The Federal Tax Ombudsman, Munir A Sheikh, has detected a case of maladministration where a Commissioner wrongly issued an order for imposition of penalty on a Karachi-based builder. In a recent judgement, the FTO has asked the Federal Board of Revenue (FBR) to direct the Commissioner for cancellation of order passed under section 183(1)(b) of the Income Tax Ordinance for the assessment year 2000-01 within 15 days and send compliance report.
Details showed that the complainant, a private limited company engaged in the business of builders, was aggrieved by the penalty order. According to FTO, brief facts of the case were that for the assessment year 2001-02 the complainant filed its return of income wherein a loss of Rs l,028,992 was declared. The assessment for this year was completed ex parte under section 63 of the repealed Income Tax Ordinance, 1979 and income was determined at Rs 3,400,000.
The complainant felt aggrieved by such order and filed an appeal before the Commissioner (Appeals) who allowed some relief but the complainant, still feeling dissatisfied, preferred an appeal before the Income Tax Appellate Tribunal against the order of the Commissioner (Appeals).
The Tribunal set aside the entire assessment order with the direction to the Assessing Officer "to examine the contentions of the assessee regarding projects undertaken in Gulistan-e-Johar or elsewhere (and), thereafter, treatment be accorded on the basis of legal plane".
In view of Tribunal order, the original demand stood eliminated and no fresh notice of hearing under section 61 or 62 of the repealed Ordinance was received by the complainant and also no order under section 124 of the Ordinance read with section 62 or 63 of the repealed Ordinance giving appeal effect was received.
On receipt of this order, the complainant informed the respondent that it has not been served with any appeal effect order and if such an order has been passed, it may be provided with a copy thereof, which was not done. Thereafter, the complainant also wrote a letter dated 17.06.2008 to the Commissioner Tax Facilitation Division (TFD) to provide a copy of the assessment order, the notice of demand and IT-30, but the said Commissioner also did not provide any such documents although it is the jurisdiction of Commissioner TFD to serve the assessment order on the taxpayers.
The complainant also wrote a letter to the Taxation Officer, IP Division, to provide certified copies of the order sheets for the assessment year 2001-02 but he has also not given any response. It is stated that thereafter the Taxation Officer (Enforcement), vide letter dated 15.07.2008, threatened the complainant to make payment of the outstanding demand failing which its properties will be attached whereupon the complainant, vide letter dated 25.07.2008, asked again for the copy of appeal effect order but again no response has been received.
The learned A.R of the complainant has contended that the impugned penalty order is illegal as the complainant has not been served with any appeal effect order after its remand by the Tribunal and since there is no tax demand in the field, therefore, the order imposing penalty for the non-payment thereof is a nullity and without jurisdiction.
The unit demanded that impugned penalty order passed under section 1 83(1)(b) of the Ordinance is illegal and without jurisdiction and accordingly be vacated.
Responding to the complainant, the Commissioner of Income Tax (Enforcement and Collection) in her written report stated that the "impugned order for non-payment of outstanding arrears demand was passed well within legal plinth" and that "allegation that no appeal effect order has been served is not correct." The Commissioner in her written report has not elaborated as to how the allegation is not correct as she has neither confirmed that pursuant to the order of the Tribunal, an order under section 124 was duly passed resulting in some tax demand for non payment of which the imposition of penalty was justified nor she has sent a copy of such order nor any evidence that such order under section 124 of the Ordinance was served upon by the complainant.
At the time of hearing, the D.R also was unable to show that any such order was passed nor he has produced any evidence regarding service of such order upon the complainant.
According to the FTO, it has, therefore, not been proved and established that there was some tax demand in the field which was outstanding against the complainant and non payment of which justified the imposition of penalty. In these circumstances, the impugned order passed under section 183(1) (b) of the Ordinance for the assessment 2000-01 is contrary to law, arbitrary and unreasonable which tantamount to maladministration, the FTO added. Therefore, the FTO recommended that the FBR should direct the concerned Commissioner to cancel the order, and compliance be reported within seven days after doing the needful.
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