COMMISSIONER INLAND REVENUE, SIALKOT vs CHAUDHRY STEEL MILLS S — 2025 PTD 101 LAHORE-HIGH-COURT-LAHORE

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COMMISSIONER INLAND REVENUE, SIALKOT VS CHAUDHRY STEEL MILLS S.I.E., DASKA Ss. 120, 122, 113 & 221---assessment, amendment of---Rectification---Scope---"Mistake apparent on record"---Scope---Record showed that respondent-taxpayer filed income tax return for the tax year 2011 (by declaring sales at Rs.232,823,500/-, net income as Rs.90610/- and tax paid as Rs.23,645/-,) which was taken as deemed assessment in terms of S. 120 of Income Tax Ordinance, 2001 ('the Ordinance, 2001')---Subsequently, minimum tax as per S. 113 read with Part-III of Second Schedule to the Ordinance, 2001 was charged by invoking provisions of S. 221 of the Ordinance, 2001, taking it as a mistake apparent on the face of record---Undeniably, income tax return for the Tax Year 2011 was an assessment order as per S.120(1), therefore, the Commissioner by virtue of and in exercise of the powers contained in Ss. 120(1a), 121, 122(1), (4), (5) & (5a) and 177 of the Ordinance, 2001, subject to the conditions prescribed, can amend or further amend the original assessment instead of invoking provision of S. 221 which only prescribes procedure for rectification of a mistake in an order, which is apparent from the record, and the circumstances under which such exercise can be done---Provision of S. 221, thus, neither creates nor takes away any right or privilege in or from anyone, it rather provides for rectification of mistake(s) apparent from the record---Essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence---The mistake should be so obvious that on mere reading of the order, it may immediately strike on the face of it---Where an officer exercising such power enters into the controversy, investigates into the matter, reassesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to 'rectification' of the order---any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under S. 221 of the Ordinance, 2001---If the return is complete in terms of S. 114(2), the same is taken as deemed assessment order within the contemplation of S. 120(1), on the day the return was furnished---However, when the return is not complete, the Commissioner shall issue notice to taxpayer confronting deficiencies in terms of S. 120(3) and if requirements of notice are satisfied, the return is treated as complete and provisions of S. 120(1) shall apply accordingly---Commissioner is also empowered to amend an assessment order treated as issued under S. 120 or 121, under S. 122(1) and in case of revised return, under S. 122(3)---Commissioner is also authorized to further amend the amended assessment order under subsections (4), (5) & (5a) of S. 122, as per conditions enumerated therein---Careful reading of Ss. 120, 122 and 221 of the Ordinance, 2001 makes it very clear that the powers under these provisions are not overlapping rather are independent clearly intended to operate within their respective compass---Section 221 of the Ordinance, 2001 relates to the rectification of mistakes which are apparent from the face of record---Words used in the said provision are very specific and purposeful "any order passed by him" and does not include an order which is deemed to have been issued by the Commissioner by fiction of law which is the case for assessment orders under S. 120 of the Ordinance, 2001---Words "an assessment order treated as issued under S. 120" used in S. 122(1) of the Ordinance, 2001 are clearly distinguishable from the words used in S. 221 of the Ordinance, 2001 which says "any order passed by him"---act of passing of formal order by any Officer of Inland Revenue presupposes an application of mind and in most cases adjudication on merits after hearing the parties---Thus, there is a marked distinction between the deemed order and the order passed by the authority after fully applying its mind and giving proper opportunity of being heard to the person---Every word used in a statute has to be given effect to and no word or provisions of a statute is to be treated as surplus and redundant---Thus, rectification is permissible only to "amend any order passed by him" and not the order treated to have been issued under S. 120 of the Ordinance, 2001 because the deemed order does not amount to an order passed by the authority---Had it been the intention of the legislature, it would have become necessary to introduce the specific provisions or amendment with certain words to cater, for the eventuality of deemed order in S. 221 that a deemed order under S. 120 can be amended in case of a mistake apparent from record---Expression "subject to this section" used in subsection (1) of S. 122 ibid further restricts that the deemed order treated to have been issued under S. 120 can only be amended under the said section---Under the law, the tax liability of an assessee in the process of rectification cannot be altered on the basis of a consideration, which was not part of the original proceedings and the concept of rectification of mistake to correct the error committed in the assessment order, which is found floating on the surface of the record, may not be beyond the assessment already made---Such mistake should be apparent from the record i.e. floating on the surface and consequently there should not be any controversies or investigation into the matter or reassessment of any evidence in order to decide whether or not such mistake needs to be rectified---Powers under S. 221 are quite limited to the extent of mistakes apparent from record since there are other provisions of law which deal with the authority of department officials with regard to reopening of assessment, revision etc. in cases where the department is of the view that certain income had escaped from the chargeability of tax, but for exercising powers under S. 221 of the Ordinance, 2001, there must be a mistake apparently floating on the surface which is so obvious to strike one's mind without entering into long drawn process of reasoning, detailed deliberation etc.---Expression "mistake apparent on record" must be the error or mistake so manifest and clear which, if permitted to remain on record, might have material effect on the case, however, an error of fact or law, having direct nexus with the question of determination of rights of parties, affecting their substantial rights or causing prejudice to their interest, is not a mistake apparent on the record to be rectified under S.156 of Income Tax Ordinance, 1979; and that the mistake must be of the nature, which is floating on the surface of record and must not involve, an elaborate discussion or detailed probe or process of determination---Thus, proposed questions were answered against the applicant-department and in favour of respondent-taxpayer---Reference application, filed by Department was dismissed.

COMMISSIONER INLAND REVENUE, SIALKOT vs CHAUDHRY STEEL MILLS S — 2025 PTD 101 LAHORE-HIGH-COURT-LAHORE

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