2004 PLP 57 (PTD)

8. The Regional Commissioner of Income Tax, Southern Region, Karachi has furnished parawise comments on behalf of the respondents raising therein preliminary objection of jurisdiction in terms of section 9(2) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000. It is stated that on receipt of information from IAC, Range-III' Survey & Collation, Zone-D, Karachi that eight (8) vehicles. were registered in the name of the complainant Mr. Abdul Karim, a show-cause notice was issued to him bearing No.31 dated 24-10-2000 as to why assessment proceedings should not be initiated against him. In response to the said notice the complainant filed an affidavit dated 13-11-2000 admitting therein the ownership of the vehicles. The complainant was, thus involved in the business of purchase and sale of vehicles. It is further, stated that subsequently the complainant was served with another show-cause notice bearing No.87 dated 16-1-2001 (inadvertently typed as 2000) whereby he was required to submit the following:-- "(1) Return of Total Income for the year he had been doing the business of vehicle dealership/transport. (2) Wealth Statement for all the years he had been doing the business. (3) Proof regarding sale of Motor Vehicles. (4) Complete names and addresses of the persons to whom he had sold Motor Vehicles."

9. The aforesaid letter was served personally on the complainant on 17-1-2001 and in pursuance thereof the complainant appeared alongwith his brother Mr. Muhammad Yousuf before the ACIT on 23-1-2001 and the case was adjourned to 27-1-2001 for filing the aforesaid documents etc. Since the compliance was not made, notices under section 56 of the repealed Income Tax Ordinance, 1979 were issued for the assessment years 1992-93 to 2000-2001 under registered cover. Due to non compliance of these notices and subsequent show-cause notice under section 13(1)(aa), the assessments for the years 1992-93 to 1997-98 were completed by making additions under section 13(1)(aa) of the repealed Ordinance, 1979 on account of unexplained investment in the purchase of vehicles.

10. It is further pleaded that the case was not hit by limitation of time as wrongly alleged by the complainant. The notices under section 56 were issued on 27-2-2001 and the assessments were made in consequence of these notices. The explanation introduced by Finance Ordinance, 2000 is therefore applicable to all the aforesaid assessments. The respondents have further stated that assessment was made strictly in accordance with law and no maladministration was committed by the Assessing Officer.

11. The authorised representative of the complainant argued that since the complainant had left Karachi for Quetta after the shifting of the old Sabzi Mandi, the notice issued under section 56 was not served on him. There is no acknowledgement receipt in possession of the Department regarding service of the notice. The departmental representative however, pleaded that notice under section 56 was issued under registered cover and since the same was not received back undelivered, it is established that the notice was served on the complainant. The postal receipt for issuing the notice on 27-2-2001 has been produced. He further, argued that the service of demand notice and assessment order at the given address has not been denied by the complainant and therefore his denial of receipt of notice under section 56 which was sent on the same address is absolutely unfounded. As regards the question of limitation of time he pleaded that since the notice under section 56 was issued on 27-2-2001 the same was strictly in accordance with law as clarified by the "'Explanation" inserted by Finance Ordinance, 2000. The amendment in this section in 2001 is applicable w.e.f. 1-7-2001.

12. The assessment records of the case produced by the departmental representative have been examined. It is distressing to note that the case has been dealt with in a very casual and irresponsible manner. The copies of relevant order sheets produced by the departmental representative show that most of the entries have not been signed of initialed by the Assessing Officer. There is no entry regarding issuance of show-cause notice bearing No.31 dated 24-10-2000 on the order sheet. Similarly the receipt of affidavit from the complainant dated 13-11-2000 has also not been recorded. in the order sheet. The departmental representative has not been able to establish that the notice under section 56 issued on 27-2-2001 was properly served on the complainant. The respondent's presumption that, since the notice was not received back unserved, the same must have been served on the addressee is not well founded. The apprehension of the complainant's authorised representative that the unserved notice received by the Department might have not been placed on record cannot be ruled out.

13. It has also been noted that notices under sections 62 and 13(1)(aa) were issued on 14-5-2001 for compliance on 30-5-2001 and the service was made by affixture The photocopies of the order sheet and the report of the notice server furnished by the departmental representative show that the service by affixture was not made in accordance with the procedure laid down in rules 17 and 20- of Order V of the Code of Civil Procedure, 1908.

14. The relevant order sheet does not indicate any instruction of the Assessing Officer for service of the notices by affixture. The serving official has not been examined on oath. The identifiable addresses of the witnesses have not been given by the notice server. In such circumstances, the validity of the service of the said notices is not established.

15. The irregularity pointed out by the complainant that the assessment, was completed after a lapse of considerable time from the date of compliance stipulated in the notice under sections 62 and 13(1)(aa) of the repealed Ordinance is also established from the record. The aforesaid notices were issued on 14-5-2001 for compliance on 30-5-2001 and the assessment was completed on 26-11-2001.

16. The facts stated above establish that the assessment was completed without proper service of the Statutory, notices on the complainant. This is prima facie a case of maladministration committed by the Assessing. Officer. The preliminary objection raised by the respondents regarding jurisdiction is misplaced and misconceived. It has been held by this forum in a number of complaints that where maladministration is established, the Federal Tax Ombudsman has jurisdiction to investigate the matter. This issue has been elaborately discussed in Complaint No. 1438 of 2002.

17. It is therefore recommended as under:-- (i) The Commissioner concerned be asked to remand the case under section 122 of the Income Tax Ordinance, 2001 to the Taxation Officer for reframing the assessment for the year 1994-95 after proper service of Statutory notices. (ii) The compliance be made within 30 days of the receipt of this order and reported within a week thereafter. C.M.A./892/FTO Order accordingly.