Rectification of Mistake

Assessing officer worked out tax liability under Ss.161 & 205 of Income Tax Ordinance, 2001, for its failure to deduct or deposit withholding tax

Assessment for the year 1996-97 was completed on 28-06-1997, assessment for the year 1999-00 was completed on 29-03-2001, additional tax was charged upto 31-12-2002 while the order under S.161, Income Tax Ordinance, 2001, was passed on 01-01-2004

Validity

Assessing officer at the relevant time had all the information with him regarding the expenses but he had failed to use it then to determine the default of withholding tax and to recover it by passing appropriate order under S.52 of the Income Tax Ordinance, 1979, which was applicable at the relevant time

Charge of additional tax for the delay over several years was not justified especially when much of the delay was attributable to the department

Appellate Tribunal declared that the reasonable period of default would be taken to end on the dates of 28-06-1997 for the tax year 1996-97 and 29-03-2001 for assessment year 1999-00 being date on which assessment under S.62 of Income Tax Ordinance, 1979, was completed and that the rates applicable during the default period under S.86 of the Income Tax Ordinance, 1979, would be applied to determine the additional tax

Appeal was allowed accordingly.

Assessing officer worked out tax liability under Ss. 161 & 205 of Income Tax Ordinance, 2001, for its failure to deduct or deposit withholding tax

Commissioner of Inland Revenue (CIR(A)) observed that the assessment for the year 1996-97 was completed on 28-06-1997, that the assessment for the year 1999-00 was completed on 29-03-2001, that notice for the recovery of tax was issued on 15-12-2003; that the limitation as prescribed under S.156 of Income Tax Ordinance, 1979, for the assessment year 1996-97 had expired, however, confirmed the order of assessing officer for the year 1999-00

Appellate Tribunal declared the order passed for the assessment year 1999-00 to be barred by limitation on the ground that the period of limitation had to be calculated from the end of financial year and not from the date of assessment order

High Court remanded the case to the Tribunal for determination in each case regarding the reasonableness of the period within which the notices were issued and for determination whether the notices ought to be sustained on the touchstone of having been issued within a reasonable period of time or not

Validity

Assessing officer's only question was to show tax deposit challans

Taxpayer did not provide the challans

No records were being called from the taxpayer for examination

Reasonableness of time to assess or determine the amount of default on examination of documents or record was not the issue in hand, hence question of reasonableness of time or time limiting factor did not arise

No time limitation could be prescribed for recovery under S.161, Income Tax Ordinance, 2001, of withholding tax default which included a default committed under S.50 of the Income Tax Ordinance, 1979

Order passed by CIR (A) was vacated and the recovery order under S.161, Income Tax Ordinance, 2001, was upheld.

Appellant had also filed an Income Tax Reference Application against the same order of the Tribunal before the High Court

Validity

Appellant could not have the best of both worlds, as seeking relief simultaneously at two Appellate forums was not justified

Issues highlighted in the miscellaneous application did not fall within the limited scope of mistake apparent from the record as envisaged under S. 221 of the Income Tax Ordinance, 2001

Re-considering the issues would tantamount to review of the appeal order and not rectification of mistake apparent from record as the controversies which devolved on a process of arguments and counter arguments for their resolution clearly fell outside the purview of rectification

Application was dismissed being devoid of any merit.

Resolution of once decided issue tantamounts to "review", which is not allowed to the Tribunal and falls under the domain of Superior Courts.

Provisions, as envisaged under S. 221 of the Income Tax Ordinance, 2001, cannot be invoked as an alternative or substitute of an appeal, revision or a review.

Question before High Court was whether Department could invoke provisions of S.156 of Income Tax Ordinance, 1979 to levy minimum tax under S.80D of said Ordinance upon taxpayer

Held, that per S.156 of Income Tax Ordinance, 1979 rectification could be made in respect of matters which were apparent from record and word "apparent" implied that mistake should be so obvious that it could be seen floating on surface of record and should not require any further investigation / evidence

In the present case, turnover for imposition of minimum tax under S.80D of the Ordinance was available in statement of account submitted by taxpayer and could not be termed as having been obtained by calling for additional evidence or inquiries

High Court observed that imposition of tax in terms of S.80D of Income Tax Ordinance, 1979 did not require any further investigation but rather a simple application of 0.5% tax upon turnover disclosed by taxpayer, and hence the same fell within parameters of "mistake floating on surface not requiring any further investigation" as stated in S.80D of Income Tax Ordinance, 1979 and thus non-imposition of tax under said S.80D was quite apparent on face of record

Reference was answered accordingly.

Any error in the order for which no argument and further investigation is required to discover the same will be treated as mistake apparent on record

If there is no need to debate and no two opinions can be framed in respect of factual controversy or as the case may be legal dispute exists in an order then such type of mistake will be termed as "mistake apparent from record".

Language of S.221 of the Income Tax Ordinance, 2001, is not restricted in any way to the extent of rectification of factual, arithmetical and clerical error but it also empowers the Authority, who has passed the order to rectify the mistake of law, obviously, if it is apparent on the face of record i.e. strikes immediately on reading the order without an inquiry and further investigation/deliberation

Mistakes are of four types which may be corrected under S.221 of the Income Tax Ordinance, 2001 (firstly) observations of the adjudicating authority based on totally and absolutely wrong fact and record, (secondly) any arithmetical or clerical error, (thirdly) misreading of any provision of law and (lastly) application of wrong provision of law.

No new ground or as the case may be new evidence can be discussed in rectification pleadings, which is restricted to error/mistake apparent on the face of the record i.e. the order to be rectified.

Appellant filed appeal before the Commissioner Inland Revenue (Appeals), whereby it was held that gain on sale of a plot was taxable under S.37(3) of the Income Tax Ordinance, 2001 and the same was to be treated as 'capital gains' on disposal of immovable assets

Commissioner Inland Revenue filed an application under S.221, Income Tax Ordinance, 2001, for rectification of the order by contending that the profit accrued to the appellant on account of sale of plot were taxed by him as income from business under S.18 of Income Tax Ordinance, 2001, which were incorrectly treated as capital gain

Commissioner Inland Revenue (Appeals) rectified the order accordingly

Validity

No debate or argument was required to the extent that the Commissioner Inland Revenue (Appeals) had applied a wrong provision of law while passing the order under S.129 of the Income Tax Ordinance, 2001, because immovable property was not qualified as "capital asset" under S.37(5) of the Ordinance in the year 2007

Appeal was dismissed.

Mistake of fact as well as law can be rectified to resolve the disputed issue, provided the said rectification is within the period of limitation.

Applicant sought rectification of the order passed by Appellate Tribunal on the ground that the details of payments on account of local purchases were over-sighted during the course of hearing of main appeal

Validity

Once the appellant had submitted the details of local purchases, the assessing officer had no authority to reject them without confronting them, which fact was not inadvertently considered by the Commissioner (Appeals) as well as by the Appellate Tribunal

Appellate Tribunal had upheld the impugned order of the officers below on the issue of the local purchases without considering the fact that the detail submitted in that regard was available on record hence, it was a mistake apparent from the record liable to be rectified

Case was remanded to the assessing officer with direction to pass a fresh order on the issue of local purchases

Application was allowed, accordingly.

Limitation provided under S. 221 of Income Tax Ordinance, 2001 was four years whereas limitation provided for filing reference application before High Court, under S.133, Income Tax Ordinance, 2001, was ninety days

If reference was allowed to be filed out of an order under S.221, Income Tax Ordinance, 2001, it could be misused for extending the period of limitation provided under S.133 of the Income Tax Ordinance, 2001

Yet, a person aggrieved by a change in order under S.132, Income Tax Ordinance, 2001, could not be deprived of the remedy provided under the Statute

Parameters provided by High Court for exercise of jurisdiction under S.133, Income Tax Ordinance, 2001, would apply with full force i.e., if any question of law arose out of the changed order, reference application, Reference would be maintainable

Reference application was decided against the department.

Department assailed order passed by Appellate Tribunal whereby it had re-fixed the case for hearing and adjudication despite the fact that it had already decided the appeal

Validity

Appellate Tribunal had accepted the rectification application while relying on the observations made in 'Messers MFMY Industries Ltd. v. Federation of Pakistan through Ministry of Commerce and others' reported as 2015 SCMR 1550 wherein it was held that maximum time within which the judgment should be pronounced was 120 days, otherwise it would stand weakened in quality and efficiency

However, it did not mean that the judgment announced beyond 120 days became nullity in the eyes of law

Appellate Tribunal had wrongly invoked its jurisdiction by allowing the rectification application on the ground that Appellate Tribunal had announced the order after 117 days

Order passed by Appellate Tribunal being result of misconception of law on the subject, was not sustainable

Reference application was decided in favour of the department.

Where rectification application is dismissed by Appellate Tribunal, the Reference application before High Court is not maintainable because the order of the Tribunal on such application does not merge into final order

Where the rectification application is allowed and the original order of the Tribunal is set aside then the said order will become part of the original order and reference application will be maintainable before High Court.

Department assailed order of Appellate Tribunal whereby rectification application of respondent/assessee was accepted and earlier order passed by Appellate Tribunal was set aside

Validity

Original order passed by Appellate Tribunal showed that it had assessed the matter in detail and after applying its judicial mind had not agreed with the contentions of the respondent/assessee and had found the respondent to be an assessee in default

Said order could not be rectified under S. 221, Income Tax Ordinance, 2001 while considering the same as an error on the face of record

Had the respondent felt aggrieved due to some legal defect in that order, the same could only be challenged before the next higher forum

Impugned order was not sustainable, being beyond the scope of S. 221 of the Income Tax Ordinance, 2001

Reference was allowed.

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

Where defect in order has direct nexus with the question of determination of rights of parties and also affects their substantial rights or causes prejudice to their interest, such defect in order is not a mistake apparent on record to be rectified under S.221 but it can only be challenged before higher forum.

No order under S. 221, Income Tax Ordinance, 2001 shall be made after five years from the date of the order sought to be rectified.

Cases where there can conceivably be two views or opinions fall outside the scope and ambit of rectification of mistake.

Application of S. 221, Income Tax Ordinance, 2001 is only permissible if the error is apparent, obvious and floating on the face of the judgment and can be rectified without long drawn arguments and proceedings for appreciating facts and interpretation or application of any provision of law

Mistake had to be so obvious that it should strike to one's mind without there being long drawn process of reasoning, interpretation of some sections/statute, dilation upon a moot or debatable issue which falls squarely outside the scope of rectification of mistake.

Taxpayer filed normal returns for the tax year 2013 which was deemed to have been assessed under S. 120(1), Income Tax Ordinance, 2001

Assessing authority observed that the taxpayer was engaged in the business of supply of medicines, therefore, normal return was illegal and unlawful as the taxpayer was under legal obligation to file statement under S. 115(4) of Income Tax Ordinance, 2001

Show-cause notice was issued confronting the taxpayer with proposed rectification, in response to which the taxpayer filed reply which was found unsatisfactory by the assessing authority

Assessment was amended by creating demand for the tax years 2013

Taxpayer, being aggrieved, filed appeal before the Commissioner Inland Revenue (Appeals), who vide impugned order rejected the appeal of the taxpayer

Validity

Initiation and subsequent conclusion of proceedings under S. 221 of Income Tax Ordinance, 2001 on 15-02-2019 to rectify the deemed assessment order for the tax year 2013 on 15-12-2013 was not sustainable in the eyes of law being barred by time limitation as provided under subsection (4) of S. 221, Income Tax Ordinance, 2001

Order passed by assessing authority and Commissioner (Appeals) were consequently vacated

Appeal was disposed of accordingly.

Taxpayer filed normal returns for the tax years 2013 to 2017 which were deemed to have been assessed under S. 120(1), Income Tax Ordinance, 2001

Assessing authority observed that the taxpayer was engaged in the business of supply of medicine, therefore, normal returns were illegal and unlawful as the taxpayer was under legal obligation to file statement under S. 115(4) of Income Tax Ordinance, 2001

Show-cause notices were issued confronting the taxpayer with proposed rectification, in response to which the taxpayer filed reply which was found unsatisfactory by the assessing authority

Assessments were amended by creating demands for the tax years 2013 to 2017

Taxpayer, being aggrieved, filed appeal before the Commissioner Inland Revenue (Appeals), who vide impugned order rejected the appeals of the taxpayer

Validity

Section 221 of Income Tax Ordinance, 2001 left no room for doubt that only those mistakes were rectifiable which were apparent from the record and floating on the surface and which did not require any long drawn process of reasoning, deliberation on a moot or debatable point

Question, whether the receipts declared by the taxpayer fully or partly fell under the ambit of Final Tax Regime (FTR) or normal tax regime was a debatable issue between the department and the taxpayer, which was outside the scope of rectification provisions as contained in S. 221, Income Tax Ordinance, 2001

If at all assessing authority deemed it necessary to make alteration or addition to the deemed assessments completed, then such exercise was required to be done by invoking powers under S. 122 of Income Tax Ordinance, 2001 with existence of definite information and the invoking of the powers under S.221, Income Tax Ordinance, 2001 was outside the authority of the assessing officer, hence, not sustainable in the eyes of law

Orders passed by assessing authority and those passed by Commissioner (Appeals) were consequently vacated

Appeals were disposed of accordingly.

Benefit under S. 65-D of Income Tax Ordinance, 2001 was available to taxpayer since he had submitted requisite record and documents which were necessary for availing 100 (percent) tax credit

Fishing enquiries on basis of assumptions as resorted by authorities were neither warranted under the law nor conducive for boosting economy

Appellate Tribunal Inland Revenue allowed facility under S. 65-D of Income Tax Ordinance, 2001 as requisite documents which were also furnished adequately fulfilled requirement of S. 65-D of Income Tax Ordinance, 2001 and were inadvertently not considered

Appellate Tribunal Inland Revenue deleted additions made under Ss. 21(c) & 111 of Income Tax Ordinance, 2001 which were not properly considered and additions were made on assumption and presumption basis

Orders were rectified accordingly.

Application for rectification under S.57 Sales Tax Act, 1990 could only be made after issuing notice to the concerned party

Clerical errors and arithmetical errors were essentially typing errors which were apparent from face of record and the same did not mean errors of findings on facts or on law

Rectification application under S.57 of the Sales Tax Act, 1990 allowed a competent officer of the Department to correct a mistake which was apparent on face of the record but did not allow for re-assessment of a case or compilation of a different opinion from one that was taken earlier

Liability of an assessee could not be changed under S.57 of Sales Tax Act, 1990 and matters which were not part of the original adjudicatory process could not be introduced in the rectification process.

Department filed applications for recall of order passed by Appellate Tribunal whereby orders of Commissioner (Appeals) and Additional Commissioner were annulled

Validity

Objections raised in the applications were in the nature of allegations contesting the original order of Tribunal for which proper and legal course was to file appeal

Issues raised in the applications were not in the nature of "mistakes apparent from the record" for which department had sought invoking of S. 221, Income Tax Ordinance, 2001

Power of review of its order by the Tribunal was not available in the Income Tax Ordinance, 2001

Applications were rejected.

Notices issued by the tax department under S. 221(2) of the Income Tax Ordinance, 2001 requiring the tax payers to show cause as to why their "assessment orders" for the relevant assessment years be not amended/rectified

Question as to whether provisions of S. 221 of the Income Tax Ordinance 2001 could be applied to the assessment orders passed under the provisions of the repealed Income Tax Ordinance, 1979; held, that the assessment order sought to be rectified through the impugned notices were finalized under S. 62 of Income Tax Ordinance, 1979 between May 2001 and June 2002, whereas said Ordinance prescribed a period of four (4) years for rectification of the assessment made under S. 62

Income Tax Ordinance, 1979 was repealed on 30-06-2002, whereafter, in July 2002, Income Tax Ordinance, 2002 came into force

Period of limitation prescribed through S. 156 of Income Tax Ordinance, 1979 had, therefore, not expired at the time of promulgation of Income Tax Ordinance, 2001

Such period during its currency thus stood extended through subsection (4) of S. 221 of Income Tax Ordinance, 2001 which provided a period of 5 (five) years for rectification of mistakes, from the date of the assessment order, sought to be rectified

Procedural amendments applied to all cases which had not become past and closed transactions, therefore, the provisions of S. 221, Income Tax Ordinance, 1979 had been rightly invoked in the present case

Appeal was disposed of accordingly.

Notices issued by the tax department under S. 221(2) of the Income Tax Ordinance, 2001 requiring the tax payers to show cause as to why their assessment orders for the relevant assessment years be not amended/rectified by levying surcharge on the tax levied under section 80-D of the repealed Income Tax Ordinance, 1979

Question as to whether surcharge could be levied on the "minimum tax" payable under S. 80-D and other paramateria sections of the repealed Income Tax Ordinance, 1979; held, that income tax in terms of S. 9 of Income Tax Ordinance, 1979 was charged and levied in respect of the total income of the assessee and at the rate specified in the First Schedule, whereas S. 80-D unlike the provision of S. 9 provided for levying "minimum tax" where no tax was payable in terms of the later provision, and in a certain specified situation, also provided for levying and charging tax in excess of what may otherwise be payable under S. 9 of the Income Tax Ordinance, 1979

Section 80-D of the said Ordinance dealt with a situation where either no tax was payable by the assessee, or the tax payable was less than one-half percent of the amount representing its turnover

Both the situations envisioned under S. 80-D did not allow for levying any surcharge, as surcharge was charged on income tax only, whereas in the first of the above situation, no income tax was payable, and in the second what was charged by way of "minimum tax"/"tax", rather than income tax, was already in excess of the income tax payable in terms of S. 9 of Income Tax Ordinance 1979, and therefore there was no justification for levying of any surcharge thereon, more so when all ingredients essentially required for such levy, were clearly missing

Surcharge could not be levied in the present case on the "minimum tax" payable under Section 80-D and other paramateria sections of the repealed Income Tax Ordinance, 1979

Appeal was disposed of accordingly.

Notices issued by the tax department under S. 221(2) of the Income Tax Ordinance, 2001 requiring the tax payers to show cause as to why their "assessment orders" for the relevant assessment years be not amended/rectified

Question as to whether provisions of S. 221 of the Income Tax Ordinance 2001 could be applied to the assessment orders passed under the provisions of the repealed Income Tax Ordinance, 1979; held, that the assessment order sought to be rectified through the impugned notices were finalized under S. 62 of Income Tax Ordinance, 1979 between May 2001 and June 2002, whereas said Ordinance prescribed a period of four (4) years for rectification of the assessment made under S. 62

Income Tax Ordinance, 1979 was repealed on 30-06-2002, whereafter, in July 2002, Income Tax Ordinance, 2002 came into force

Period of limitation prescribed through S. 156 of Income Tax Ordinance, 1979 had, therefore, not expired at the time of promulgation of Income Tax Ordinance, 2001

Such period during its currency thus stood extended through subsection (4) of S. 221 of Income Tax Ordinance, 2001 which provided a period of 5 (five) years for rectification of mistakes, from the date of the assessment order, sought to be rectified

Procedural amendments applied to all cases which had not become past and closed transactions, therefore, the provisions of S. 221, Income Tax Ordinance, 1979 had been rightly invoked in the present case

Appeal was disposed of accordingly.

Notices issued by the tax department under S. 221(2) of the Income Tax Ordinance, 2001 requiring the tax payers to show cause as to why their assessment orders for the relevant assessment years be not amended/rectified by levying surcharge on the tax levied under section 80-D of the repealed Income Tax Ordinance, 1979

Question as to whether surcharge could be levied on the "minimum tax" payable under S. 80-D and other paramateria sections of the repealed Income Tax Ordinance, 1979; held, that income tax in terms of S. 9 of Income Tax Ordinance, 1979 was charged and levied in respect of the total income of the assessee and at the rate specified in the First Schedule, whereas S. 80-D unlike the provision of S. 9 provided for levying "minimum tax" where no tax was payable in terms of the later provision, and in a certain specified situation, also provided for levying and charging tax in excess of what may otherwise be payable under S. 9 of the Income Tax Ordinance, 1979

Section 80-D of the said Ordinance dealt with a situation where either no tax was payable by the assessee, or the tax payable was less than one-half percent of the amount representing its turnover

Both the situations envisioned under S. 80-D did not allow for levying any surcharge, as surcharge was charged on income tax only, whereas in the first of the above situation, no income tax was payable, and in the second what was charged by way of "minimum tax"/"tax", rather than income tax, was already in excess of the income tax payable in terms of S. 9 of Income Tax Ordinance 1979, and therefore there was no justification for levying of any surcharge thereon, more so when all ingredients essentially required for such levy, were clearly missing

Surcharge could not be levied in the present case on the "minimum tax" payable under S.80-D and other paramateria sections of the repealed Income Tax Ordinance, 1979

Appeal was disposed of accordingly.

Contention of taxpayer was that Commissioner Inland Revenue (Appeals) had erred in maintaining the action of Additional Commissioner Inland Revenue in calculating "depletion allowance"

Taxpayer also sought consequential relief in the liability of Workers Welfare Fund

Validity

Calculation of "depletion allowance" was justified and contention of taxpayer was repelled

Commissioner Inland Revenue (Appeals) had clearly issued directions to the Adjudicating Officer for allowing the relief in liability of Workers Welfare Fund after verification

Taxpayer, in circumstances, had already been granted required consequential relief in shape of the directions

Order accordingly.

Taxpayer in its return classified a portion of its income under the head of "income from business", which return was subsequently rectified under S. 221 of the Income Tax Ordinance, 2001 by an order of the Commissioner, and said income was reclassified as income from other sources

Contention of the taxpayer, inter alia, was that such amendment did not fall within ambit of S. 221 of the Income Tax Ordinance, 2001 and was time barred under S. 122 of the Income Tax Ordinance, 2001

Validity

Difference between Ss. 122 & 221 of the Income Tax Ordinance, 2001 was that under said S. 122; an amendment was allowed in returns submitted by the taxpayer, whereas under S. 221 of the Income Tax Ordinance, 2001 empowered the named authorities to amend its own order to rectify mistake apparent in the assessment order

Taxpayer, in the present case, while submitting his returns classified its income as "income from business" which was initially accepted by the Commissioner through an order, without realizing it was not an income from business

Return submitted by the taxpayer under such classification of income was against fundamental principle of the Income Tax Ordinance, 2001 which was mistakenly accepted by the Commissioner and as such required rectification

When such mistake surfaced on the record, impugned notice was issued and mistake made in the returns was legitimately designed to avoid payment of tax; therefore the same needed to be corrected

Such amendment in the order rectifying an apparent mistake fell within ambit of S. 221 of the Income Tax Ordinance, 2001 instead of S. 122 of the same

No illegality therefore existed in the impugned orders

Reference was answered, accordingly.

Assessment order of taxpayer was amended by authorities in exercise of powers under S.122(1) of Income Tax Ordinance, 2001

Appellate Tribunal Inland Revenue set aside the amended assessment order

Validity

Powers of Deputy Commissioner Inland Revenue under S.221 of Income Tax Ordinance, 2001, were limited to the extent of mistakes apparent from record

Other provisions of law could deal with the authority of department officials with regard to reopening of assessment, revision etc.

Where department was of the view that certain income had escaped from chargeability of tax but for exercising such powers under S. 221 of Income Tax Ordinance, 2001, there must be a mistake apparently floating on the surface which was to strike one's mind without entering into long drawn process of reasoning, detailed deliberation etc.

Only those mistakes were rectifiable which were apparent from the record and floating on the surface and which did not require any long drawn process of reasoning, deliberation on a moot or debatable point

Issue with regard to taxability on services rendered by taxpayer outside Pakistan had been a continuous issue between authorities and taxpayer, therefore, the same fell outside the scope of mistake apparent from the record

In cases where there could conceivably be two views / opinions the same fell outside the scope and ambit of rectification of mistake

High Court answered all questions in favour of taxpayer

Reference was dismissed in circumstances.

If there is any mistake, deficiency or error in calculation of tax, same can be rectified under S. 221 of Income Tax Ordinance, 2001

When assessment has been made in respect of income of taxpayer, any error or omission appearing therein can be rectified under S. 221 of Income Tax Ordinance, 2001

Fresh assessment cannot be made in that respect as that will be double assessment, which is not permissible under law.

Department moved application for rectification of an error in the order of the Appellate Tribunal on the ground that the Appellate Tribunal had relied on a judgment of a High Court (reported as 2004 PTD 2267) and ignored a judgment of the Supreme Court (reported as 2001 PTD 2094) which supported contention of the Department

Validity

Contention of the Department regarding judgment of the Supreme Court was not tenable as the said judgment did not address the issue in question and the judgment of High Court relied on in the impugned order had not been suspended by the Supreme Court therefore, the Appellate Tribunal had rightly placed reliance on said judgment

No mistake apparent on the record in the impugned order was present

Application was rejected, in circumstances.

Error/mistake floating on surface of order was not at all restricted to clerical error or arithmetical mistake instead all types of errors whether factual/legal or substantive or procedural fell within ambit of "apparent mistake floating on surface of an order" and could be rectified within one year from the date of order by Tribunal being final facts finding forum.

Reference application under S. 133 of Income Tax Ordinance, 2001, could be filed only against order passed under S. 132 of Income Tax Ordinance, 2001

On exercise of jurisdiction under S.122 of Income Tax Ordinance, 2001, if order under S.132 of Income Tax Ordinance, 2001, was rectified in a way that a consequent change effected rights of either Commissioner or Taxpayer, then Reference Application could be filed

Doctrine of merger would apply i.e. order under S. 221 of Income Tax Ordinance, 2001, to the extent of rectification/change would merge into the order under S. 132 of Income Tax Ordinance, 2001

As cause of action was to accrue on the date of rectification Order, therefore, period of ninety days would start from such point

Conversely if no change/ rectification was made in the order under S. 132 of Income Tax Ordinance, 2001, the order passed under S. 221 of Income Tax Ordinance, 2001, would stand alone and independent, against which, Reference Application was not allowed

Appellate Tribunal Inland Revenue refused to rectify order under S. 132 of Income Tax Ordinance, 2001, therefore, Reference Application, proposing question from order under S. 221 of Income Tax Ordinance, 2001, was not entertainable

Reference was dismissed in circumstances.

Appellate Tribunal observed that "notifications, notices, orders or rules issued under the Income Tax Ordinance, 1979 which were inconsistent with the corresponding provision of the Income Tax Ordinance, 2001 had been repealed; and since S.18 of the Income Tax Ordinance, 2001 itself said that the local business was to be taxed under normal law the Circular relied upon under Income Tax Ordinance, 1979 being inconsistent had no application whatsoever"

Taxpayer contended that benefit of Circular No.20 of 1992, regarding direction to treat 20% of local sales of exporters as export sales, was denied despite the fact that it was still intact and very much in existence and was still in field; that constitution guarantees equal protection of law among persons who were equally placed and that persons similarly placed had equal rights and they could not be treated differentially and discriminatorily; that department itself had treated local sales of exporters as export sales in many cases, charging tax on local sales and in the present case nothing except a discriminatory treatment would occur

Validity

No doubt Circular had instructions to treat 20% of local sales of exporter as export sales was still in field

In number of cases it had been held that Circular/instructions issued by the Federal Board of Revenue were not binding on the Appellate Tribunal

Circular in question embodied instructions which were quite contrary to law

Board had no authority to issue directions to treat 20% of local sales as export sales of exporters

Appellate Tribunal could not give any findings/directions on the basis of such unlawful instructions, however, departmental officers were under legal obligation to follow the instructions of the Board

Where departmental officer had not followed the Circular instructions, it was for the Board to held such officer accountable, however, similar treatment should be accorded to all the taxpayers

If the department on the basis of Circular/instructions of Federal Board of Revenue had treated less than 20% of local sales (of exporter) as exports, then similar treatment should also be given to the taxpayer

Case could not be decided in favour of the taxpayer on the basis of Circular which was contrary to law and on the same issue, discriminatory treatment could not be favoured to different taxpayers

Case was remanded back to the Taxation Officer with the directions to settle the issue and give the same treatment as was given to the exporters in respect of their local sales in similar circumstances

Order passed was rectified/modified to such extent by the Appellate Tribunal.

Such attitude of the applicant was evident of his utmost desire to keep the matter pending unnecessarily as long as possible

Said type of behavior was not tolerable, however, for the sake of justice and fair play, Appellate Tribunal afforded a last chance to applicant to represent his case

Prayer was allowed and main order was restored to its original number

Counsel of the taxpayer was burdened with special cost of Rs.500 for filing frivolous applications and irresponsible attitude, which caused wastage of precious time of the Tribunal and also to curb wrong practice

Appellate Tribunal directed that the amount of costs be deposited in the account of Lahore Tax Bar Association for Tribunal's Bar Renovation Fund Account.

Taxpayer contended that expenses related to local travelling of employees and other miscellaneous small labour, small entertainment and other expenses based on the claims of the employees and labour engaged though employees for which it was an accepted principle that the taxi drivers and labour did not issue a printed receipt; and expenses were in consonance with the past history

Validity

Expenses were disallowed on stock phrases, without properly identifying any defect in the maintenance of accounts and against past history

Similar addition made was retrenched by the Appellate Tribunal in the previous year

Addition of expenses retrenched and disallowed on account of travelling and conveyance and entertainment had not been justifiably established

Order of the Bench not attending to the correct facts and the legal apposition deserved richly to be rectified, amended and withdrawn

Appellate Tribunal ordered accordingly and treatment of First Appellate Authority was restored on the issue.

Appellate Tribunal held that First Appellate Authority was not justified in deleting the same as no legal efforts had been made by the assessee to recover the amount so that bad debts could not be held to be "bad" and irrecoverable; and in absence of proper efforts to recover the same the disallowance made by the Taxation Officer was restored and order of First Appellate Authority was vacated

Rectification of such order

Validity

Omission to decide the issue on the part of the earlier Benches of Appellate Tribunal was not correct and proper as per facts and in law, while in the order of the first appeal before the First Appellate Authority it was found that litigation was not considered to be proper and germane in view of the high cost of litigation and non-cooperation of the debtors and for other objections which had not been repelled

Order of Appellate Tribunal was recalled and rectified and that of First Appellate Authority was approved and restored

Addition of bad debts stood corrected, revised and allowed by the Appellate Tribunal.

Addition on the grounds that (a) taxpayer acted in "collusion" with the associated concern and had made the arrangements to lessen the legitimate tax liability (b) term "income" not only included those things which were included in S.29 of the Income Tax Ordinance, 2001 but covered all such things which the term signified according to its general and natural meaning (c) "voluntary contribution from foreign associated undertaking was declared as income as per the Audited Accounts whereas it was excluded from the income in the computation of income" and (d) that the claim of voluntary contribution was only supported by a photocopy of credit advice of Bank and was not supported by the Audited Accounts of foreign donor company

Validity

Taxation Officer was not entitled to make any requisition in respect of the audited accounts of the foreign donors which were not maintained and kept by the assessee and could not have been demanded

Certificate of the bank which was based on the monitoring of State Bank of Pakistan was authentic and complete proof of the foreign remittance

Remittance of foreign exchange from abroad was encouraged for long by the Economic Reforms Act, 1992 and later specific instructions of the Federal Board of Revenue

Receipts in foreign exchange were exempted from the Income Tax Ordinance, 1979 and was further acknowledged, well guarded and specifically provided in S.111 of the Income Tax Ordinance, 2001 which seemed to have escaped consideration by the assessing officer and the Appellate Tribunal altogether

Omission in not considering a specific provision of the statute appeared to be a fatal mistake

Such was not income liable to be taxed and it was not a revenue receipt

Earlier order was rectified by the Appellate Tribunal and restored the treatment meted out by the First Appellate Authority.

Order under S.221 of the Income Tax Ordinance, 2001 was passed to charge tax under S.113 of the Income Tax Ordinance, 2001 on declared net turnover

Taxpayer contended that it was not patent mistake apparent from the record rather levy of the minimum tax under S.113 involved interpretation of provisions of law, hence was beyond the scope of rectification

Validity

Failure of application of any provision of law fell under the purview of rectification

Scope of rectification could not be limited to arithmetical error and any mistake of law which was glaring and floating on the surface

Taxpayer could not take refuge to avoid application of law merely complicating or protracting the legal issue

Neither documents were called nor fishing enquiries were made prior to the order under S.221 of the Income Tax Ordinance, 2001

Accounting records accompanying the return were consulted to apply the relevant legal provisions

Departmental action to invoke the provisions of S.221 of the Income Tax Ordinance, 2001 was the correct treatment

Appeal on this issue was rejected by the Appellate Tribunal.

Revenue contended that High Court had issued directions for issuance of fresh notice with regard to selection of the case for audit under S.177(4) of the Income Tax Ordinance, 2001, whereas the Assessing Officer had amended the assessment under S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001 on the basis of "definite information"; as such the Assessing Officer had not proceeded within the meanings of S.177(4) of the Income Tax Ordinance, 2001 and there was no need to issue fresh notice under S.177(4) of the Income Tax Ordinance, 2001; that Appellate Tribunal could not appreciate the exact nature of proceedings despite clear mention in the show-cause notice; and relied on the issuance of fresh notice under S.177(4) of the Income Tax Ordinance, 2001; that had the proceedings been conducted under S.177 of the Income Tax Ordinance, 2001 the directions of High Court would have become operative but quite contrary to that the Assessing Officer opted to directly proceed under S.122(5) of the Income Tax Ordinance, 2001 on the basis of definite information; and as such findings of Appellate Tribunal that High Court's decisions were not complied with were based on an omission which needed rectification

Validity

Issue raised that the amendment order passed under S.122(1) read with S.122(5) of the Income Tax Ordinance, 2001 was independent of the earlier proceedings initiated before the judgment of High Court was not found to be correct from the facts of the case

Notices issued under S.122(9) of the Income Tax Ordinance, 2001 were on the basis of same facts and figures during the course of proceedings started after the notice issued under S.177(4) of the Income Tax Ordinance, 2001

Notice issued under S.122(9) of the Income Tax Ordinance, 2001 as on 23-6-2010, had stated that the directions of High Court had duly been complied with whereas the judgment of High Court was delivered on 8-6-2009 i.e. after the issuance of said notice

Appellate Tribunal after considering and discussing in detail all the facts of the case had given its opinion on the issue

Revenue failed to point out any mistake floating on the surface of the record or the order of the Appellate Tribunal requiring rectification under S.221 of the Income Tax Ordinance, 2001

Miscellaneous application of the Department was rejected by the Appellate Tribunal.

Taxpayer contended that re-adjudication/re-appreciation of facts was beyond the scope of the provisions of S.221 of the Income Tax Ordinance, 2001

Validity

Wrong tax calculation may be corrected under S.221 of the Income Tax Ordinance, 2001 but this had to remain within the parameters of rectification of error as defined by the courts

Controversial or debatable issues were outside the ambit of rectification.

Mistake which was sought to be rectified, must be so obvious and apparent from record that it may immediately strike on the face of it and may not be something which was to be established by a long drawn process of reasoning on issues on which there could be conceivably two views or opinions

Scope of rectification was limited to the extent of rectification of an "error apparent from record" and hence S. 221 of the income Tax Ordinance, 2001 could not be invoked as an alternate or substitute for appeal, revision or review

Issue, in the present case, did not fall within the category of "mistake apparent on record"

Reference application was dismissed, in circumstances.

Revenue contended that addition was deleted on the ground that same was made without obtaining approval of the Inspecting Additional Commissioner; and since the order under S.66A of the Income Tax Ordinance, 1979 was passed by the Additional Commissioner Income Tax himself, the approval of higher authority was not required

Validity

Department was seeking rectification of the order on the pleas, which already stood answered by the Appellate Tribunal and Department failed to point any mistake apparent on record, which could be rectified

Scope of rectification was very limited and only those mistakes could be rectified, which were detectable by mere reading of the order without any investigation of new evidence supported by new set of arguments

As no glaring mistake was apparent from the surface of the order, the same did not need rectification and the request made by the department was rejected by the Appellate Tribunal.

Initiation of fresh assessment proceedings under S.221 of the Income Tax Ordinance, 2001 as the department had still limitation to rectify the deemed assessment and which was rectified

Validity

If department could not fulfil the legal requirement in the manner as prescribed under the law or basis of assessment was without authority, then the entire superstructure built thereon would fall on the ground automatically

By annulling the rectified /amended assessment order passed by the tax authorities was removed from the way and in result, deemed assessment remained in the field

Department was well within its functioning by opting proper legal course and procedure if the limitation was not beyond the clock.

Rejection of application asking rectification on the identical grounds which had been agitated in appeal and rectification asked was of such a nature which could be termed the review or revision of the order

Validity

Order passed by the First Appellate Authority refusing the rectification was quite justified because the relief asked was of such a nature which fell outside the mandate of S 156 of the Income Tax Ordinance, 1979 which fact was also evident from identical grounds in the departmental appeals, which alone was sufficient for rejection of appeal

Appellate authority was mandated to adjudge the matter, passing of any rectified order by the same authority who had passed the order sought to be rectified would amount an appellate order, while one could not sit as a judge to give the adjudication as an appellate authority against its own order

No mistake or illegality or infirmity was noticed and there was no reason to disapprove the impugned conclusion being in accordance with law

Conclusion was confirmed and departmental appeal being infructuous and devoid of merits stood rejected.

Department requested for expunction of some paragraphs from the order as the career of the Departmental Representative and Assessing Officer was in danger since they were called by the Federal Tax Ombudsman in contempt

Taxpayer stated that merits of main appeal shall not be prejudiced if such paragraphs were expunged at the request of department and after getting relief in first two appeals, latter appeals were not pressed by him

Validity

Appellate Tribunal treated the statement of taxpayer, that second set of appeals were not pressed, as mistake had been rectified under S.221 of the Income Tax Ordinance, 2001

Since department, requested for expunction of remarks in some paragraphs and it had not challenged the recommendations of Federal Tax Ombudsman before the President, such paragraphs were expunged from the order and were replaced by the paragraph " second set of appeals are dismissed being not pressed by learned counsel for appellant taxpayer".

Scope of S.221 of the Income Tax Ordinance, 2001 could not be extended to matter where new arguments were to be considered and deliberation was to be made afresh and there was no mistake apparent from record

Miscellaneous application was rejected by the Appellate Tribunal.