1996 P T D (Trib.) 1117
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and Muhammad Mahboob Alam,
Accountant Member
I.T. As. Nos.3300/HQ to 3306/HQ of 1987-88, decided on 13/12/1995.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.156---Rectification of mistake---Word 'record' as used in S.156, Income Tax Ordinance, 1979---Meaning---Power of Income Tax Authorities and Income Tax Appellate Tribunal to rectify their own mistakes---Scope.
Legislature has given power to Income Tax Authorities and Income Tax Appellate Tribunal to rectify their own orders if the mistake is apparent from record of the assessee. Any mistake, which is based on information outside the record cannot, therefore, be termed as a mistake that comes out of the record of the assessee. The 'record' as used in section 156, Income Tax Ordinance, 1979 means record of the assessee and not that of any other person.
Republic Motors Ltd. v. Income Tax Officer arid others 1990 PTD 889 distinguished.
(b) Income-tax---
----Re-opening of assessment---Scope---Re-opening of assessment on the information obtained from the record earlier considered is not justified.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.156---Rectification of mistake---Scope---Overlooking a mandatory provision of law can be rectified---Rectification can be carried out on the finding of fault from the record of the assessee and not from subsequent information.
(1987) 166 ITR 454; (1958) 34 ITR 143 and 1988 PTD (Trib.) 785 ref.
(d) Income Tax Ordinance (XXXI of 1979)--
----S.156---Rectification of mistake---Originally a good order may subsequently reveal .a mistake in the light of a subsequent decision.
(1962) 44 ITR 260; (1967) 64 ITR = 67 (SC); (1968; 67 ITR 210 and (1971) 80 ITR 1 ref.
(e) Income Tax Ordinance (XXXI of 1979)---
----S.156---Rectification of mistake---Assigning of a wrong status to the assessee being a mistake if apparent from record---Provisions of S.156, Income Tax Ordinance, 1979 could be invoked.
(1962) 44 ITR 260; (1967) 64 ITR 67 (SC); (1968) 67 ITR 210. and (1971) 80 ITR 1 ref.
(f) Income Tax Ordinance (XXXI of 1979)---
----First Sched., Part IV, Para. B (2)(a)---Public Limited Company---Assigning of status---Company, a taken-over industry but being administered by a Government Controlled Corporation holding more than 50% shares of the assessee-Company meaning thereby that the majority shares were not held by Government but, by a Government-controlled Corporation---Such a company, held, could not be treated as a Public Limited Company in terms of First Sched., Part IV, para. B(2)(a) of the Income Tax Ordinance, 1979.
(g) Income Tax Ordinance (XXXI of 1979)---
----S.156---Rectification of mistake---Scope---Income Tax Authority or Income tax Appellate Tribunal may amend an earlier order passed by it to rectify any mistake.
PTD 1993 (Trib.) 1100 ref.
Ibrahim Dahodwala, C.A. for Appellant.
?Israr Rauf, D.R. for Respondent.
Date of hearing: 14th September, 1995.
ORDER
These are assessee's appeals wherein a number of grounds have been taken on which one common ground is in respect of legality of rectification under section 156 of the Income Tax Ordinance by the I.T.O. and confirmation by the C.I.T. (Appeals).
2. The facts of the case are that the original order for three impugned years was finalised by the I.T.O. vide his order dated mentioned below respectively for each year:---
| 1978-79 ??????????? | 28-2-1980 |
| 1979-80 ??????????? | 27-4-1980 |
| 1980-81 ??????????? | 15-6-1981 |
While the rectification order under section 156 has been carried out on 15-6-1987.
3. The A.R. has argued that the limitation to rectify the orders impugned ended on 15-6-1985. The action of the I.T.O., therefore, was time-barred for all the three years. The same, he argued should have been cancelled. Regarding Assessment years 1982-83 to 1985-86, he argued that the I.T.O. has made rectification on the basis of difference of opinion, while the provision of section 156 cannot be invoked in such circumstances. He said that it is only a bona fide and actual mistake arising out of the record of the assessee which is rectifiable and that any opinion formed by the I.T.O. on the basis of the information gathered from outside cannot be made base of rectification. He said that the question whether the assessee was a private limited or a public limited company is a question of determination of fact. The opinion subsequently formed as against the one formed earlier would form a change in the opinion and that the same does not warrant application of the provisions under reference. He has produced us a copy of an order reported as 1990 PTD 889, in the case of Republic Motors Ltd. v. Income Tax Officer and others, which he claims is applicable on all fours in the present case. The relevant para is reproduced below:---
"Income Tax Ordinance, 1979 (XXXI of 1979) sections 65 & 156- Notice Rectification of mistake Assessee/Petitioner as private limited was nationalized by the Government and transferred to PACO? Assessments framed as public limited company from the date of nationalization upto the year 1985-86. Income Tax Officer issued a letter for rectification of assessments for the assessment years 1979-80 to 1985-86 as the company has wrongly been taxed as public limited company on receiving reply Income Tax Officer withdrew the action and expressed his intention to reopen the case-assessee filed appeals against the assessment order. During the pendency of appeals assessee filed Constitutional petition and challenged the Income Tax Officer's action being no change in the structure or the constitution of the company. Income Tax Officer action whether or mere change of opinion Held yes---Whether assessments made without lawful authority. Held yes."
Regarding the fact whether the company was a public limited or private limited company, he said that the issue becomes redundant in the impugned case as the same comes only after the action of the I.T.O. to reopen the order.
4. The learned D.R. has, however, supported the orders of both the officers below. He said that the rectification for the earlier three years has been carried out from the mistakes detected out of the order of appeal effects by the I.T.O. on the basis of appellate order. He argued that appellate order being continuation of the old proceedings the limitation of rectification runs from the date of allowance of appeal effected by the I.T.O. He also said that the assessee has wrongly been assessed as a public limited while the same was not covered under the definition of the same under para. B(2) part IV of the first Schedule of the Income Tax Ordinance which is as under:---
"(a) A company in which not less than fifty percent. of the above shares are held by the Government;
The other provision of law impugned before us reads as follows:---
"156. Rectification of mistakes.---(1) Any income tax authority or the Appellate Tribunal may amend any order passed by it to rectify any mistake apparent from the record on its own motion or on such mistake being brought to its notice by any other income tax authority or by the assessee.
(2) No order under subsection.---(1), which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee shall be made unless the parties effected thereby have been given a reasonable opportunity of being heard.
(3) Where any such mistake is brought to the notice of any income tax authority by the assessee and to order under subsection (1) is made by such authority before the expiration of the financial year next following the date on which it was so brought to its notice, the mistakes shall be deemed to have been rectified and all the provisions of this Ordinance shall have effect accordingly.
(4) No order under subsection (1) shall be made after the expiration of four years from the date of the order sought to be amended."
5. We shall deal with section 156 first and then with the other points. A bare reading of the section makes it clear that the legislature has given power to Income Tax Authorities and Income Tax Appellate Tribunal to rectify their own orders if the mistake is apparent from record of the assessee. Any mistake which firms based on information outside the record cannot, therefore, be termed as a mistake that comes out of the record of the assessee. The 'record' as used in this section means record of the assessee and not that of any other person. In the impugned case the I.T.O. found that he has wrongly assigned status of Public Ltd., Company on assessee's representation that industry was taken over by the Government owned department, hence is a Government department, and rectified the same. Before we give our finding it will be more appropriate to dilate the arguments established earlier. Firstly the argument of the A.R. that section 156 cannot be applied on the facts and circumstances of the case and the judgment cited. We would respectfully submit that the judgment referred to is not applicable in this case. The same relates to the jurisdiction of the I.T.O. acquired under section 65 the facts and circumstances of that case, the Honourable- High Court considered re-opening of the assessment under section 65 as unjustified. Before us the question is not that of re-opening but of rectification under section 156. There is no dearth of reported judgments that reopening of the assessments on the information obtained from the record earlier considered is not justified. Similarly, there is a chain of reported judgments wherein the rectification has been allowed to be' Carried out on finding of fault from record of the assessee. Reference in this regard may be made to following reported judgments wherein the Courts have given following findings:---
'Over looking a mandatory provision, is a mistake of law and is rectifiable'
(1987) 166 (ITR) 454
(1958) 34 (ITR) 143
'Rectification arises from the record available at the time of Assessment. Not from the subsequent information.'
1988 PTD (Trib.) 785.
The A.R. has also argued that it was not from record of the assessee that the I.T.O. found the mistake. It was on information gathered from other orders that taken over industries are not to be considered as Government and assigning of status of Public Ltd. Company to them was incorrect the provisions of section 156 have been invoked. In hip opinion this was extraneous ?information on which section 156 cannot be applied. This argument of learnt A.R. is also of no support to the assessee as there is consensus of opinion among the Courts on the fording that "originally a good order may subsequent, reveal a mistake in the light of a subsequent decision". This quotation finds support from following reported judgments:---
(1962) 44 ITR 260; (1967) 64 ITR 67 (SC); (1968) 67 ITR 210 and (1971) 80 ITR 1.
6. In view of the above discussion and the ratio of the judgments cited we have no hesitation in holding that the action of the learned I.T.O. to consider the assigning of a wrong status was a mistake on record and provisions of section 156 on the facts and circumstances of this case have rightly been invoked.
7. Now we come to the other issue i.e. as to whether the Company was a public limited or private limited. The impugned company is a taken over industry but is being administered by the Ghee Corporation of Pakistan, which is holding more than 50% shares of the assessee Company, meaning thereby that the majority shares are not held by Government but, by a Government controlled Corporation. As such it cannot be treated as a Public Limited Company in term of para. B(2)(a) Part IV of the first schedule. Our observation also finds support from the judgment of the Income Tax Appellate Tribunal reported as:---
PTD 1993 (Trib.) 1100.
In the referred decision it has been yield that taken over Industries would not always be considered to be Government for all purposes, so as to give it a status of Public Limited Company. The relevant part is as follows:---
"As stated earlier a company is a public company if 50% or more of its shares are held by the Government. There is no dispute that the share of the assessee-company are not held by the Government as such but by another company which admittedly is cent percent. owned by the Government. The question is whether the expression 'Government' used in the definition of the company includes a company owned by the 'Government'. As stated earlier the assessee asks us to read the expression 'Government' in the definition as a company owned by the Government and in that context reference is invited to the judgment of the Supreme Court and of the Lahore High Court already noted. Neither the Supreme Court nor the High Court has held that a company owned by the Government shall for all purposes mean a department of the Government owning such company. The holdings of the Supreme Court and of the Lahore High Court proceed on the basis of immunity granted under the Constitution to the Federation to be taxed by or under a Provincial Law and the Provinces to be taxed by or under a Federal Law.
We, therefore, have no hesitation in holding that the I.T.O. has rightly assigned status of a private limited company to the assessee.
9. Now we come to the issue regarding limitation of section 156 claimed to have been expired for the earlier three years i.e. assessment years 1978-79 to 1980-81. The law of rectification is that an Income Tax Authority or I.T.A.T. may amend an earlier order passed by it to rectify any mistake. In the impugned orders the mistake was made at the time of finalization of the first Assessment by the I.T.O. which is sought to be rectified. The same arose from the orders of the I.T.O. finalised by him on the following dates:---
| 1978-79 ??????????? | 28-2-1980 |
| 1979-80 ??????????? | 27-4-1980 |
| 1980-81??????????? | 15-6-1981 |
The limitation to rectify the same expired on 27-2-1984, 26-4-1984 and 14-6-1985, respectively for each year.
10. The upshot of the above discussion is that the limitation in respect of assessment years 1978-79 to 1980-81 having expired the action of the I.T.O. to invoke the provisions for these three years vide his order dated 15-6-1987 was unjustified and assessee's appeal succeed to this extent while for the subsequent years his action to assign the status of Private Limited Company by way of rectification was fully justified. The assessee's appeals therefore, fail for assessment years 1982-83 to 1985-86.
??????????? The appeals in respect of all the seven years are accordingly disposed off.
M.B.A./213/Trib????????????????????????????????????????????? Order accordingly.