2012 PLP 1439 (PTD)

5. The complainant contends that the order passed under section 162(1) was illegal because sufficient time was not allowed to make a suitable response to the final show-cause notice dated 20-2-2012. However, the complainant had already filed a reply, clearly stating that tax was deducted at source under section 148 of the Ordinance in accordance with the FBR's own Rulings referred to above. Now when he was being told that the earlier Rulings had been withdrawn and a fresh Ruling issued, he needed time to make a considered response. The Deptt's failure to allow the only adjournment sought by the complainant is assailed as an arbitrary, capricious and whimsical exercise of discretion that has no sanctity in law. The ex parte assessment being illegal and void ab initio was otherwise also bound to be struck down/ annulled. Case-law was cited as 2011 PTD (Trib.) 2005; 1988 PTD 1014; 2003 PTD (Trib.) 242 in support of arguments made. The complainant further pointed out that the Supreme Court of Pakistan in judgment cited as PLD 1997 SC 582 = 1997 PTD 1555 had held:-- "We may point out that an executive order/notification, which is detrimental or prejudicial to the interest of a person, cannot operate retrospectively. However, a beneficial executive order/ notification issued by an executive functionary can be given retrospective effect." It is thus the complainant's contention that the FBR's latest Ruling dated 9-2-2012 could only be applied prospectively and not retrospectively.

6. When confronted, the Deptt. raised the preliminary objection that the matter involved interpretation of law and assessment of income and therefore did not fall within the Hon'ble FTOs jurisdiction as per provisions of section 9(2)(b) of the FTO Ordinance. It was also argued that the complainant had filed an appeal before the Commissioner (Appeals) and the matter was therefore sub-judice before that forum and hence did not fall within the Hon'ble FTO's jurisdiction.

7. On merits, the Deptt. contended that the complainant had been allowed sufficient time for compliance and there was no justification for an adjournment as no record was required to be produced and no further explanations were required to be filed. The Deptt. held that the latest interpretation of the FBR in the matter of chargeability of tax under section 148 of the Ordinance was the correct interpretation and would therefore prevail over the earlier interpretation.

8. As regards the complainant's contention that the order under section 162 was passed on 28-2-2012 and then backdated to 27-2-2012, the Deptt. denied the same. The Deptt. contends that the hearing was conducted and concluded on 27-2-2012 when the AR was present in the office but he did not sign the order sheet. As for determining tax liability for Tax Years 2010 and 2011 through a consolidated order of assessment for the two years and not separately, the Deptt. argued that there was no specific bar on such an approach in the statute and hence the assessment was not illegal.

9. Both sides have been heard, record examined and cited case-law perused.

10. The preliminary departmental objections have been considered and are found to be misconceived. The moot point before the Hon'ble FTO is not assessment of income per se, but the denial of reasonable opportunity under the law to respond to a statutory notice. This is a matter well within the Hon'ble FTO's domain. As regards the Departmental contention that the matter was sub-judice before the CIR (Appeals) and thus placed outside the Hon'ble FTO's jurisdiction, that objection too is misconceived. The appeal before the CIR (Appeals) was filed after the filing of the complaint before the Hon'ble FTO, and so it did not fall within the purview of section 9(2)(a) of the FTO Ordinance.

11. On merits, when the FBR changed its opinion with regard to chargeability of tax under section 148 of the Ordinance in the case of importers of CNG kits/cylinders, the complainant had an inalienable right to be allowed reasonable time to respond to the FBR's altered stance in the matter. After all, the same FBR had earlier, on two occasions, held unequivocally that tax was required to be deducted at the concessional rate of 1% on imports of CNG kits/cylinders. As per record, the second show-cause notice issued to the complainant, though dated 20-2-2012, was actually received on 23-2-2012 when the hearing date was 27-2-2012. When the complainant sought an adjournment for the first time on 23-2-2012, it was refused. Four days time could not be held as 'sufficient time' under the statute especially when the matter was contentious and the taxpayer needed to make consultation with his legal counsel in order to be able to make a considered response. FBR had itself issued circular instructions vide C.No.7(36)DT.14/92 dated 1-2-1994 in which 15 days time was recommended to be allowed to taxpayers in order to respond to statutory notices during assessment proceedings.

12. The Hon'ble Supreme Court judgment cited as PLD 1997 SC 582 would also appear to be applicable in the present case. The earlier FBR Rulings being clearly beneficial to the complainant, the current Ruling could not be made applicable retrospectively. As interpretation of the law by the Supreme Court was definitive, the Departmental action in the case of the complainant being in conflict with the cited Supreme Court judgment was an act "contrary to law" and therefore not maintainable.

13. As regard the complainant's contention that the order under section 162 of the Ordinance for Tax Years 2010 and 2011 was passed on 28-2-2012 and then backdated to 27-2-2012, the contention is not definitively established from the record.

14. Finally, the issuance of show-cause notices that do not expressly cite the Tax Year to which they pertain and the finalization of assessment for Tax Years 2010 and 2011 through a single order in which tax liability has been computed summarily for the two years may not be fatal to the assessments made but is certainly objectionable, and so well within the purview of maladministration. Findings:

15. The denial of reasonable opportunity to the complainant to respond to show-cause notice dated 20-2-2012 and refusal of adjournment when sought by the complainant for the first time on 23-2-2012, constitutes maladministration under section 2(3) of the FTO Ordinance. Likewise, the Show-Cause Notices dated 16-12-2011 and 20-2-2012 do not mention any Tax Year, which shows ineptitude, inefficiency and carelessness tantamounting to maladministration under section 2(3) of the FTO Ordinance. Retrospective application of the latest FBR Ruling which affects the complainant adversely also being an act contrary to law, in view of cited Supreme Court judgment, is tantamount to maladministration. Recommendations:

16. FBR to direct the Commissioner to - (i) invoke revisionary jurisdiction under section 122A of the Ordinance and annul impugned orders passed under section 162 of the Ordinance for Tax Years 2010 and 2011, as per law, within 21 days; and (ii) report compliance within 7 days thereafter. H.B.T./108/FTO Order accordingly.