Mistake

2024 PTD 511 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 120, 221 & 170Income Tax Rules, 2002RefundsAdjustment of prior year's excess payment of tax, disallowing ofRectification proceedings, invoking ofMistakeFormat of Return for a yearReturn Adjustment of other Year(s)Established past practiceVerification by the Department, absence of

Officer Inland Revenue while observing that Taxpayer (private limited company) had wrongly adjusted unverified refund of previous year towards the current year's tax liability, termed as mistake warranting rectification under S.221 of the Income Tax Ordinance and subsequently disallowed adjustment of previous year refund against liability for tax year (2019); Commissioner Appeals also confirmed the impugned / said treatment

Validity

Format of Return of total income, admittedly, had been prescribed under the Income Tax Rules, 2002

Format of Return for the year 2019, relating to present case, indicated that under the head computation there was a column with description " Return Adjustment of Other Year(s) against Demand of this year" at Code [92101]; in said column the adjustment-in-question had been made

As per Format of Return and instruction thereof contained in the Rules, there was no requirement or additional documentation for making the adjustment-in-question

As per facts, neither there was any recent change in S. 170 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') nor in the column of adjustment of refund

It appeared that the adjustment-in-question was being considered to be an order under S.170(3) of the Ordinance, 2001, whereas as per principles of law, an established past practice had the force of law

Unless refund claimed by a taxpayer was found inadmissible , after due verification under the law , the same could not be disallowed merely on basis that it was "unverified"

In the present case, the Department had neither disputed tax overpaid for preceding year nor was there any verification process employed by DCIR to declare it as inadmissible, therefore, disallowing adjustment of prior year's refund was not found justified under the circumstances and that too through rectification proceedings

Order passed by the Commissioner (Appeals) showed that he , by relying on S.170(3) of the Ordinance, 2001, observed that refund was only due when the Commissioner was "satisfied" that tax had been overpaid and there was an adjustment order under S.170(3)(a) of the Ordinance, 2001

Said finding was misconceived since said provision envisaged issuance of refund or its adjustment by the Department and not adjustment by the taxpayer

Secondly, if the Commissioner , in the present case, was not "satisfied regarding excess payment of tax ", which also meant that the Commissioner was not "unsatisfied" as well on said account

Record revealed that, undisputedly, no order under any provision of the Ordnance, 2001 had been made by the Department to the effect that , in the present case, tax had not been overpaid

Verification of correctness of refund claim of a taxpayer was the responsibility of Department; if said responsibility was not fulfilled, the taxpayer could not be punished for inaction of the Department

Before disallowing refund adjustment, in the present case, the OIR should have made attempt to verify refund claim of the taxpayer for relevant year and if, after verification, tax paid in excess was not verified, only then he could issue notice for disallowing adjustment of the same against tax payable for subsequent year

In the absence of any finding on record, the observation that taxpayer had adjusted "unverified" refund was not sustainable

When the ground on which rectification was not established from record, question of there being any mistake apparent from record did not arise, hence S. 221 of Ordinance, 2001 was wrongly invoked under the circumstances

Mistake, if any, could at best be attributed to the relevant tax year to which the said " unverified refund" pertained to and not said subsequent year

Adjustment of prior year's refunds appearing in the acknowledgment as " refundable income tax" was in accordance with law, rules and established past practice, therefore, there was no mistake apparent from record which could be rectified through order under S. 221 of the Ordinance, 2001

Tribunal set aside orders passed by the Authorities below, being not maintainable

Appeal filed by the taxpayer was allowed, in circumstances.

2023 PTD 1687 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 57 [as substituted by Finance Act (XXII of 2013)]Rectificational jurisdictionNature and scopeReviewScopeCorrection of clerical errorsMistakeConditionsExpression "apparent on the face of record"Scope

By allowing the application for rectification filed by the tax-payer, Appellate Tribunal Inland Revenue ('Tribunal') reversed its order and accepted the appeal preferred by the tax-payer

Applicant /Department filed reference before the High Court contending that the Tribunal unlawfully assumed jurisdiction of review in the garb of rectification which was confined to correction of any clerical or arithmetical error apparent on the face of record whereas review entailed re-consideration of the matter on discovery of new facts or patent error of law occurring in the order or judgment sought to be reviewed

Validity

While exploring the nature and scope of jurisdiction qua rectification under S. 57 of the Sales Act, 1990 ('the Act, 1990'), it would be advantageous to mention that the said section was substituted by the Finance Act, 2013 ; so the comparison of the text of provisions of S. 57 of the Act, 1990 prior and after its substitution by the Finance Act, 2013, envisaged that the scope of rectification, which was previously confined to correction of clerical or arithmetical errors in any assessment, adjudication, order or decision, had been enlarged to rectify any mistake in the order which was apparent from the record

However, the essential condition for the exercise of such power was that such mistake should be apparent from the record i.e. the mistake which might be seen floating on the surface and did not require investigation or further evidence

Any mistake in the order which was not patent and obvious from the record , could not be termed to be rectifiable

Although the power of the rectification visualized under S.57 of Sales Tax, 1990, might not cover a full-fledged review of an order on discovery of new evidence or fresh legal ground becoming available after the decision sought to be corrected

However, the failure to adjudicate upon a substantial plea taken or controversy raised, when materially affects outcome of the case, it does constitute a mistake apparent from the record which is rectifiable under S.57 of the Sales Act, 1990, subject to satisfaction of other conditions and limitations specified therein

Mistake is not rectifiable when the decision sought to be rectified is already assailed in appeal or Tax Reference which merged into the final decision of that higher forum

In the present case, relevant paragraph of the impugned order, revealed that the respondent raised a categorical plea that 10% unadjusted input tax was available for adjustment in the very next tax period which, being a substantial right of the taxpayer, could not be denied

This being a substantial plea, materially affecting outcome of the case i.e. determination of tax liability of the respondent, was required to be adjudicated upon and failure to do so by the Tribunal constituted a mistake obvious and apparent from the record, thus was rectifiable, which prompted the respondent to file an application for rectification under S.57 of the Sales Act, 1990

Tribunal had allowed said application of rectification while recording valid reasons

Applicant /Department could not point out any illegality or infirmity in the impugned order passed by the Tribunal

Reference filed by the Department was dismissed, in circumstances.

2023 PLD 283 FEDERAL-SHARIAT-COURT Judicial Precedent

Legislative draftingMistakeState cannot afford even the slightest error in drafting of laws, as it may cause serious legal complicationsMistake of only one word, in a legislation, may defeat its very purpose

Federal Shariat Court directed Secretary Law and Justice to ensure special care in legislative drafting.

1970 PLC 265 WEST-PAKISTAN-INDUSTRIAL-APPELLATE-TRIBUNAL Judicial Precedent

Reviewdispute

Clerical mistake in order of Industrial Appellate Tribunal found obviously to have wrongly contained word "dismiss" instead of word "discharge"

' Correct word ordered to be substituted in place of wrong word by Tribunal in review application-Civil Procedure Code (V of 1908), S. 152 and West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance (VI of 196'8), S. O. 12(5).

1963 PLD 422 DHAKA-HIGH-COURT Judicial Precedent

Mistake -Whether can avoid a contract-Doctrine of "mistake" explained-[Cheshire and Fifoot : "Law of Contract" 4th Edn. p. 182 ; Kerr : "Fraud and Mistake" 7th Edn. p. 155 and Chitty : "Contracts" 21st Edn. Vol. 1, p. 227 ref.]