2003 PLP 2676 (PTD)

12. It has been further submitted by the RCIT that the case of the assessee is selected for total audit on genuine grounds. Procedure prescribed in this behalf has been duly followed. The matter has been thoroughly discussed with the tax advisor of assessee and his view point has been judiciously considered; hence case has been selected for total audit for valid reasons.

13. The authorized representative of complainant, besides reiterating the submissions already made before the RCIT further submitted that the RCIT did not examine the assessment record of the assessee and his submissions were rejected without application of mind. The case of the assessee was recommended for total audit firstly on whimsical grounds and secondly the veracity of submission was neither checked nor examined. The selection of the case at the fag end of the period of limitation under section 59(4) is fanciful and reflects misuse of powers for the following reasons:--‑ (i) The assessee had declared income for the preceding years as under: Assessment year Property income Business Income Total 1996‑97 57,600 28,935 86,535 1997‑98 57,600 41,900 99,500 1998‑99 76,800 64,600 141,400 1999‑2000 76,800 118,700 195,500 2000‑2001 215,453 Including estate commission. 215,453 It was pointed out that in assessment year 1996‑97 the assessee declared income from property and insurance business, while in assessment years 1997‑98 and 1998‑99 income was declared, from property income and real estate agency commission and in assessment year 1999‑2000 income from property, estate agency and trading was declared. In assessment year 2000‑2001 income from property was not declared as the shop at Main Boulevard was sold out while income from estate agency and trading of wheat was declared. The reason for non‑declaration of property income was that the shop fetching rent was sold out during the year 1‑7‑1998 to 30‑6‑1999 and possession was handed over to the vendees and this fact was declared in the wealth statement. Subsequently copy of sale‑deed was also filed. The perusal of wealth statement as on 30‑6‑2000 showed advance against shop/property at Rs.300,000 while in the wealth statement as on 30‑6‑2001 the said shop did not appear in the wealth statement. There was, therefore, no basis to hold that the assessee did not have sufficient funds for investment in trading business. This observation shows that the Commissioner of Income Tax recommended the case for total audit without appreciating that advance of Rs.300,000 was available for business in addition to his own capital.

14. It has been submitted on behalf of the complainant that the reasons recorded by the learned RCIT do not conform to any of the guidelines for selection of cases, circulated by the Central Board of Revenue (C.B.R.) vide Circular Letter No.7(7) S. Asstt of 2001, dated 26th March, 2002 which are as under:‑‑ (i) Evidence, information or reason to believe that true particulars of income have been suppressed and it is a revenue potential case. (ii) Such selection tray be based upon factors including:‑‑‑ (a) Evident decline in income. (b) Any addition to the assets that is not covered by income declared. (Tax profiles of Survey and Registration may be consulted to identify such cases). (c) Disparity is expenses on utilities vis‑a‑vis income declared.

15. The counsel of the complainant has submitted that there is neither any evidence of decline in income, nor there is any evidence that addition, to assets during the year is not covered by the known sources of the complainant nor there is any evidence or information that true particulars of income have been suppressed. All the 'reasons that the complainant was confronted with by the RCIT through his notice and on the basis of which he believed that the potential of revenue could be more than what was declared have been fully explained, according to the learned counsel, He submits that sufficient cause has been duly shown that the reasons were invalid and unfounded. Attention is invited to the decision of the RCIT reproduced supra where no reasons have been recorded by the RCIT for his dissatisfaction with the causes shown why the return does not warrant selection for audit.

16. Finally it is submitted on behalf of the complainant that on the foregoing facts there was no valid reason for the RCIT to believe that true particulars of income had been suppressed or that the revenue potential of the case in assessment year 2001‑2002 was more than what had been already declared.

17. Submissions made on behalf of each side have been considered. It is found that the complainant has satisfactorily explained all the issues that it was confronted with by the RCIT through his notice and sufficient cause has been shown on his behalf as to why the reasons that the RCIT had for his belief that it was a revenue potential case were unfounded and invalid. The RCIT himself has not recorded any reason for his dissatisfaction with the cases shown to him on behalf of the complainant.

18. Selection of return of income filed by the complainant for audit therefore, is arbitrary. Any order passed without reasonable ground or in breach of the parameters laid down by rules, regulations or binding orders will be contrary to law, arbitrary and based on irrelevant grounds. This amounts to maladministration, attracting the jurisdiction of the Federal Tax Ombudsman. The alleged maladministration stands established.

19. It is recommended that:‑ (i) The C.B.R. 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. C.M.A./883/FTO Recommendation Made.