FEDERAL TAX OMBUDSMAN SECRETARIAT
Regional Office, Lahore
Complaint No.389/LHR/IT(298)732/2012
Dated: 30.05.20121
Islamabad Steel Re-Rolling Mills
SIE-II
Gujranwala …Complainant
Versus
The Secretary
Revenue Division
Islamabad … Respondent
Dealing Officer : Mr. Haji Ahmad, Advisor
Authorized Representatives : Mr. Siddique Ahmad Ch., Advocate
Mr. Husnain Siddique Ch,, Advocate
Departmental Representative : Mr. Taimoor Aman, DCIR
FINDINGS/RECOMMENDATIONS
This complaint is filed against the CIR (Appeals)’ order No.356-
358 dated 27.03.2012.
2. According to the Complainant, the upholding of an illegal order
passed by the Inland Revenue Officer (IRO) u/s 182 of the Income Tax
Ordinance 2001 (the Ordinance) is arbitrary and unlawful. Further, the
CIR (Appeals) confirmed the said order without verification of the
facts, ignoring the points of law and the grounds of appeal.
3. The facts briefly stated are that the Complainant being a
prescribed person was required to deduct tax and furnish monthly
statements u/s 165 of the Ordinance by 15 th of each month as per
Rule 44 of Income Tax Rules, 2002, but he failed to file the statement
for the month of July 2011 to September 2011. Accordingly, a notice
was issued to produce evidence/documents and attend proceedings
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Date of Registration in FTO Sectt.
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on 17.11.2011. The Complainant neither appeared before the IRO nor
provided evidence on the due date. As such, the IRO passed ex-parte
order. Penalty was also imposed at Rs5,000 for each month of default.
Aggrieved with this treatment, an appeal was filed before the CIR
(Appeals) who vide order dated 27.03.2012 rejected the same with the
observation that as the Complainant had failed to provide evidence of
filing monthly statement within time, the order passed by the IRO was
lawful.
4. The Complainant contended that the order of the CIR (Appeals)
was illegal, as the following points of law and facts were ignored by
him:
(i) No show cause notice was served on the Complainant. As
proper opportunity of hearing was not provided, the
Complainant was condemned unheard.
(ii) the default was neither willful nor intentional.
(iii) under sub-section (1) of Section 182 of the Ordinance, the
penalty can only be imposed with reference to specific tax
demand / tax payable, but in this case no order regarding
tax payable was in existence on the date of imposition of
penalty.
(iv) the CIR (Appeals) reproduced the grounds of appeal and
the arguments in his order, but the same were neither
discussed nor adjudicated. He even did not discuss and
follow the Supreme Court judgment: [(1974)29 TAX 192
(S.C)] cited in appeal ground No.4.
(v) the ratio laid down in the following judgments of the High
Court was also ignored:
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Judgment Ratio
2005 PTD 1567 “since reasonable opportunity
of hearing was not extended to
assessee, penalty levied held
to be void ab-initio and ordered
to be deleted”.
2000 PTD 3410 “penalty cannot be levied
where default is unintentional
and not willful”.
5. When confronted the CIR (Appeals) as well as the Chief
Commissioner, RTO, Gujranwala, submitted written replies contending
that the Hon’ble FTO had no jurisdiction to entertain the complaint
against the order of appeal in terms of Section 9(2)(b) of the FTO
Ordinance, 2000, and also the order involving examination of statutory
provisions governing assessment of tax. Also, the Complainant being
a prescribed person / withholding agent was under legal obligation to
file monthly statements u/s 165 of the Ordinance, but the same were
not filed on the due dates. The default stood established, thus the IRO
was justified in passing penalty order.
6. Show cause was served through notice server, but none
attended on the date of hearing and even no explanation was filed.
Not only was ‘proper opportunity’ of hearing provided to the
Complainant, but all the grounds of appeal, written arguments and
contentions of the AR were incorporated, discussed and adjudicated in
the order of appeal. Remedy to file further appeal before the Appellate
Tribunal was available to the Complainant, but he preferred to file
complaint before the Hon’ble FTO.
7. The DR reiterated the written comments. According to him, there
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was no maladministration involved in the case.
8. The AR contended that reasonable opportunity of hearing was
not extended to the Complainant which was not only contrary to
several decisions of the superior courts, but also against the directions
of the FBR, as per Circular No.7(2)DT-14/94 dated 01.02.1994.
According to the Circular, the first notice of hearing should specify the
details and information and the books of account that are required to
be produced by the assessee. A clear period of 15 days is required to
be given for compliance. The notice may also conspicuously indicate
that this is FIRST call. If the taxpayer does not appear on the given
day or the details furnished are lacking in any respect, a second notice
may be issued specifying remaining detail/documents still required.
This notice should conspicuously indicate that it is SECOND NOTICE.
9. Both the parties have been heard and record perused.
10. The Hon’ble FTO has jurisdiction to entertain complaints of
maladministration at any level of the hierarchy, constituted under
Section 207 of the Income Tax Ordinance 2001. Thus objections to
his jurisdiction are misconceived. The question that has arisen in this
case is whether the Complainant was served with the notice dated
18.10.2011. Both the IRO and the CIT (Appeals) in their orders have
mentioned issue of the notice but not of its service. The Complainant
on the other hand has denied its service at every opportunity. An ex
parte order based on absence of the Complainant due to non service
of the single notice dated 18.10.2011 is not sustainable under the law.
This view is lent support by 2005 PTD 1567 and (2005)92 Tax 71 H.C.
Lahore. Order No. 317 dated 04.02.2009 in the matter of M/s Iqbal
brothers by the predecessor of the instant CIT(Appeals) also
subscribes to the same view.
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Findings:
11. No superstructure built on the single unserved notice can be
allowed to stand under the law. Reliance on such notice strikes at the
very root of the matter and is tantamount to maladministration.
Recommendations:
12. FBR to direct the CIR (Appeals) to-
(i) invoke jurisdiction under Section 221 of the Income Tax
Ordinance 2001, and pass a speaking order, as per law,
after providing reasonable opportunity of hearing to the
Complainant, within 21 days; and
(ii) report compliance within 07 days thereafter.
(Dr. Muhammad Shoaib Suddle)
Federal Tax Ombudsman
Dated:24-07-2012
Khalil Ahmad/my
