2007 PLP 1186 (PTD)

5. The Assessing Officer gave effect to the appellate order and computed the income as follows:-- "Number of Delivery Cases in a month taken as confirmed by the AAC

4 Fee per case as confirmed by the AAC

Rs.1,700 Total (4 x 12 x 1700) = Rs.81,600 Number of patients consulted in OPD as confirmed by the 6 AAC

Fee per patient as confirmed by the AAC Rs.70 Total (7 x 70 x 300) Rs.126,000 Total Receipts: Rs.207,600 Less 25% P&L expenses as directed by the AAC. Rs. 51,900 Net Income after appeal effect. Rs.155,700"

6. Taking the income computed for the assessment year 1998-99 as the basis, income for the subsequent years was taken at enhanced figures as enumerated in para. 2.1 supra.

7. The assessment order of the year, 1998-99 stands merged in the appellate order, dated 30-3-2003. From the plain reading of the appellate order it appears that the AAC, while giving her directions, was not conscious of the fact that income computed on the basis of her order would exceed the income assessed. Both the Repealed Ordinance and the Income Tax Ordinance, 2001 provided, in sections 132(2) and 129(2) respectively, that the AAC shall not enhance the assessment unless the appellant has been given a reasonable opportunity of showing cause for such enhancement. The enhanced income worked out on the basis of A.AC's order has become the cause of grievance for the complainant which demands redressal. Further, though the AAC observed that the Inspector had conducted the enquiry without permission from the IAC, she still relied on the report. This is a clear case of maladministration and the FTO has jurisdiction to investigate such cases.

8. In view of the facts and circumstances of the case, the order of the AAC required rectification. There may not be a mistake on the face of record in the said order but a mistake of law can also be rectified as envisaged in C.B.R.'s Circular No.10 of 1960 in which the scope of section 156 of the repealed Income Tax Ordinance, 1979 has been explained as under:-- "The Board have noticed that some officers give a very narrow meaning to section 35 of the Income Tax Act. They think that only mistakes apparent on the face of the records and errors of clerical or arithmetical nature can be rectified under section

35. This is wrong. Section 35 is much wider in its application". "Equally wide meaning was given to the section by the Supreme Court of India in M.K. Vankatachalam, Income Tax Officer and another v. Bombay Dying and Manufacturing Company Limited-1958 (34) ITR 143 Gajengragadkar (J.) who delivered judgment of the Supreme Court remarked "if a mistake of fact apparent from the record of assessment order can be rectified under section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified".

9. In view of the above discussion, it is recommended that: (i) The Appellate Additional Commissioner to rectify the appellate order under section 221 of the Income Tax Ordinance, 2001 after providing an opportunity of hearing to the complainant. (ii) The Commissioner to amend the assessment orders for the assessment years 2000-2001 to 2002-2003 in consequent to the appellate order as per pars (i) above. (iii) Compliance in respect of paras. (i) and (ii) be reported within 45 days of the receipt of this order. M.I./287/FTO Order accordingly.