2009 PLP (Trib (PTD)

This appeal filed at the instance of the department has assailed the order of learned CIT(A), dated 17-12-2007 on the following grounds:-- "CIT(A) has erred in annulling the order under section 221 ignoring that mistake was apparent on record and full time teacher rebate was admissible only against the salary source of income. CIT (A) has erred in annulling the 221 order ignoring that allowance of correct amount of rebate was not a domain of section 122 of Income Tax Ordinance, 2001. The annulment of 221 order by CIT(A) is not admissible under law as the mistake was apparent on record and 221 order was in accordance with law."

2. Facts of the case in brief are that taxpayer an individual engaged in the profession of Medical Sciences filed return declaring taxable income at Rs.5,19,832 and claimed tax rebate @ 75% as full time teacher. This return had become a deemed order in terms of section 120 of the Income Tax Ordinance, 2001. Later on, the Assessing Officer observed that the 75% tax rebate had wrongly been claimed by the taxpayer. According to him, the rebate was only allowable on salary income and not on the other income. Thus, a show-cause notice was issued and since reply was tendered on behalf of the taxpayer order under, section 221 was passed on 27-8-2007.

3. This action of the Assessing Officer was challenged in appeal before the First Appellate Authority on various grounds. The appellant had also filed written arguments' which were duly reproduced in the CIT(A)'s order. Considering the arguments of the learned AR the learned CIT(A) annulled the amended order under section 221 with the following observations:-- "...The word "Full time" has not been defined in the Income Tax Ordinance, as such ordinary dictionary meaning will be taken which means "Normal Working Hours". The issue whether the appellant is full-time or not, is debatable as such the provisions of section are not applicable, which provides that mistake apparent from the record can be rectified. The case-laws relied by the learned AR 65 Tax 257 (S.C. Pak.) fully support his contention. It would not be out of place to mention here that such issues are covered by the provisions of section 122(5A) which has not been invoked by the Authority, therefore, the impugned order is hereby annulled."

3. The learned DR contended that the mistake was apparent and therefore, the learned CIT(A) was not justified in annulling the order passed under section 221 of the Income Tax Ordinance. The learned AR appearing on behalf of the taxpayer, besides reiterating his submissions as were advanced before the First Appellate Authority contended that amendment in clause (2) Part III of Second Schedule was made through Finance Act, 2006 which would be applicable to the Tax Year, 2007 and not to Tax Year, 2006 which is under appeal. He, therefore, prayed for dismissal of the departmental appeal.

4. After hearing the parties we are inclined to agree with the contentions put forth at the bar for the taxpayer. Amendment made in clause (2) Part-III of Second Schedule through Finance Act, 2006 substituting the clause restricting reduction of 75% to tax payable on salary income only has no retrospective application. Therefore, factually there is no mistake in the deemed order which could be rectified. Hence, we are of view that the learned CIT(A) had rightly annulled the amended order passed under section 221 of the Income Tax Ordinance, 2001.

5. Resultantly, the appeal filed by the department is dismissed being devoid of merit. C.M.A./69/Tax (Trib.) Appeal dismissed.