VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 521 (2008)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 2(36) & 122---Rectification of mistake---Scope---"Desk Audit" of return revealed that assessee had sustained a loss and minimum tax required under S.113 of the Income Tax Ordinance, 1979 had not been paid on the plea of being non-profit organization---Record further revealed that Commissioner's approval for declaring the organization as a non-profit organization under S.2(36) of the Income Tax Ordinance, 1979 had never been accorded to the assessee---Such discrepancies were treated as a mistake being apparent from record requiring rectification---Validity---Taxation Officer had stretched the scope of S.221 of the Income Tax Ordinance, 2001 to a great extent but under S.221 of the Income Tax Ordinance, 2001, the Taxation Officer may rectify the order if there was any mistake apparent from record---Apparently there was no mistake as the Taxation Officer himself had mentioned that discrepancies in the returns had been found after `Desk Audit' of the taxpayer's return and after the scrutiny of record---Application of S.221 of the Income Tax Ordinance, 2001 was not justified and the Department, if required, may amend the already completed assessment by invoking S.122 of the Income Tax Ordinance, 2001 or under any other provision of law applicable---First Appellate Authority upheld the treatment meted out by the Taxation Office with the observation that assessment had applied for rectification of order which was not mentioned in the assessment order---Order of First Appellate Authority was vacated and orders passed by the Taxation Officer under S.221 of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal.

Jawaid Khurram for Appellant.

Gauhar Ali, D.R. for Respondent.

ORDER

The appellant through these two appeals has objected to the consolidated impugned order of the learned CIT(A), dated 2-8-2008 for the tax years, 2006 and 2007 upholding the order passed by the Taxation Officer under section 221 of the Income Tax Ordinance, 2001. Following common grounds have been raised for both the years under review:--

"(2) That the learned Commissioner of Income Tax Appeals, Hyderabad has erred to confirm invocation of section 211 of the Income Tax Ordinance, 2001 in the case of the appellant, although it was beyond the jurisdiction of the learned Taxation Officer.

(3) That without prejudice to the Ground No.2, the learned Commissioner of Income Tax Appeals, Hyderabad has erred to confirm the levy of turnover tax @ 05% under section 113 of the Income Tax Ordinance, 2001 amounting to Rs.866,456 for the tax year, 2006 and amounting to Rs.1,093,442 for the tax year, 2007 on gross receipt of the appellant."

2. We have heard the learned representatives of both the sides and have also perused the impugned order of the learned CIT(A) and the orders passed by the Taxation Officer for both the years under review.

3. We have found that the assessee in this case is an organization registered under the Companies Ordinance, 1984 enjoying the status of a company. The declared versions as per the return of income for both the years under review were accepted by the Taxation Officer. However, as mentioned in the order passed by the Taxation Officer under section 221 of the Income Tax Ordinance, 2001, "Desk Audit" of the taxpayer's return for the charge tax years revealed that the' taxpayer has sustained a loss and tax required under section 113 (minimum tax) under the Income Tax Ordinance, 2001 has not been paid on the plea of being a non-profit organization. It has further been mentioned in both the orders that the scrutiny of the record further reveled that the "Commissioner' approval for declaring the organization as a non-profit organization under section 2(36) of the Income Tax Ordinance, 2001 has never been accorded to the assessee. The Taxation Officer has treated these discrepancies,' as a mistake being apparent from the record requiring rectification.

After considering the above made observations by the Taxation Officer in his orders under section 221, we are of the view that the Taxation Officer has stretched the scope of section 221 to a great extent but in our view, under section 221, the Taxation Officer may rectify the order if there is any mistake apparent from the record but in the present case, apparently there was no mistake as the Taxation Officer himself has mentioned that the discrepancies in the returns have been found after Desk Audit of the taxpayer's returns and after the scrutiny of the record.

We are further of the view that for the discrepancies, as has been described by the Taxation Officer, there are specific provisions in the Ordinance authorizing the Taxation Officer/Commissioner to amend the assessments already finalized but keeping in view the facts and circumstances of the case, we are of the view that in the present case, the application of section 221 of the Income Tax Ordinance, 2001 is not justified and the Department, if required, may amend the already completed assessment invoking section 122 or any other provision of law applicable in this case.

We have further noted that the learned CIT(A) in the impugned order has upheld the treatment meted out by the Taxation Officer with the observation that the appellant has applied for rectification of the order which is not mentioned in the assessment order. The impugned order of the learned CIT(A) is, therefore, vacated and both the orders passed by the Taxation Officer under section 221 of the Income Tax Ordinance, 2001 for both the years under review i.e. tax years, 2006 and 2007 are annulled.

4. Both the appeals filed by the assessee are allowed.

C.M.A./13/Tax (Trib.)Appeals accepted.