there is no proof to show that the cheques were encashed and the proceeds were received by the complainant. He further stated that it is only a presumption that the cheques were received by the complainant and were encashed in USA. This can hardly be treated a definite information. The reply of the Department is also very clear as reproduced above. It has been admitted that Assessing Officer added income on the basis of photocopy of cheques alone which was not a sound basis or evidence for such treatment. The Department has rightly commented that the remittance cannot be held as income unless it was proved that it was encashed or appropriated by GSA. No such proof is on record. I appreciate the frank and honest opinion expressed by, the learned Commissioner.
7. The next aspect is that before any action was taken against the complainant it should have been established that he had received the alleged amount in his personal capacity and appropriated it. As he is the Chief Executive and Director of Messrs Paramount (Pvt.) Limited, any amount received on behalf of company should not be treated as his personal income. No enquiry seems to have been made in this regard as well.
8. The patent illegality in the entire proceedings is clear and obvious on the face of the record. As pointed out by the Department in reply there is no definite information on record to justify action under section
65. This illegality was neither noticed nor a proper investigation was made to bring the case within the four corners of this provision. The absence of jurisdictional facts renders the entire proceedings null and void. The impugned proceedings under section 65 of the Income Tax Ordinance taken and orders made by the Commissioner and Deputy Commissioner Income Tax are arbitrary, illegal and on no evidence on record. The proper course for the Department should be to wait for the final judgment of the High Court in which the rights and liabilities of the complainant, Paramount (Pvt.) Ltd. and the Airline, will be decided.
9. In the circumstances as the mistake is apparent from the record it is recommended that:‑‑ (i) The Commissioner to rectify the impugned order in the light of the aforestated observations. (ii) All proceedings, orders leading to the order passed by the Commissioner of Income Tax under section 138 are arbitrary, 'illegal, null and void and be not enforced against the complainant. (iii) Fresh proceedings if permissible under law may be initiated in the light of the final judgment in the suit pending before the High Court of Sindh. (iv) Compliance be reported within 30 days. C.M.A./M.A.K./394/PTO Order accordingly.