Rectification of mistakes

2026 PTD 757 PESHAWAR-HIGH-COURT Judicial Precedent

Ss. 18, 37, 133 & 221ReferenceExpression “mistake apparent from the record”Rectification of mistakesScopeCapital gainSale of immovable property

Commissioner Appeals corrected his earlier order wherein he treated income from sale of plot as capital gain and taxable under S. 37 (3) of Income Tax Ordinance, 2001; resultantly mistake committed by the authorities was rectified

Order passed by Commissioner Appeals was maintained by Appellate Tribunal Inland Revenue

Validity

Provision of S. 221 of Income Tax Ordinance, 2001 uses the broader expression “mistake apparent from the record”

Such choice of wording reflects the Legislative intent to permit rectification of any mistake whether clerical, arithmetical, legal, or factual provided the mistake is apparent from the record

Power to rectify is not confined to narrowly defined categories but extends to any mistakes evident on the face of the record

Any limitation inferred through restrictive interpretation such as confining the scope of S. 221 of Income Tax Ordinance, 2001 to only clerical or arithmetical mistakes would amount to reading into the statute what is not stated

Commissioner Appeals or the Appellate Tribunal were legally empowered to rectify any mistake apparent from the record, including legal or factual errors, while exercising authority under S. 221 of Income Tax Ordinance, 2001

Immovable property under S. 37 (5) of Income Tax Ordinance, 2001 has expressly been excluded from “capital assets”

As immovable property did not fall in the definition of capital gain therefore same was not liable to tax under S. 37 of Income Tax Ordinance, 2001 but was taxable under S. 18 of Income Tax Ordinance, 2001

Earlier order of the Commissioner was erroneous and the result of applying wrong Section of law

This was a mistake discoverable on perusal of the record and same did not require any further analysis, interference or further inquiry and investigation

Commissioner Appeals had rightly invoked his jurisdiction under S. 221 of Income Tax Ordinance, 2001, and had lawful authority for such purpose

High Court declined to interfere in the orders passed by Commissioner Appeals and Appellate Tribunal Inland Revenue

Reference was disposed of accordingly.

2023 PTD 1582 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S. 221Civil Procedure Code (V of 1908), O. XLVII, R. 1Rectification of mistakesReviewScopeWord "review" refers to the re-examination of a previously expressed "view" by a court or other legal forum

If no view has been expressed on certain vital issues that are fundamental to a case and have a direct impact on its outcome, then direction to adjudicate the unresolved issues under S. 221 of the Income Tax Ordinance, 2001, cannot be considered a "review"

Rather, it is a simple "rectification" of the "mistake" of failing to adjudicate the vital issues that are directly related to the fate of the case

Furthermore, the wording of S. 221 is similar to R. 1 of O.XLVII of the C.P.C., which supports the view that even though the section is titled "Rectification of Mistakes," the title of a section cannot control the power given by the express wording of the section

If the wording permits "review," it cannot be considered "prohibited" under the Income Tax Ordinance, 2001.

2023 PTD 789 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Rectification of mistakesScope

An error of law or fact that directly relates to a question regarding the determination of the rights of the parties involved, affecting their significant rights or causing harm to their interests, is not a mistake that is evident from the record to be rectified under S.221.

2023 PTD 789 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Rectification of mistakes

Scope of rectification is limited to correcting mistakes that are easily identifiable on the surface of the order.

2023 PTD 789 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Rectification of mistakesScope

Section 221 of the Income Tax Ordinance, 2001, is circumscribed to rectifying mistakes that are evidently discernible from the record

Phrase "mistake from the record" utilized in S.221 pertains to an error or mistake that is glaringly evident and unambiguous and, if allowed to remain on the record, may have a substantial impact on the case.

2023 PTD 789 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 124 & 221Assessment giving effect to an orderRectification of mistakesScope

According to S.124 of the Income Tax Ordinance, 2001, the assessing officer must adhere to the directions given in the appeal effect order and cannot make any additions, deletions, or alterations on his own

Furthermore, the appeal effect order must solely focus on the issues stated in the appellate order and cannot address any extraneous or unrelated matters

If the assessing officer believes that an incorrect assessment has been made, he can proceed with amending the assessment subject to limitation

However, it's important to note that the assessing officer cannot amend the assessment of income in rectification proceedings.

2023 PTD 424 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Rectification of mistakesExpression "mistake apparent from the record"Scope

Law intends rectification of an identified mistake within the existing final order and not another independent order for different reasons

After exercising original jurisdiction, the Tribunal becomes functus officio with little window for rectification of a mistake which is an equitable remedy

Scope of S. 221 of the Income Tax Ordinance, 2001, is restricted to rectify the mistake apparent from the record

Expression "mistake apparent from the record" as used in S.221 of the Income Tax Ordinance, 2001, means that error or mistake is so manifest and clear that if permitted to remain on record, it may have material effect on the case.

2023 PTD 424 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Rectification of mistakesScope

An error of law or fact having direct nexus with a question of determination of rights of parties affecting their substantial rights or causing prejudice to their interest is not a mistake apparent from record to be rectified under S.221 of the Income Tax Ordinance, 2001.

2023 PTD 424 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Rectification of mistakesScope

Rectification is a jurisdiction ancillary to the appellate jurisdiction intended to rectify a mistake of fact or law apparent on the face of record which does not require investigation, appraisal of evidence, interpretation of law or an enquiry into facts.

2023 PTD 424 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss.133 & 221Reference to High CourtRectification of mistakesDoctrine of electionScope

Against the order of the Appellate Tribunal, any aggrieved party is entitled to file tax reference under S.133 of the Income Tax Ordinance, 2001, within 90 days of the communication of the impugned order

Taxpayer also has a right to file a rectification application against an error or mistake in the impugned order under S. 221 of Income Tax Ordinance, 2001

However, once the matter arising out of the order of Appellate Tribunal has been challenged by the applicant in the tax reference before the High Court and has attained finality, the applicant cannot be allowed to re-agitate the same matter by means of an alternative remedy that was not resorted to earlier

If this is allowed, this would go entirely contrary to 'doctrine of election' which exists to ensure that once a litigant has made the choice of pursuing a certain course of action available to him or has abandoned a certain plea/action, he is not allowed to re-open the same matter only because he has received unfavourable results in proceedings of his first choice.

2023 PTD 390 ISLAMABAD Judicial Precedent

S.221Rectification of mistakesScope

Commissioner issued an exemption for the purposes of S. 152(5-A) allowing the respondent to make certain payments to a foreign company

Commissioner, after a period of four years, issued an order under S. 221 holding that the payment made by respondent was liable to withholding tax

Commissioner (Appeals) allowed the appeal of taxpayer

Appellate Tribunal dismissed the appeal of department

Validity

Income Tax Ordinance, 2001, vested no power in Commissioner to undertake a review of its previous order in exercise of authority under S.221 of the Income Tax Ordinance, 2001

Such exemption could not have been withdrawn retrospectively after a period of four years on the basis that the Commissioner granting such exemption had mis-interpreted provisions of the treaty

In the event that there were two reasonable interpretations of the provisions of the treaty which were possible and the Commissioner had opted for one such interpretation, such exercise of judgment could not have been overridden by another Commissioner to prefer a different interpretation of the treaty provisions

Such exercise tantamounted to a review of the decision previously made and not a rectification of any mistake apparent from the record for purposes of S. 221, Income Tax Ordinance, 2001

Scope of S. 221 had been appreciated by the Appellate Tribunal in its true perspective and needed no interference

Reference was answered accordingly.

2022 PTD 1839 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss.221, 131, 129, 128 & 127Rectification of mistakesAppeal to the Appellate TribunalDecision in appealOral order, legality ofScope

Appellate Tribunal while invoking its jurisdiction under S. 221 of Income Tax Ordinance, 2001 on its own observed that in an earlier order it had committed some grave mistakes of law, which were based on some omitted law and statement of counsel for the appellant who had stated that the Commissioner (Appeals) had refused to entertain appeals manually, which was factually incorrect

Appellate Tribunal could entertain an appeal under S.131(1) of the Income Tax Ordinance, 2001 against an order passed by the Commissioner (Appeals) under S. 129 of the Income Tax Ordinance, 2001

Subsection (4) of S. 129 explicitly mandated that as soon as practicable after deciding an appeal, the Commissioner (Appeals) would serve his order on the appellant and the Commissioner

Said provision clearly provided that a written order had to be passed by the Commissioner (Appeals), irrespective of fate of matter argued before him by any taxpayer

If written order was not passed by the Commissioner (Appeals), Ss.127, 128 and 129 would become redundant

Redundancy was not attributable to the law

Tribunal observed that appeals should not have been entertained by the Tribunal under S. 131 of the Income Tax Ordinance, 2001, as no written orders were in field

Earlier order passed by the Appellate Tribunal was re-called and withdrawn.

2014 PTD 1032 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss.221 & 121(1)Rectification of mistakesScopeBest judgment assessmentApplication for re-calling of order

Taxpayer contended that ex parte order under S.121 (1) of the Income Tax Ordinance, 2001 could only be passed where no return had been filed; and Appellate Tribunal while delivering decision had apparently lost sight of High Court Full Bench decision reported as 2013 PTD 837, on the issue and as such error of law had incurred which could be rectified by resorting to the provisions of S.221 of the Income Tax Ordinance, 2001

Validity

High Court, in the said Full Bench Judgment had held that "prior to the amendment brought about in Ss. 121 & 177(10), through Finance Act, 2010, S. 121(1)(d) did not apply to cases where return of total income had been filed and did not envisage a second assessment order"

Following the principle of consistency, applicant also deserved the same relief as accorded to other taxpayer

Order was modified by following the decision of the High Court and dismissed the departmental appeal for tax year 2008 and maintained the order passed by the First Appellate Authority.