Pakistan Case LawMAQSOOD AFZAL Versus SECRETARY, REVENUE DIVISION, ISLAMABAD
This is a tax complaint matter before the Federal Tax Ombudsman concerning an assessment order passed under section 177(10)/121(1)(d) of the Income Tax Ordinance, 2001 for the tax year 2012. The core legal question was whether the Department's actions regarding the audit selection, assessment, and service of notice upon the complainant constituted maladministration under section 2(3) of the Establishment of the Office of Federal Ombudsman Ordinance, 2000. The Federal Tax Ombudsman held that the Department failed to establish the electronic filing of the return, erroneously appended another taxpayer's assessment order to the demand notice, and failed to rectify the mistake, which constituted maladministration. The Federal Tax Ombudsman finally recommended that the Federal Board of Revenue direct the Chief Commissioner to revisit the impugned assessment order and finalize the matter after providing an opportunity of hearing to the complainant within four weeks, and report compliance. The key principle laid down is that where the Department fails to establish the filing of a return by a taxpayer, the selection of the case for audit under section 214C of the Income Tax Ordinance, 2001 does not arise, and dispatching demand notices with incorrect assessment orders amounts to maladministration.
- Whether selection of a case for audit under section 214C of the Income Tax Ordinance, 2001 can arise when the filing of the return by the taxpayer is not established?
- Does the attachment of another taxpayer's assessment order with a demand notice and failure to rectify the mistake amount to maladministration under the Establishment of the Office of Federal Ombudsman Ordinance, 2000?
- Can an assessment order passed under sections 177(10) and 121(1)(d) of the Income Tax Ordinance, 2001 be sustained in law when the Department fails to prove proper service of the order and filing of the return?
FINDINGS/RECOMMENDATIONS
ABDUR RAUF CHAUDHRY, FEDERAL TAX OMBUDSMAN.-- This complaint is against assessment order passed under section 177(10)/ 121(1)(d) of the Income Tax Ordinance, 2001 (the Ordinance) for the tax year 2012.
2.The Complainant contended that he started business with effect from 18.12.2012 which was evident from taxpayer's on line verification certificate. The return was due from tax year 2013 and not for tax year 2012, his case could not be selected for audit u/s 214C by the FBR. The Deptt. issued illegal demand notice u/s 137 and assessment order of another party was attached with the said demand notice. The rectification application was not responded which tantamounted to maladministration under section 2(3) of the FTO Ordinance.
3.The complaint was referred for comments to the Secretary, Revenue Division, in terms of Section 10(4) of the Ordinance. In response, the Deptt. filed para-wise comments through FBR's letter C.No.4(1471)TO-1/2014 dated 16.01.2015 contending therein that the Complainant filed return for the tax year 2012 which was available on FBR's e-portal and the same was selected for audit through random computer balloting under section 214C of the Ordinance. As per registration profile, business starting date was shown as 02.07.2011 which indicated that return for tax year 2012 was due and the same was filed. The assessment was finalized u/s 177(10)/121(1)(d) under the law and order was properly served upon the Complainant.
4.During the hearings, the parties reiterated the averments of their written pleadings. The DR stated that no element of mal-administration was involved in the case. The proceedings were initiated/concluded as per law and amended order along with demand notice was issued properly. The AR contended that return was not e-filed and the case was wrongly selected for audit u/s 214C of the Ordinance. The Deptt. had not issued rectified assessment order till the filing of instant complaint. As the Complainant had not e-filed return, selection for audit u/s 214C of the Ordinance was inappropriate.
5.The complaint has been examined in the light of the written and oral submissions of the parties and available record. Perusal of the record showed that the Deptt failed to provide proof regarding service of order on the Complainant passed in his name. The filing of return on e-portal of the FBR is not established from the record being maintained by the Deptt. The contention of the Complainant that the assessment order of another taxpayer existing at NTN 4103592 was appended with the demand notice issued in his name has been found correct and the same is verified from the documents provided by him. Since the Deptt failed to establish the filing of return by the Complainant, its selection under section 214C of the Ordinance does not arise.
Findings:
6.The order passed under sections 177(10)/121(1)(d) of the Ordinance is not tenable in law as mistake in passing/service of order upon the Complainant was not rectified. The act of the Deptt. in dispatching the demand notice with incorrect assessment order in a hasty manner shows inefficiency and incompetence which tantamounted to maladministration u/s 2(3) of the FTO Ordinance.
Recommendations
7.The FBR to direct the Chief Commissioner to-
HBT/63/FTO Order accordingly.
Judges on this bench
- Abdur Rauf Chaudhary78 judgments
- Federal Tax Ombudsman30 judgments