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545/LHR/IT(406)/1032/2012

FEDERAL TAX OMBUDSMAN SECRETARIAT

Regional Office, Lahore

Complaint No 545/LHR/IT(406)/1032/2012

Dated: 31.07.2012 *

Muhammad Umer

Proprietor Umer & Co

P-68 Gole Sabanwala

Faisalabad … Complainant

Versus

The Secretary

Revenue Division

Islamabad … Respondent

Dealing Officer : Muhammad Munir Qureshi, Advisor

Authorized Representative : Muhammad Bashir Malik, Advocate

Departmental Representative : Sultan M Nawaz Nasir, ACIR

FINDINGS/RECOMMENDATIONS

This complaint is against illegal levy of penalty.

2. The Complainant was served with three notices under Section 116(1) of the Income Tax Ordinance 2001 (the Ordinance) for filing Wealth Statement for Tax Year 2007. Each time he filed reply explaining that being a retailer he had filed Return under Section 113A of the Ordinance. Furthermore, the income declared was below the threshold for which wealth statement was required to be filed. Notwithstanding the explanations given a Show Cause Notice (SCN) under Section 182(1)of the Ordinance dated 26.06.2012 was served on the Complainant for compliance by 29.06.2012. The Complainant replied to the same on 03.07.2012. However, the assessing officer levied penalty of Rs2000 under Section 182 of the Ordinance on 30.06.2012. The Complainant assails the levy as unjustified and points out that the assessing officer completely ignored the three replies submitted by him. He even did not refer to the replies in the penalty order.

3. When confronted, the Deptt filed a reply raising a preliminary objection that as legal remedy of appeal before the Commissioner (Appeals) was available to the Complainant, the Hon’ble FTO did not have jurisdiction to investigate the complaint as per stipulation obtaining in Section 9(2)(b) of the Ordinance. On merits, the Deptt acknowledged that the Complainant did respond to the notices dated 16.06.2012 and 20.06.2012 but maintained that the compliance was not proper as no wealth statement was filed. Only a general reply was filed intimating that the Complainant was not liable to file a wealth statement. The Deptt further stated in the reply that the assessing officer was justified to call for a wealth statement due to discrepancy in the receipts declared as per Return filed and the credit entries in the bank statement.

4. The preliminary objection raised by the Deptt has been considered and found to be misconceived. The assessment per se is not the moot point in the complaint. Rather, the Complainant contends that the assessing officer deliberately ignored the fact that the complainant had replied to all the notices issued by the Deptt and in the penalty order he made no mention at all of the replies filed by the Complainant which omission was tantamount to maladministration. It was evident that in the complaint’s case maladministration issues were intertwined with the issue of assessment of penalty under Section 182 of the Ordinance. In such situations the Hon’ble FTO exercises concurrent jurisdiction, as held by the Lahore High Court in order dated 13.09.2012 disposing of Writ Petition No.11545 of 2012. On merits, the record shows that the Complainant had proof that replies filed by him to the notices issued under Sections 116 and 181 of the Ordinance were duly received in the Deptt. The Deptt also acknowledges that the Complainant’s replies dated 16.06.2012 and 20.06.2012 were received by the assessing officer. That being so, if the assessing officer was not satisfied with the replies he should have issued a notice explaining to the Complainant why his replies were unsatisfactory. There was no point in repetitively issuing one notice after another and then levying penalty without informing the Complainant why he was required to file a wealth statement in the first place. Moreover, as the Complainant had replied to all notices issued by the Deptt the assessing officer was required to discuss them in the assessment order. The order thus passed was not a speaking order and contravened a fundamental requirement of the statute.

Findings:

5. Repetitive issuance of notices under Section 116(1) of the Ordinance and passing an arbitrary order ignoring the replies filed by the Complainant is tantamount to maladministration under Section 2(3) of the FTO Ordinance. Levy of penalty under Section 182 of the Ordinance without discussing the reply filed by the Complainant being illegal was again tantamount to maladministration under Section 2(3) of the FTO Ordinance.

Recommendations:

6. FBR to direct the Commissioner to –

(i)  invoke revisionary jurisdiction under Section 122A of the Ordinance to revisit the illegal levy of penalty order dated 30.06.2012, as per law;

(ii)  initiate disciplinary proceedings against Mr Muhammad Umer Yunus, ACIR, for conducting assessment proceedings illegally in a manner that was contrary to law; and

(iii) report compliance within 30 days.

(Dr. Muhammad Shoaib Suddle)

Federal Tax Ombudsman

Dated: 24-10-2012

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