Amendments to orders for accuracy: Commissioner IR has powers under Sec 221(1) of IT law: SC
ISLAMABAD: The Supreme Court ruled that the Commissioner Inland Revenue has jurisdiction under Section 221(1) of Income Tax Ordinance, 2001 to amend the orders by rectifying any mistake apparent from the record.
The 24-page judgment, authored by Justice Munib Akhtar, set aside the impugned judgments of the Lahore High Court (LHC) and the Islamabad High Court (IHC).
It held; 'the tax references out of which these matters arise shall be deemed pending in the respective High Courts and the questions of law raised therein decided in accordance with law and consistently with this judgment.'
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'CPLA 431-L/2023 involves questions of law other than the one decided by this judgment. This leave petition is returned to the office to be fixed in the ordinary course before an appropriate Bench,' it also said.
A three-judge bench, headed by Justice Munib Akhtar, and comprising Justice Ayesha A Malik and Justice Shahid Waheed heard the department (FBR) petitions against the LHC and IHC decisions. Babar Bilal appeared in CPLA Nos.4583 to 4585/2023.
The judgment noted that the matters relating to the deemed assessment order (and indeed, the deemed amended assessment order) fall only and always within the first part (of Mehreen Zaibun Nisa), with all ensuing 'inevitable corollaries' applying accordingly. One of these is that the deemed orders of both kinds must be regarded as orders 'passed' by the Commissioner within the meaning, and for the purposes of, Section 221(1). 'The Commissioner therefore has the jurisdiction to amend the orders by rectifying any mistake apparent from the record'.
The judgment decided the question; 'Whether the Commissioner has jurisdiction under subsection (1) of Section 221 of the 2001 Ordinance to amend, in exercise of the power thereby conferred and, in the manner, and to the extent therein stated, what is known as a deemed assessment order under s. 120 to rectify a mistake apparent from the record?', in favour of the Commissioner and against the taxpayers.
The High Courts had answered the question in the negative. The Department urged that both the courts erred materially in this regard. The taxpayers pray that the impugned judgments be upheld as having reached the correct conclusion in law.
The judgment confirmed that the error made by the High Courts was to conflate the two deeming provisions into one. It was on account of this mistake that both judgments, whose reasoning run in parallel, concluded that there was no application of mind by the Commissioner and that the mistake always lay where, and by whom, in fact made, i.e., the taxpayer.
However, once this unfortunate fusing is unpacked, and what the subsection actually does and require is realized, the mistake becomes apparent. Had the subsection only contained the deeming required by clause (b), then there could be merit to what the learned High Courts concluded.
In such a situation, the only 'state of affairs' required to be imagined would be the deemed issuance of an assessment order. It could perhaps then be said that the deeming did not reach or touch any mistake to be found as a matter of fact in the return, and hence the deemed assessment order did not deal with any such thing.
In this situation the attribution of the mistake, being outside the scope (or beyond the limit) of the legal fiction could be said to lie where, and by whom, actually made as a matter of fact. But that of course is not the case. There is also the (precedent) deeming required by clause (a). Once that is kept in mind then the inevitable conclusion is that there was, as a matter of law, a (deemed) application of mind by the Commissioner.
Since it operated (as it could only) on the return, an inevitable corollary is that it is the whole of it, mistakes and all, that is the assessment (deemed) to have been made.
And it is the (deemed) assessment so made that then results in the (deemed) issuance of the assessment order. In our view, it is only in terms of this bifurcation that subsection (1) can be properly understood and applied. A rolling up of the two clauses into one, with respect, led to the error into which both the learned High Courts fell. Thus, in the principal LHC judgment much emphasis was placed on s. 221(1) requiring that the order be 'passed' by the Commissioner.
The matters before the Supreme Court arose under the Income Tax Ordinance, 2001 in relation to the jurisdiction, under subsection (1) of Section 221, of the Commissioner to rectify any mistake apparent on the face of the record and thereby amend what is known as a deemed assessment order under s.
Most of these matters come from the Lahore High Court, where the principal judgment is dated 27.04.2022. That decision disposed of eight tax references that had been filed by the Commissioner and was followed in all the other matters in the said High Court by various orders of different dates. Islamabad High Court, where the principal judgment is dated 20.09.2023 which disposed of tax references filed by the Department.
Both High Courts reached the same conclusion on the question now before the Court and therefore, all these matters were heard together and are being decided by this judgment.
Copyright Business Recorder, 2025
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