2004 PLP 1438 (PTD)

(11‑3‑2003) Issue Show‑Cause Notice under section 66A for compliance by 13‑3‑2003. IAC (18‑3‑2003) Received letter from Rehan Naqvi Associates in compliance to Notice under section 66A which is placed on file. Reply for examination. IAC (3‑6‑2002) Received letter from Additional Director Inspection (DT) Range‑A Southern Region for sending case record. DCIT"

17. According to Mr. Barakzai, the jurisdiction over the case was transferred to LTU at this stage. The following next two entries on the second Order Sheet (Page III) were also unsigned: (31‑10‑2002) Letter issued by Commissioner Audit Division to the Director of Inspection and Audit, Southern Region Karachi which is placed on file ILLEGBLE (25‑11‑2002) Received copy of letter from Director Inspection and Audit (DT) Southern Region, Karachi addressed to DG Inspection and Audit (DT) Islamabad which is placed on file. DCIT"

18. There were another three notes on the same order sheet (Page IV). Whereas the note, dated 29‑6‑2003 was signed by the IAC, the later two notes written in the same handwriting as the former one was unsigned and purportedly written by DCIT. The three notes were as under:‑‑ "(29‑6‑2003) Issue Notice under section 122 of Income Tax for all the three years for compliance by 7-7-2003. (Sd.) IAC (6‑8‑2003) Received letter from Commissioner Audit for enclosing parawise comments regarding complaint filed by the complainant before Hon'ble Federal Tax Ombudsman by DCIT (13‑8‑2003) Sent parawise comments in the complaint No. 1073 of 2003 Habib Oil Mills (Pvt.) Ltd. Assessment year 1997‑98 to 1999‑2000 through proper channel to DG (LTU). DCIT"

19. The last note on the third order sheet (Page IV) duly signed by Z was as under:‑ "(26‑8‑2003) Received letter from Commissioner Audit LTU that hearing before Hon'ble Federal Tax Ombudsman in complaints Nos. 1073, 1074 and 1075 were fixed for hearing on 29‑8‑2003 at 10‑00 A.M. (Sd.) IAC"

20. The letter of Director, Inspection and Audit (DT), Southern Region, Karachi, dated 25‑11‑2002 which is referred to in the Order Sheet note of the even date is relevant to the issue being investigated. It is also being reproduced hereunder for convenience of reference: "The Director General (By Name) Inspection & Audit (D.T.) Islamabad. SUBJECT: FOLLOW UP ACTION‑DIRECTIVE NO. 4 OF 1993 MESSRS HABIB OIL MILLS (PVT.) LIMITED, KARACHI ASSESSMENT YEAR 1997‑98 TO 1999‑2000. I have the honour to refer to your officer letter No. 22(04)Pt‑13/Insp/1‑2 dated 5th November 2002 on the above noted subject and to submit that Special Inspection Note was delivered on 18‑2‑2002, in the office of the CI'C Cos‑I, Karachi. On point of jurisdiction the case was transferred to Cos‑V, Karachi and therefore, the IAC Range‑II, Cos‑V, Karachi (Mr. Muhammad Umer Farooq) through his office Letter No. IAC/R‑II/COS‑V/2001‑2002/191, dated April 18, 2002 intimated that the Note does not warrant action under section 66A in any of the assessment years under review. The comments of the IAC were rebutted by this office Letter No. DIA (DT)/ADI(RA)/SR/2001 2002/124, dated 4‑6‑2002. Again on point of jurisdiction the case was transferred to LTU Karachi, CIT Audit LTU through his office letter No. CIT(AUDIT)/LTU/2002‑2003/9822, dated 31‑10‑2002 has informed that show‑cause notice under section 122 has been issued by the IAC. No further information regarding finalization of Amended Assessment and tax retrieval is sent so far. (NAWAL RAI N. OAD) DIRECTOR OF INSPECTION & AUDIT (D.T.) SOUTHER REGION‑KARACHI. Copy to

1. D.G.LTU. Karachi.

2. The, Commissioner of Income‑tax LTU, Audit for information and with the request that copy of Amended Assessment may please be sent to the office of the DG Inspection and Audit and this Directorate, hopefully by the end of this month. If the Amended Assessment could not be made, as expected, such reasons may please be submitted to the D.G. and also to this Directorate."

21. Regarding the contention of the Taxation Officer that his jurisdiction over the proceedings taken up by him under section 122 is saved under subsection (4) of section 239 of the Income Tax Ordinance, 2001 suffice it to observe that subsection (4) provides that any proceeding under the repealed Ordinance pending on the commencement of this Ordinance before any income‑tax authority, the Appellate Tribunal or any Court by way of appeal, reference, revision or prosecution shall be continued and disposed of as if this Ordinance has not come into force. Firstly he has failed to prove that the proceedings under section 66A of the repealed Ordinance were pending before his predecessor on the commencement of the Income Tax Ordinance, 2001 because the authenticity of the order sheets found on the, records produced by him on requisition is doubtful on facts recorded supra. The fact that his predecessor had dropped those proceedings is proved from communication of his decision to the Additional Director Inspection as well as his own Commissioner under his own signature. He had himself given a copy of the said report to the counsel of the assessee as stated by the counsel of the complainant at the bar. Thus it cannot be said that he had only expressed his intention to do so in a Departmental communication.

22. Maladministration is found after the foregoing investigations and enquiries: (a) On the part of Additional Director Inspection for directing the IAC concerned to initiate proceedings under section 66A on the basis of his report on Special Inspection conducted into refund cases of complainant. The Additional Director Inspection had no jurisdiction to issue any direction or even to suggest to the IAC to invoke his jurisdiction under section 66A. He could only recommend action against the concerned Assessing Officer or officers, responsible for the alleged loss of revenue. (b) On the part of the DCIT, Circle C‑5, Companies V, Karachi for failing to sign the proceedings recorded on the order sheets purportedly under his name, as per findings recorded at Para.16 supra. (c) On the part of IAC, Range II, Companies V, Karachi for failure to sign the observations/directions recorded on the order sheet with regard to proceedings under section 66‑A besides failing to record his decision to drop the proceedings initiated under section 66‑A conveyed by him to the Additional Director Inspection vide his letter, dated 18‑4‑2002 a copy whereof was also endorsed by him to the CIT, Companies V, Karachi as per findings recorded at para. 8 supra. (d) On the part of Taxation Officer exercising powers delegated by the Commissioner under section 122 (5) firstly for invoking jurisdiction under the said section over assessment order issued under section 135 and under section 66‑A of the repealed Ordinance which is contrary to law and secondly, without, prejudice to the foregoing, for treating the contents or Inspection Report ibid to be the definite information acquired from an audit. The alleged errors pointed out in the Inspection Report are based on presumptions and no definite conclusion can be deduced from the said report that the orders passed by the DCIT are erroneous and prejudicial to the Revenue.

23. It is recommended that:‑‑ (a) The then DCIT, Circle C‑5, Companies‑V and the then IAC, Range II, Companies V, Karachi are required to explain as to why the proceedings noted in the order sheets produced during investigation proceedings were not signed by them. (b) That why the then IAC, Range II, Companies V, Karachi did not record the proceedings conducted and concluded under section 66‑A as reflected from the findings and decisions in respect thereof conveyed through his report, dated April 18, 2002 to the Additional Director Inspection, Southern Region Karachi. (c) That the proceedings initiated under section 122 by the Taxation Officer‑B, Audit Division, LTU, Karachi, are ab initio contrary to law, are not pursued by the respondent. (d) Compliance of recommendation (c) is reported within 30 days and compliance of recommendation (a) and (b) is reported within 45 days. C.M.A./1005/FTO Order accordingly.