Change of Opinion

2023 PTD 1158 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss.221 & 122(5A)Income Tax Ordinance (XXXI of 1979) [since repealed], Ss.62, 80-D, 156 & Third Sched., R.5Constitution of Pakistan, Art. 4Assessment orderRectificationChange of opinionScopeTaxation Officer, powers ofScopeInitial depreciation allowable on building and plant and machinery installed by 30th June, 2002Original assessment was finalized on 28-09-2002 and further proceeded under Ss. 156 & 80D of Income Tax Ordinance, 1979

Earlier two notices under S.122(5A) of Income Tax Ordinance, 2001, (ITO, 2001) having been issued in the year 2003 were still pending, another notice under S.221 of the ITO, 2001 was served upon the applicant (Refinery Company) alleging that initial depreciation on buildings and plant & machinery was incorrectly allowed

Appellate Tribunal treated notice under S.221 of ITO, 2001 as valid one

Applicant assailed order of the Tribunal contending that the impugned order amounted to "change of opinion" from assessment order passed in the year 2002, which could not be passed during pendency/disposal of two notices already issued under S.122(5A) of the ITO, 2001

Validity

Record revealed that initial depreciation was never claimed by the applicant/company , rather First Year Allowance @ 80% of the "capitalized assets" was claimed

Taxation officer allowed initial depreciation under R.5(1)(cc) of the Third Schedule of the Income Tax Ordinance, 1979, which provision was not relevant to the facts of the present case, because the same prescribed 40% depreciation allowance to machinery or plant given on lease by a Scheduled Bank, a Financial Institution or Modarba or leasing company duly approved by the FBR

Case of applicant/company for allowing initial depreciation being against the said provision of law, compelled the Taxation Officer to rectify the order in exercise of power under S.221 of the ITO, 2001

Incorrect statement of law was always open to rectification and penitence

Taxation Officer was empowered to rectify assessment order under S. 221 of ITO, 2001and rectification of the Assessment Order under S.221 of ITO, 2001, could be applied retrospectively

Expression "mistake apparent from the record" as used in S. 221 of ITO, 2001, meant that error or mistake was so manifest and clear, which if permitted to retain on record, could materially affect the case

Conditions precedent to amend an assessment order under S. 122(5A) of ITO, 2001, were different from the conditions laid down in S. 221 of ITO, 2001

For S. 122(5A) of Income Tax Ordinance, 2001, the order had to be erroneous insofar as prejudicial to the interest of revenue, whereas S. 221 of the ITO, 2001, empowered the Taxation Officer to amend the order to the extent of rectifying the legal or factual mistake apparent from the face of the assessment or if mistake was apparent, obvious and floating on the surface of order and could be rectified without long drawn arguments and proceedings for appreciating facts and interpretation of provisions of law

There was no involvement of any fresh investigation

Mistake was apparent on the basis of facts floating on record as well as the applicable law

Under the law Taxing Authority had power to correct a mistake in tax matter resulting in loss of revenue in blatant violation of law after terming such mistake to be apparent on face of record

Any other interpretation of the said provision would be against the spirit of Art. 4 of the Constitution guaranteeing equal treatment in accordance with law

Findings of facts given by the Appellate Tribunal were not open to further scrutiny by the High Court in reference jurisdiction when the same had not been shown either to be perverse or against record and the High Court had to give opinion in advisory jurisdiction, on the basis of facts as determined by the Appellate Tribunal

No adjudication on merit was made on the earlier notices, therefore, doctrine of res judicata was not applicable

Mere issuance of notices did not bar the Authority from either issuing fresh notice or exercise power of rectification within scope of S.221 of the Income Tax Ordinance, 2001

No interference was made out in the order passed by the Appellate Tribunal

Reference was dismissed accordingly.

2022 PTD 1069 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Ss.114, 120, 122, 174 (3) & 177Sales Tax Act (VII of 1990), Ss.11 & 25Constitution of Pakistan, Art. 199Constitutional petitionChange of opinionScope

Dispute was with regard to concept of “Change of opinion” as show cause notice issued under S.65 of Income Tax Ordinance, 1979 (since repealed) was not applicable for a show-cause notice under S.122 of Income Tax Ordinance, 2001 and S.11 of Sales Tax Act, 1990

Validity

No occasion for 'change of opinion' could arise under scheme of existing Income Tax Ordinance, 2001, as return filed under S.114 of Income Tax Ordinance, 2001, was taken to be an assessment order under S.120 Income Tax Ordinance, 2001, for all purposes, without application of mind by any officer/authority

After filing return, record supporting declarations in return, was to be kept by taxpayer for six years under S.174(3) of Income Tax Ordinance, 2001, which could be called for audit under S.177 of Income Tax Ordinance, 2001, to verify declarations in the return and could ensure compliance of different provisions under Income Tax Ordinance 2001

Person registered under Sales Tax Act, 1990 was obliged to make declaration of taxable supplies in tax period and was authorized to adjust input tax paid from amount due as output tax, while filing the return

Such declarations were subject to audit under S.25 of Sales Tax Act, 1990 and consequent proceedings under S.11 of Sales Tax Act, 1990

Provisions of S.11 of Sales Tax Act, 1990, could be invoked in absence of audit also, if tax due on supplies was not paid, short paid, wrongly adjusted or refunded etc., which in the matter of petitioners, assertively, was non-payment of further tax

Taxation Officer applied its conscious mind for the first time on the issue of charging further tax under facts and circumstances of the case, therefore, law on 'change of opinion' was inapplicable

High Court declined to interfere in impugned show-cause notice in question

Constitutional petition was dismissed, in circumstances.

2019 PTD 1741 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 120, 122(5A) & 153(6) Third ProvisoAmended proceedingsReassessmentChange of opinion

Taxpayer, provider of telecommunication services and tax return filed by taxpayer was amended under S. 122(5A) of Income Tax Ordinance, 2001

Subsequently other assessing officer again invoked provisions of S. 122(5A) of Income Tax Ordinance, 2001 which order was maintained by Commissioner Inland Revenue (Appeals)

Validity

Tax deducted under clause (iii) of Second Proviso to S. 153(1)(b) of Income Tax Ordinance, 2001 and Third Proviso to S. 153(6) of Income Tax Ordinance, 2001 were adjustable for tax years 2009-2015 in hands of corporate taxpayers

While passing first amended order, assessing officer had already examined return of income filed by taxpayer and other assessing officer again by resorting to S. 122(5A) of Income Tax Ordinance, 2001 return/deemed order was examined which was tantamount to change of opinion and was not permissible under law

Tribunals/Courts and in particular, High Courts and Supreme Court were sentinel of justice and have been vested with extraordinary powers of judicial review and supervision to ensure that rights of citizens are duly protected

Appellate Tribunal Inland Revenue quashed subsequent amended assessment orders passed under S. 122(5A) of Income Tax Ordinance, 2001 and maintained first amended order passed under S. 122(5A) of Income Tax Ordinance, 2001

Appeal was allowed accordingly.

2012 PTD 1559 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Income Tax Ordinance (XXXI of 1979), Ss.65, 66A, 62, 19(2)(b) & 19(3)Rectification of mistakeDefinite informationChange of opinionRent free tenancyInformation of

Assessee submitted that tenant was their sister company having same directors and had been rent free tenant of the assessee company since the very beginning, in lieu of the loan extended to assessee to construct the entire building

Assessee was confronted with a show cause notice under S.65 of the Income Tax Ordinance, 1979 with the approval of Inspecting Additional Commissioner

Assessing Officer did not agree with the assessee's explanation that it was change of opinion and that it was not definite information for the purpose of S.65 of the Income Tax Ordinance, 1979

Assessing Officer computed rental income of the ground floor occupied by the tenant under S.19(2)(b) of the Income Tax Ordinance, 1979 and finalized the assessment under Ss.62/65 of the Income Tax Ordinance, 1979

Appeals were dismissed by the First Appellate Authority as well as by the Appellate Tribunal

Taxpayer contended that information regarding "ground floor of the building" was already in possession the Department right from the beginning particularly at the time of original assessment and that this argument was never agitated by the assessee; and that right from the beginning it was established that the rent was not being declared for the ground floor and this information was definite information for the purpose of assessment

Validity

Neither assessee declared the rent for the ground floor nor the sister concern at any time in his return stated that rent had been paid to the assessee by the sister concern

In case rent was not declared the Assessing Officer was under legal obligation to confirm from the sister concern as to whether rent had been paid

In case rent was not paid for whatsoever reason, the Taxation Officer could not add the proposed rent as income of the assessee

Only two options were left with the Assessing Officer (i) to prove that rent had been paid and received and (ii) to make out a case that the rent was being paid but collusion with the sister concern it had not been declared

For both the reasons the Taxation Officer had taken no pains at all to make out a case that it was collusive arrangement to avoid the fact that rent had been paid

Assessing Officer was further required to prove that rent had been paid as existence of the ground floor of the building could not be denied, the ground floor related rent appeared to have been ignored, instead there was complete knowledge and information in this regard

During assessment proceedings of assessment year 1995-1996 a letter was submitted to the fact that the sister concern did not occupy any rent free area, so at that particular time the Assessing Officer was legally bound to ask for complete information that business premises was occupied by assessee itself or by some other person

Having complete knowledge of the ground floor premises, mere presumption that the business premises was self occupied was of no consequence, besides it referred to a fact that the dispute regarding the ground floor area was completely within the knowledge of the Assessing Officer during the assessment year 1995-1996 and thereafter, no new information had come into the possession of the Assessing Officer whereas S.65(2) of the Income Tax Ordinance, 1979 provided that an assessment could be re-opened only when definite information comes to possession of the Assessing Officer

Information, in the present case, was not a definite information said to have come into possession of the income tax officer

Definite information on the basis of which assessments had been re-opened did not come into the possession of the Department during the assessment proceedings for 2000-2001 as it was available at that moment when original assessments were framed under S.62 of the Income Tax Ordinance, 1979

When for the first time during the assessment proceedings under S.62 of the Income Tax Ordinance, 1979 the Department collected information about the said portion of the building, the assessee at that particular time replied to a query that the sister concern of the assessee did not occupy any rent free area, that was a proper time for legal action for a false statement if any, and to collect evidence so as to arrive at a proper conclusion regarding occupancy of the ground floor area as the Department had information about the actual occupants of the ground floor at that very moment

If representatives of the assessee bluffed the Department, even then that was proper time for action

After expiry of six years when Taxation Officer initially had complete knowledge of the situation but failed to take an appropriate action invoking S.65 of the Income Tax Ordinance, 1979 should be beyond the spirit of S.65 of the Income Tax Ordinance, 1979 as the Department on the basis of Inspectors Report during the assessment year 2000-2001 could not invoke S.65 of the Income Tax Ordinance, 1979

Even if it was a false statement, no case was made out to invoke S.65 of the Income Tax Ordinance, 1979

Such was nothing less than the second opinion different from the finding and conclusion recorded at the time of initial assessment

Miscellaneous applications were allowed and no case appeared to have been made out to invoke S.65 of the Income Tax Ordinance, 1979

Order under S.65 stood annulled by the Appellate Tribunal in circumstances.

2012 PTD 1559 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.221Income Tax Ordinance (XXXI of 1979), Ss.65, 66A, 62, 19(2)(b) & 19(3)Rectification of mistakeDefinite informationChange of opinionRent free tenancyInformation of

During the assessment proceedings under the assessment year 1996-1997 it was established that rent was never declared for the ground floor and taxpayer's contention was that this information was not a definite information for the purpose of assessing and reopening of the case under S.65 of the Income Tax Ordinance, 1979

Department might have presumed that the ground floor was occupied by the taxpayer

Rent of the ground floor was not declared in the Annual Letting Value and taxpayer's contention that it was possible to correct the mistake of law under S.66-A of the Income Tax Ordinance, 1979 but no action under S.65 of the Income Tax Ordinance, 1979 could be taken, was correct

During assessment proceedings of assessment year 1995-1996 a letter was submitted to the effect that the sister concern did not occupy any rent-free area but during that time no information in this regard was sought by the Taxation Officer from the taxpayer

Having complete knowledge of the ground floor premises, mere presumption that the business premises was self-occupied, was of no consequence, besides it referred to a fact that the dispute regarding the ground floor area was complete within the knowledge of the Assessing Officer during the assessment year 1995-1996 and thereafter which established the fact that there was no new information in possession of the Assessing Officer to reopen the case under S.65 of the Income Tax Ordinance, 1979

Miscellaneous applications were allowed and orders of both the officers below were annulled by the Appellate Tribunal.

2012 PTD 741 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.122(5A)Amendment of assessment'Definite information'Change of opinionTerm 'definite information' conveys a meaning which is not the same as change of opinion

Different interpretation of any provision of law or deriving a different conclusion from a given set of facts will not amount to 'definite information', such will be a change of opinion.

2011 PTD 2679 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 10 &' 23Excess amount to be carried forward or refundedTax invoicesChange of opinionRe-initiation of scrutiny of the refund which had already been sanctioned to be issued on the dictation of CollectorValidity

Case of the Department was not that the input tax invoices produced by the registered person did not qualify to be "Tax invoices" within the meanings of S.23 of the Sales Tax Act, 1990, rather the invoices-in-question were so perfect and confidence inspiring that during scrutiny of the same none of the refund sanctioning authority raised any eye-brow to any of the invoices, and sanctioned issuance of Refund Payment Order on 24-8-2004

Almost nine months later the Assistant Collector, on the dictation of the Collector, Sales Tax and Central Excise, re-initiated the scrutiny of the refund which had already been sanctioned to be issued

Such an exercise amounted to 'change of opinion' on the same material which was not permissible, as it would divest the actions taken in accordance with law of the finality, and the taxpayer's claim would remain on the tenterhook of time to time changes in views of the succeeding officers, and no finality to an action would ever be conferred

Policy of law had always been to confer finality on the actions once taken in accordance with law, so that enforceable rights and obligations may flow therefrom

Department could not be allowed to have dwindling views on a given issue, and move on changing views according to whims and caprices of the big bosses

Departmental officers dubbed the input tax invoices to be 'fake" notwithstanding the fact that the same had been considered by their predecessors to be "genuine" and Refund Payment Order had been sanctioned to be issued on 24-8-2004

If the then refund sanctioning authority had treated the allegedly 'fake' invoices to be 'genuine', that authority was involved in the 'tax fraud', and action ought to have been taken against him also

If he was not tried for tax fraud, how his decision of issuance of refund could be dissented from, and the same be ignored in the lighter vein, and one could refuse to issue an already determined refund to the registered person

Fact that there was nothing on record which may justify declining of claimed refund was evident from the Daily Refund Sanctioning Report which showed that the Refund Payment Order had been made after ascertaining the claimed input tax and refund, and there remained nothing except issuance of the refund in accordance with the Refund Payment Order, but for the reasons best known to the Departmental officers, the whole mess was created and the registered person was denied the refund due

Registered person was an exporter, whose supplies/exports were zero-rated, and he was entitled to refund of the whole of the sales tax paid as input tax on local purchases; provided he held a tax invoice in respect of taxable supply as required by S.7(2) of the Sales Tax Act, 1990 in his name and bearing his registration number

Registered person's claim of refund in respect of tax periods 02/2004, 04/2004 and 05/2004 had been rejected illegally and without lawful authority, which was ordered to be issued without further probe

Order-in-Appeal and Order-in-Original were upheld and set at naught.

2011 PTD 1824 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.122(5)Income Tax Ordinance (XXXI of 1979), S. 65Amendment of assessmentChange of opinion

Re-opening of assessment under S.65 of the Income Tax Ordinance, 1979 was para meteria to provisions of S.122(5) of the Income Tax Ordinance, 2001

Where all the facts had been fully disclosed by the assessee which had been duly considered by the Income Tax Authorities and the assessment had been framed consciously and no new fact had been discovered the assessment could not be reopened at later stage merely for the reasons of change of opinion.

2011 PTD 936 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.122Amendment of assessmentSecond amendmentDoctrine of mergerChange of opinion

Merger of original assessment order under S.120 of the Income Tax Ordinance, 2001 in the first amendment assessment order

Validity

Several part of order treated as issued under S.120 or issued under S.121 of the Income Tax Ordinance, 2001 merged into amended assessment order under S.122(1) or (3) of the' Income. Tax Ordinance, 2001

Assessment order under S.120 of the Income Tax Ordinance, 2001, to the extent of determining commercial status of the taxpayer, had merged into the first amended assessment order

In the present case, Taxation Officer in opening paragraph of that order, treated the taxpayer as 'manufacturer' before making addition of the claimed expenses

Since taxpayer's commercial status, as manufacturer, had already been examined by the Taxation Officer,' re-examination of the same for further amendment was change of opinion

Language of second amended assessment order clearly showed that it was amending the original assessment order under S.120 of the Income Tax Ordinance, 2001, without discussing the first amended assessment order

Even the 'taxable income/(loss)' was noted, whereas the same was reduced, by first amendment

Taxation Officer through second amended order had attempted to amend the part of assessment order under S.120 of the Income Tax Ordinance, 2001 which had merged into first amended assessment order under S.122(5A) of the Income Tax Ordinance, 2001 so was not in existence

Second/further amended assessment order was not sustainable.

2011 PTD 372 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Change of opinionExplanation

Principle of "change of opinion" relates to the "order" and not the notice because during the course of interaction between the taxpayer and the taxation officer information/ details and record etc. were provided in different phases and consideration thereof may prompt the taxation officer to change of his opinion depending upon the situation of the case

When audit proceedings culminate into an order, the findings recorded by the taxation officer on different aspects of the case could not be reviewed by him or an officer succeeding him because change of "opinion" about a fact or a finding already recorded in the assessment order was not permissible.

2011 PTD 372 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 122(9) & 177Amendment of assessmentCost of constructionChange of opinionAddition

Taxation officer changed his stance about the declared cost of construction which he was fully authorized to do provided the change was the outcome of convincing and plausible reason

Change in stance by the taxation officer before finalization of assessment though permissible, was not based upon valid reasons

Addition made to the income of the taxpayer on account of reduction in cost of construction had been ordered to be deleted by the Appellate Tribunal.

2002 PTD 283 INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN Judicial Precedent

S. 66-AChange of opinion

Order recorded by the Inspecting Additional Commissioner under 5.66-A of the Income Tax Ordinance, 1979 would not be hit by the concept of "change of opinion" as he exercised supervisory jurisdiction and could give a different conclusion on the basis of same points of law and facts which were available with the Assessing Officer

Inspecting Additional Commissioner had jurisdiction to exercise his powers under S.66-A to appreciate the law and facts in the light of his own experience and legal knowledge and he may come to a different conclusion than that of the Assessing Officer.