Amended assessment u/s 122(5A) of IT Ordinance: President rejects FBR's representation against FTO decision

President has rejected a representation filed by the Federal Board of Revenue (FBR) against recommendations issued by the Federal Tax Ombudsman (FTO) on the issue of amended assessment under section 122(5A) of the Income Tax Ordinance and withdrawal of show cause notices. It is learnt that the FTO's landmark order on the issue of amended assessment under Section 122(5A) of the Income Tax Ordinance, 2001 has been confirmed by the President by rejecting the FBR's representation.
Sources said that FTO's order was endorsed by the President and questioning the jurisdiction of the FTO by the FBR on the basis of availability of remedy through appeal was rejected unequivocally. President has observed that issuance of arbitrary notices clearly fell within the jurisdiction of FTO in terms of Section 2(3) read with Section 9(1) of the FTO Ordinance, 2000. The Agency (FBR) does not have an unbridled power to keep on issuing amended assessments.
President order states "The Agency has filed instant representation impugning the FTO's order mainly on the ground of jurisdiction under Section 9(2)(b) of the FTO Ordinance, 2000 for the matter being that of tax assessment which entails remedy of appeal under the Income Tax Ordinance, 2001. The agency visibly failed on that account and embarked upon entirely a different course under Section 122 of the Ordinance. In this regard the Agency's reliance on honourable President's decision in 204/2011 is misplaced in that the FTO's impugned decision in the instant case merely referred to stipulation of "definite information" as a pre-requisite for issuance of notices and subsequent proceedings under Section 122 which was ostensibly found missing in Agency's pleadings/representation.
Earlier in the case the FTO observed that the Complainant contests alleged unlawful, arbitrary and vindictive order passed u/s 122(5A). AR also prayed that action be taken against the responsible officers who committed such an oppressive, malafide, vindictive and unlawful act. They further prayed that the Deptt be directed to drop the unlawful proceedings initiated for tax years 2009 to 2013. In the written comments, filed by the Commissioner, it has been stated that show cause notices were issued to the Complainant on the ground that assessments deemed to have been completed under Section 120(1) were erroneous and prejudicial to the interest of revenue and the Respondent intended to pass order under Section 122(5A). It has also been stated in the written comments that assessment has rightly been completed u/s 122(5A) and there was no maladministration.
FTO further observed the record shows that the Respondent officer did not have legally valid reasons to declare the assessments as prejudicial to the interest of revenue. Such an assessment can only be made if factually definite amount of expenses are detected which are legally inadmissible or claim of such expense/credit is clearly not permissible. No such amount could be detected by the concerned officer. Indeed he required the Complainant to file details which can only be asked for in the audit proceedings, when a case is selected for audit. Show cause notices issued for tax years 2009 to 2013 are contrary to legal provisions, established practices/procedure and are based on irrelevant grounds. Unlawful, arbitrary, malafide and vindictive as well as defiant conduct is tantamount to maladministration. FBR to direct the Chief Commissioner concerned to review the unlawful order u/s 122A of the Ordinance and withdraw unlawful notices issued for tax years 2009 to 2013. Identify the officers responsible for acts of omission and commission and take disciplinary action against them.
Language of the relevant provisions of the statue; viz sub section (5) of section 122 of the Income Tax Ordinance, 2001 if read in the light of Division Bench judgement of High Court, the conclusion is that under section 122(5A) of the Ordinance, the agency does not have an unbridled power to keep on issuing amended assessment(s). Accordingly the President has rejected the above referred Representation of the FBR. Compliance now be reported to the FTO's Secretariat within thirty days, President order stated.