M/s Askari Bank Ltd. Vs Commissioner Inland Revenue, Zone-II, LTU, Islamabad.

 

APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I, ISLAMABAD

ITA No.216/IB/2018

(Tax Year, 2015)

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M/s Askari Bank Ltd. 2nd Floor AWT Plaza, The Mall, Rawalpindi. (NTN:0709045).		Appellant
	Vs
Commissioner Inland Revenue, Zone-II, LTU, Islamabad.		Respondent
Appellant By:		Mr. Bilal Ali, FCA
Respondent By:		Ms. Aisha Asad, DR
Date of Hearing:		04.12.2025
Date of Order:		04.12.2025

ORDER

M. M. AKRAM (Judicial Member): The appellant has preferred the instant appeal assailing Order-in-Appeal No. 300/2018 dated January 01, 2018, passed by the learned Commissioner Inland Revenue (Appeals-I) [“CIR(A)”], LTU Islamabad, under section 129 of the Income Tax Ordinance, 2001 (“the Ordinance”) for Tax Year 2015. The appeal has been instituted on the grounds articulated in the memorandum of appeal.

2. Briefly stated, the appellant is a banking company deriving income from the business of banking and the provision of financial services. Its original assessment for Tax Year 2015 was amended vide order passed under section 122(5A) of the Ordinance (DCR No. 06/51 dated 29.04.2016), wherein the taxable income was determined at Rs. 4,176,309,751 and tax payable at Rs. 1,628,760,803. The assessing officer extended credit for taxes paid during the relevant year, amounting to Rs. 1,397,323,713, subject to verification from the record. Upon scrutiny, the Inland Revenue Officer (“IRO”) observed that the appellant had failed to furnish verifiable documentary proof of tax withheld at source amounting to Rs. 44,463,155. Likewise, details and verifiable evidence regarding the refund adjustment of Rs. 15,516,558 were not available on record, nor was any determined refund traceable in the appellant’s profile. Consequently, a show-cause notice under section 221(2) of the Ordinance was issued vide No. 167 dated 17.08.2016 by the IRO, confronting the appellant with the alleged mistakes apparent from the record. Thereafter, the IRO passed the impugned rectification order, disallowing both credits, after providing the appellant an opportunity of hearing.

3. The appellant, being aggrieved, preferred an appeal before the learned CIR(A), LTU Islamabad. After examining the record and the contentions of the parties, the learned CIR(A), vide Order-in-Appeal No. 300/2018 dated January 01, 2018, upheld the action of the IRO. The appellant, still dissatisfied, has now filed the present appeal before this Tribunal.

4. The appeal was fixed for hearing on December 04, 2025. The learned Authorized Representative (“AR”) for the appellant, at the outset, contended that the rectification order passed by the IRO under section 221 of the Ordinance is illegal, void ab initio, and without lawful authority, as the order sought to be rectified had been passed by the Additional Commissioner Inland Revenue under section 122(5A) of the Ordinance. It was argued that, in terms of section 221, only the authority that passed the original order, or an authority specifically empowered to rectify such an order, could undertake rectification; therefore, the IRO, being a subordinate officer, lacked jurisdiction. When this jurisdictional objection was put to the learned Departmental Representative (“DR”), he was unable to offer any cogent or satisfactory explanation.

5.      We have heard the parties and perused the record. After examining the record and considering the arguments advanced by both sides, we find that the core issue relates to the jurisdictional competence of the Inland Revenue Officer (“IRO”) in invoking section 221 of the Ordinance. Section 221 of the Ordinance empowers an “income tax authority” to rectify any mistake apparent from the record in any order passed by it. The statutory prerequisite is explicit and mandatory: the rectification must be undertaken by the authority that passed the original order, unless the Ordinance expressly provides otherwise.

The language of section 221(1) is unambiguous:

“The Commissioner, the Commissioner (Appeals) or the Appellate Tribunal  may, by an order in writing, amend any order passed by him to  rectify any mistake apparent from the record …………….” (Emphasis supplied)

The words “passed by him” limit the jurisdiction exclusively to the authority that authored the original order.

6.      In the present case, it is an admitted position on record that the original order sought to be rectified was passed not by the IRO, but by the Additional Commissioner Inland Revenue under section 122(5A). This distinction is material. Under the statutory hierarchy, the Additional Commissioner is a senior officer vested with independent revisional/ amendment jurisdiction under section 122(5A). Rectification of such an order cannot lawfully be undertaken by an inferior officer unless the law explicitly authorizes such delegation, which it does not. It is a settled doctrine that:

A subordinate authority cannot review, revise, amend, or rectify an order passed by a superior authority unless the law expressly empowers it to do so.

This principle applies with full force in tax administration to preserve hierarchical discipline and ensure lawful exercise of statutory powers. Reliance may be placed on the judgments Muhammad Yousaf Vs Deputy Land Commissioner, Multan and 3 others (2020 CLC 1548), Union of India and others Vs Kamlakshi Finance Corporation Ltd ( AIR 1992 SC 711) and M/s Godrej Sara Lee Ltd Vs The Excise and Taxation Officer (Order by the SC of India dated February 01, 2023).

7.      No material has been placed on record by the Department to establish the existence of any delegation under section 210 of the Ordinance, or any statutory authorization empowering a subordinate officer to rectify an order passed by a superior authority. In the absence of such delegation, the IRO’s assumption of rectification jurisdiction is manifestly ultra vires and contrary to the settled principle that a subordinate officer cannot amend, revise, review, or rectify an order of a superior authority unless such authority is expressly conferred by law. It is equally well-established that the legislature cannot divest itself of its essential legislative function or create a parallel legislative authority; it must exercise its own judgment on matters of fundamental policy and articulate the governing principles to be embodied in legislation. Reliance is placed on the judgment reported as Flying Cement Company v. Federation of Pakistan [(2017) 115 TAX 290 (H.C. Lahore)].

8.      The Departmental Representative has also failed to provide any cogent justification or legal foundation for the IRO’s impugned action. Accordingly, the rectification order, having been passed without lawful authority and coram non judice, is void ab initio and devoid of legal effect. Consequently, the order of the learned CIR(A), which merely affirms an invalid exercise of jurisdiction, is likewise unsustainable. It is an immutable principle of law that defective assumption/exercise of jurisdiction by the authorities is incurable. Reliance may be placed on Director General Intelligence and Investigation FBR Vs Sher Andaz and 20 Others (2010 SCMR 1746), Director General Intelligence and Investigation and others Vs M/s AL-Faiz Industries (Pvt.) Limited and others PTCL 2008 CL 337(S.C) and Collector, Sahiwal and 2 others Vs Muhammad Akhtar (1971 SCMR 681). In all these judgments, it was held by the Hon’ble Supreme Court of Pakistan that:-

i)       Where an essential feature of the assumption of jurisdiction is contravened, or the forum exercises power not vested in it or exceeds authority beyond the limit prescribed by law, the judgment is rendered coram non-judice and inoperative (2002 SCMR 122).

ii)      If a mandatory condition for the exercise of jurisdiction before the Court, Tribunal, or Authority is not fulfilled, then the entire proceedings which follow become illegal and suffer from want of jurisdiction. Any order passed in continuation of these proceedings in appeal or revisions equally suffer from illegality and are without jurisdiction (2008 SCMR 240).” 

As the proceedings are fundamentally vitiated at the jurisdictional threshold, no adjudication on the merits of the disallowed tax credits is warranted.

9.      In view of the above, the appeal of the appellant is accepted, and the orders passed by the lower authorities are annulled.

 

	-SD- (M. M. AKRAM) JUDICIAL MEMBER
-SD- (SHARIF UD DIN KHILJI) MEMBER