2007 PLP 927 (PTD)

6. Regarding the condonation of delay, he placed reliance on the case of Honourable Supreme Court of Pakistan cited as 1991 PTD

968. It was prayed that the Taxation Authorities may be directed to accept the case of the Complainant under, SAS by condoning the delay of2days.

7. The Respondent, in his written reply, dated 2-2-2004 and also the pleading of its representative raised the preliminary objection that the provisions of section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 placed the instant case outside the jurisdiction of the Federal Tax Ombudsman.

8. On the merit of the case, it was stated that in explaining the delay for filing of the details, the Complainant took self-contodictory position. At one place it was stated that he was admitted in private hospital and remained there 4 to 5 days whereas in the complaint it has been stated that he was advised bed rest for at least one week. Secondly, the receipt of the application for condonation of delay was denied. The peon book showing the alleged receipt was tampered, according to the Respondent.

9. The Respondent also stated that the procedure laid down in Circle No.7 of 2002 for processing of Returns did not give any discretion to the Taxation Authorities to extend the date where compliance was not made within the time allowed. For the facility of reference, the provisions of sub-para (b) and (c) of para. 8 of the said scheme are reproduced as under: (i) "In case of non-filing of documents as required by this Scheme, a notice shall be issued to the person indicating the deficiency to be made up within 15 days of the receipt of such notice. (ii) In cases of non-compliance within the time so allowed, the DCIT shall exclude the case from the SAS by passing a speaking order immediately but not later than fifteen days from the expiry of prescribed time."

10. In view of the above provisions, the representative of the Respondent submitted, the Taxation Authorities did not have the powers to condone the delay even beyond a day.

11. The Advocate from the side of Complainant quoted a number of cases of the Higher Courts and the Income Tax Appellate Tribunal regarding the condonation of delay. He relied on the judgment of the Honourable Supreme Court of Pakistan cited in para. 6 (supra) in particular. The quoted case dealt with the refusal in condoning the delay in filing the documents by a Registered firm. The assessee, in the quoted case, failed to file the Balance Sheet, Statement of partner's Account, partners' bank statements and partners' Wealth Statements within one month of the issue of the notice. The explanation furnished was that the Accountant of the firm suddenly fell ill and was confined to bed for a month and a half. This explanation was not found satisfactory and was rejected by the Income Tax Officer. This action was challenged before the Honourable Sindh High Court in a Constitution Petition, which was dismissed in limine. This decision of the learned High Court was challenged before the Supreme Court.

12. The Honourable Supreme Court of Pakistan in the case quoted as Novitas International v. Income Tax Officer and others 1991 PTD 968 held that the Taxation Authorities were not justified in selecting the case for detailed scrutiny without considering the request for condonation of delay. The relevant portions of the judgment are quoted as follows: "Therefore on a plain reading of the aforesaid sub-paragraph, even if an assessee fails to provide documents within the prescribed period, the Income Tax Officer is not obliged to exclude the case of such an assessee from the benefits of the assessment scheme ipso facto. But he has the choice not to exclude the same and still accept the documents and assess the case under the scheme. There can be no other meaning from the language employed in the sub-paragraph. Clearly therefore the Income Tax Officer possessed discretionary powers under the statute which had to be exercised on sound principles and not mechanically as a ministerial act". (12.1) The Honourable Judges further observed: "We cannot conceive of the framers of the scheme to have laid down that once there is failure on the part of the assessee to submit documents within prescribed period of one month, even if he was prevented by circumstances beyond his control or for sufficient grounds to have delayed the submission of the documents beyond the said period, to be totally deprived of the benefit of the scheme. We therefore, hold that the Income Tax Officer had the power to condone the delay and even if he did not do so, he had the discretion not to exclude the case of the appellant from the benefit of the scheme, if it was otherwise entitled thereto under the other provisions of the scheme."

13. Assuming but not accepting that the C.B.R. did not empower the Taxation Authorities to extend the date of compliance, the fact remains that the judgment of the Honourable Supreme Court of Pakistan is binding on the C.B.R. within the meaning of Article 189 of the Constitution of Pakistan. The Article is quoted as follows:-- "Article

189. Any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other Courts in Pakistan."

14. The Circular No.7 of 2002 regarding SAS for the Assessment year 2002-2003 and the Circular No.5 of 1984 for SAS for Assessment year 1984-85 have been examined in the light of the judgment of Honourable Supreme Court of Pakistan. Though the said judgment pertained to the Assessment year 1984-85, it is fully applicable on the circumstances of the complaint under consideration, for following reasons:

(a) On a plain reading of sub-paras (b) and (c) of para. 8 of the SAS 2002-2003, it appears that the scheme does not provide the discretionary powers to the Taxation Authorities for extending the date of compliance. The same position existed in the provisions of sub-para (b) of para. 5 of the SAS 1984-85. Though the said judgment pertains to a different year than the one under consideration, it is as much applicable because of the identity of the circumstances. (b) There was a delay only of 2 days. The delay which was the subject-matter of the decision of the Honourable Supreme Court extended to 8 days.

15. Regarding the doubts expressed by the Respondent in respect of the medical certificate produced by the Complainant, it is observed that c it was obligatory for the former to conduct necessary enquiries to conclusively establish its falsity. Mere expression of doubt did not vindicate his position.

16. Regarding the objection by the respondent to the jurisdiction of the FTO to entertain the complaint, the same is based on misreading of the provisions of section 9(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. Clause (b) of subsection (2) of section 9 relates only to the decisions on matters enumerated therein "in respect of which remedies of appeal, review or revision are available in the Relevant legislation" itself. On the other than, no such remedy has been provided in respect of a refusal to condone delay and selection of case for Total Audit which are completely independent of assessment. The objection is overruled.

17. In view of the above discussion, the provisions of the Constitution of Pakistan and the judgment of the Honourable Supreme Court of Pakistan, the Taxation Authorities were not justified in refusing to condone the delay of 2 days in submitting the short documents by the Complainant and it is a clear case of maladministration. It is, therefore, recommended that: (a) The Return of Income of the Complainant for the year under consideration be accepted under SAS; and (b) The compliance of the above-mentioned, recommendation be reported to this office within 30 days of the receipt of this order. C.M.A./274/FTO Order accordingly.