APPELLATE TRIBUNAL INLAND
REVENUE, DIVISION BENCH-I, ISLAMABAD
ITA
No.423/IB/2025
(Tax Year, 2017)
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M/s
Al Safa Golden Co (Private) Limited; 5A, Safa Gold Mall, Jinnah Super, F-7
Markaz, |
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Appellant
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VS |
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Commissioner
Inland Revenue, RTO, Rawalpindi. |
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Respondent |
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Appellant by: |
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Mr. Sufyan Qayyum, Advocate Mr. Noman Rafiq, Advocate |
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Respondent by: |
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Mrs.
Farah Amanullah, DR |
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Date of hearing: |
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22.09.2026 |
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Date of order: |
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22.09.2026 |
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O R D E R
M. M. AKRAM (Judicial Member): The
instant appeal has been preferred by the appellant against the impugned order
dated 30.06.2025,
passed by the learned Deputy Commissioner Inland Revenue, Zone-I, Corporate Tax
Office, Islamabad (hereinafter referred to as “the DCIR”), under section
221 of the Income Tax Ordinance, 2001 (hereinafter referred to as “the
Ordinance”), pertaining to Tax
Year 2017. The appellant has assailed the impugned order on the
grounds set forth in the memorandum of appeal.
2. Briefly
stated, the appellant is a private limited company which filed its return of
income for the Tax Year 2017. Upon examination of the return and the relevant
withholding tax statements, the DCIR observed that the appellant had declared
property income and claimed tax credit under section 155 of the Ordinance
amounting to Rs.31,367,468/-, whereas, according to the ITMS data
available with the Department, tax amounting to Rs.11,576,487/- had
been deducted under section 155 of the Ordinance. On that basis, the Department
formed the view that the appellant had claimed an excess tax credit of Rs.19,790,981/-
and, accordingly, initiated proceedings under section 221 of the Ordinance by
issuing a notice to the appellant. In response thereto, the appellant submitted
a written reply dated 03.06.2022, wherein it was explained that
certain tenants had deducted tax under section 155 of the Ordinance from rent
payments made to the appellant, but, due to an inadvertent error, the
corresponding tax was deposited through CPRs in the name of the appellant’s
Director instead of the appellant company. It was further submitted that
applications for correction/rectification of the relevant CPRs had been filed
with the competent authority. Thereafter, another notice dated 07.06.2022
was issued requiring compliance by 13.06.2022, followed by a reminder dated 14.06.2022,
requiring compliance by 17.06.2022, whereby the appellant was
called upon to furnish the orders relating to correction/rectification of the
relevant CPRs in support of the tax credit claimed. In response, the Authorised
Representative (AR) of the appellant submitted a further reply
explaining that the application for correction of the CPRs had been declined by
PRAL on the ground that the relevant CPRs had already been utilised. It was
further contended that, since the Director had not himself claimed credit of
the tax so deducted in his personal return, the corresponding tax credit was
legitimately claimable by the appellant-company and ought, therefore, to be
allowed. The explanation furnished by the appellant was, however, not accepted
by the Department on the premise that the credit of tax deducted could be
claimed only by the person in whose name the tax had actually been
collected/deposited. Consequently, the proceedings were finalised by
disallowing the alleged excess tax credit. As a result, the income of the
appellant was determined at Rs.393,256,321/-, as against the declared
income of Rs.133,981,013/-.
3. Aggrieved by the said order, the appellant
preferred an appeal before the learned Commissioner Inland Revenue (Appeals) [“CIR(A)”],
who, after examining the matter, remanded the case to the assessing authority for
reconsideration in accordance with law. Pursuant to the remand,
a show-cause notice was issued to the appellant. During the subsequent
proceedings, the AR of the appellant was informed that the relevant CPRs were
required to be corrected in terms of the directions contained in the order of the
learned CIR(A). The appellant, however, maintained that the correction of the
CPRs was pending and that the same could not be attributed to any default on
its part. Since the CPRs had not been corrected, the learned DCIR proceeded to
finalise the proceedings and passed the impugned order dated 30.06.2025
under section 221 of the Ordinance.
4. Being aggrieved by and dissatisfied with
the impugned order, the appellant has preferred the present appeal before this
Tribunal, challenging the assumption and exercise of jurisdiction under section
221 of the Ordinance, as well as the disallowance of the tax credit claimed by
it.
5. The appeal came up for hearing before us
on 22.09.2026,
when the learned AR for the appellant and the learned Departmental
Representative (DR) appeared and advanced their respective submissions. The
appellant, assailing the impugned order, contends that the learned DCIR
travelled beyond the limited scope of section 221 of the Ordinance by
undertaking an appraisal and verification of ITMS data, CPRs and other
evidentiary material, whereas such factual inquiry or appreciation of evidence
does not fall within the ambit of rectification proceedings, as held by the
Hon’ble Supreme Court in 2003
PTD 253 (SC) and 1992
SCMR 687. It is further contended that the impugned order is
arbitrary, mechanical and without lawful authority, having been passed in
disregard of the specific directions contained in the Commissioner (Appeals)’s
remand order dated 13.01.2023, whereby the matter was to be decided afresh
after PRAL’s decision upon the appellant’s pending applications for correction
of CPRs. Since the said applications remained pending for reasons beyond the
appellant’s control, the appellant could not lawfully be prejudiced on account
of such delay, particularly when the relevant CPRs were capable of correction
by the competent tax authorities. The appellant further asserts that the
impugned proceedings effectively circumvented the prescribed rectification
mechanism and deprived it of due process and proper adjudication of its pending
applications. On merits, it is pleaded that the tax deducted at source was
beneficially attributable to the appellant-company, the corresponding rental
receipts were duly reflected and taxed in the company’s accounts and return,
and the tax credit was claimed exclusively by the appellant in accordance with
section 168 of the Ordinance. The appellant relies upon the Director’s
individual return, wherein no corresponding tax credit was claimed, as evidence
that there was neither duplication nor double benefit. Reliance was also placed
on the judgment of the Islamabad High Court titled Commissioner Inland
Revenue Vs Farooq Awais and another (ITR No.09/2023 dated
21.10.2024. It is, therefore, maintained that no loss or prejudice was caused
to the Revenue. Finally, the appellant contends that section 168(2B) entitles
the person from whom tax is collected or to whom the payment subject to
deduction is made to claim the corresponding tax credit; consequently, where
tax was deducted from rent payable to the appellant-company, the mere fact that
the tenants inadvertently deposited the deducted tax in the name of the
appellant’s director constituted, at most, a curable procedural defect in the
CPRs, which could be rectified by the tax authorities and could not lawfully
extinguish the company’s substantive entitlement to the tax credit.
6. On the contrary, the learned DR appeared
and strongly supported the impugned order. However, having regard to the
factual and legal controversy involved in the matter, the learned DR was
specifically confronted with the fundamental question as to how the alleged
grant of an “excessive relief” could validly be brought
within the limited and circumscribed jurisdiction of rectification contemplated
under section 221 of the Ordinance. She was further required to explain, in
particular, as to how the alleged discrepancy relating to the claim of tax
credit, which essentially involved examination, verification and appreciation
of ITMS data, CPRs and other evidentiary material, could constitute an error
apparent from the record amenable to rectification under section 221, rather
than a matter falling within the substantive assessment jurisdiction
contemplated under section 122(5)(ii) of the Ordinance.
It
was specifically pointed out during the course of the hearing that section
122(5)(ii) expressly contemplates a situation where a taxpayer has been
allowed, or has claimed, excessive relief, and that the statutory scheme
therefore appears to distinguish such a substantive determination from the
limited jurisdiction conferred for rectification of an apparent error. The
learned DR was accordingly called upon to identify the statutory basis and
explain the precise manner in which the alleged excessive relief, requiring
examination of the underlying factual material and verification of the relevant
CPRs, could nevertheless be treated as an error apparent from the record under
section 221. Despite being allowed to address this material question, the
learned DR was unable to furnish any plausible, cogent or legally sustainable
explanation reconciling the impugned action with the distinct statutory fields
occupied by sections 221 and 122(5)(ii) of the Ordinance.
The
inability of the learned DR to demonstrate the statutory nexus between the
alleged excessive relief and the restricted jurisdiction of rectification
assumes significance, particularly because the exercise of power under section
221 cannot be employed as a substitute for an assessment, reassessment or
adjudication of a disputed factual issue. Where determination of the alleged
error necessarily requires investigation into the correctness of ITMS data,
verification of CPRs, examination of the source and ownership of tax deducted,
or appreciation of other evidence, the matter ceases to be one of a patent or
self-evident error apparent from the record and enters the domain of
substantive adjudication. The learned DR, despite supporting the impugned
order, could not point out any patent error capable of being identified merely
from the existing record without undertaking such an evidentiary exercise. This
aspect, therefore, materially weakens the legal foundation of the impugned
order and calls for examination of whether the jurisdiction vested by section
221 was validly invoked in the circumstances of the present case.
7. We have heard the learned AR for the
appellant as well as the learned DR and have carefully examined the impugned
order, the material available on record and the respective submissions advanced
before us. The controversy, in our considered view, requires determination
primarily with reference to the scope and permissible limits of the
jurisdiction conferred by section 221 of the Ordinance. The undisputed factual
position emerging from the record is that the appellant declared property
income and claimed tax credit under section 155 of the Ordinance amounting to
Rs.31,367,468/, whereas the ITMS data reflected tax deduction of Rs.11,576,487/-.
The Department consequently treated the differential amount of Rs.19,790,981/-
as excessive tax credit. The appellant, however, consistently maintained that
the entire tax had in fact been deducted from rent payments made to the
appellant-company by its tenants, but that, owing to an inadvertent error on
the part of the tenants(withholding agent), the corresponding CPRs were
generated in the name of the appellant's Director. The appellant further
asserted that applications for correction of the relevant CPRs had been filed
before the competent authority/PRAL and that the Director had not claimed the
corresponding tax credit in his individual return. Copy of return of the
Director was also placed on record.
8. The
first and foremost question, therefore, is whether determination of the
aforesaid controversy could validly be undertaken in proceedings under section
221 of the Ordinance. Section 221 confers a limited power to amend an order for
the purpose of rectifying a “mistake
apparent from the record.” The statutory expression itself
places a clear limitation upon the jurisdiction. It does not confer a general
power of review, reassessment or reconsideration of an earlier determination.
The jurisdiction can be exercised only where the error is patent, manifest and
self-evident from the existing record and does not require a process of
investigation, collection of further evidence, reassessment of evidence or
determination between competing factual positions.
9. The Hon’ble Supreme Court in Commissioner of Income-Tax,
Companies-II, Karachi v. Messrs National Food Laboratories (1992 SCMR 687 =
1992 PTD 570), has authoritatively delineated the scope of
rectification. It has held that a mistake amenable to rectification must be one
which is apparent on the face of the record, “floating on the surface” and
not requiring investigation or further evidence. The Court further made it
clear that where the authority, while exercising rectification jurisdiction,
enters into the controversy, investigates the matter, reassesses evidence or
takes additional evidence and, on that basis, forms an opinion different from
the earlier order, such exercise does not constitute rectification. The same
principle has subsequently been reiterated in relation to section 221 of the
Ordinance. In CIR
v. E.N.I. Pakistan (2013 PTD 508), the High Court held that
rectification under section 221 is confined to an error apparent from the
record and cannot be employed as an alternative or substitute for appeal,
revision or review. Likewise, the Supreme Court in CIT v. Shadman Cotton Mills Ltd (2008 PTD 253),
explained that an error of fact or law having a direct nexus with determination
of the substantive rights of the parties, particularly where its determination
requires an elaborate discussion, detailed probe or process of determination,
does not constitute a mistake apparent on the record. Recently, the Full Bench
of Lahore High Court also deliberated on the narrow scope of rectification
proceedings in the case of Commissioner Inland Revenue Multan Vs Ms
Northern Power Generation Company (2026 LHC 1787).
10. Tested on the above principles, the
controversy before us cannot, in our considered view, be characterised as a
simple or patent mistake apparent from the record. The Department's case is
founded upon a comparison between the tax credit claimed by the appellant and
the tax deductions appearing in ITMS. That comparison, by itself, may
constitute a basis for initiating appropriate proceedings, but it does not,
without more, conclusively establish that the appellant had unlawfully claimed
excessive tax credit. The real controversy is whether the tax reflected in the
relevant CPRs, notwithstanding the fact that the CPRs stood in the name of the
appellant's Director, was in substance deducted from payments made to the
appellant-company and was consequently attributable to it for purposes of
section 168 of the Ordinance.
11. This distinction is material. Section
168(1)(a) provides that tax deducted from a payment under the relevant
provisions is treated as income derived by the person to whom the payment was
made, while section 168(2) provides for tax credit where tax has been collected
from a person or deducted from a payment made to that person. Thus, the
substantive controversy is not resolved merely by identifying the name appearing
on a CPR. It requires determination of the factual relationship between the
payer/tenant, the rent payment, the person to whom such payment was made, the
person from whom tax was actually deducted, the corresponding CPRs and the tax
credit claimed in the return.
12. More importantly, the appellant had
specifically placed before the Department the plea that the CPRs had been
generated in the name of the Director due to an inadvertent mistake and that
applications for correction thereof had been filed. The appellant further
relied upon the Director's return to demonstrate that the Director had not
claimed the corresponding tax credit. Whether these assertions were factually
correct, whether the relevant rental payments were actually made to the
appellant-company, whether tax was deducted from those payments, whether the
corresponding CPRs related to those very deductions, and whether the Director
had derived or claimed any corresponding tax benefit, are all matters requiring
factual verification. These questions cannot be answered merely by looking at
the face of the assessment record or by applying a mathematical comparison
between two figures appearing in the ITMS. They require examination and
appreciation of the underlying material. The very course adopted by the
Department, calling upon the appellant to produce correction orders relating to
CPRs and thereafter rejecting the explanation because the CPRs had not been
corrected, demonstrates that the alleged mistake was not self-evident from the
record. Rather, its determination depended upon further factual inquiry.
13. The Department's own approach is, therefore,
significant. Had the matter involved an obvious mathematical, clerical or
computational error, capable of being detected merely by reading the order and
the record forming its basis, section 221 could legitimately have been invoked.
Here, however, the Department first identified an apparent discrepancy from ITMS
data and then sought supporting material regarding the CPRs. Once the authority
embarked upon verification of the correctness, ownership and evidentiary
character of those CPRs, the matter travelled beyond the narrow confines of
rectification jurisdiction. The jurisdiction under section 221 cannot be
enlarged merely because the additional material sought happens to exist
somewhere within the departmental record.
14. The contention of the learned DR that the
matter represented an “excessive relief” also does not answer the
jurisdictional objection. It is true that the statutory scheme governing
amendment of assessments contemplates situations where an assessment has resulted
in excessive relief or refund. The statutory framework of section 122 provides
a substantive mechanism for amendment of an assessment where the statutory
conditions are fulfilled, including circumstances involving excessive relief.
However, the existence of a substantive power to amend an assessment in an
appropriate case does not convert every alleged excessive relief into a “mistake
apparent from the record” for purposes of section 221.
Indeed,
the distinction between the two jurisdictions is fundamental. Section 221 is concerned with
correcting an apparent mistake; section 122 is concerned with amendment of an
assessment in circumstances specified by the statute. The
former cannot be employed merely because the ultimate consequence of an alleged
error is an increase in tax liability. Otherwise, every disputed assessment
issue could be recast as a “mistake” and brought within section 221, thereby
rendering the statutory distinction between rectification and amendment of
assessment substantially meaningless.
15. There is, however, another important aspect
of the matter which requires consideration. The controversy relates to Tax Year 2017.
At the time when the proceedings under section 221 were initiated, the
statutory period available to the Department for taking substantive action
under section 122 had not yet expired. Thus, if the Department
was of the view that the appellant had been allowed excessive tax credit or
excessive relief, the substantive jurisdiction contemplated under section 122
was available to it. Notwithstanding such availability, the assessing officer
consciously invoked section 221 and proceeded to treat the
alleged excessive tax credit as a mistake apparent from the record.
16. The significance of this circumstance is
considerable. The question before us is not whether the Revenue, at some
subsequent stage, had lost its remedy under section 122 by efflux of time.
Rather, the material question is whether, at the very inception of the
proceedings, the Department could lawfully choose the limited
jurisdiction under section 221 to determine an issue which, by its very nature,
involved an alleged excessive relief and which was otherwise capable of being
examined under the substantive mechanism of section 122.
The
answer, in our considered view, must be determined from the nature and
substance of the controversy and not from the eventual expiry of limitation
under section 122.
17. Section 122(5)(ii) specifically recognises a
situation where the total income has been under-assessed, assessed at too low a
rate, or has been the subject of excessive
relief or refund. The legislature has thus provided a
substantive statutory mechanism for dealing with an assessment which, according
to the Department, has resulted in excessive relief. Section 221, on the other
hand, is couched in materially narrower terms and authorises amendment only for
the purpose of rectifying a mistake
apparent from the record. The two provisions
consequently operate in distinct fields and cannot be treated as
interchangeable merely because the ultimate consequence of an alleged error may
be an increase in tax liability.
18. It follows that the mere fact that an
alleged discrepancy is capable of resulting in excessive tax credit does not,
by itself, bring the matter within section 221. The Department was required to
first determine whether the alleged discrepancy constituted a patent and
self-evident error apparent from the record or whether its determination
required a substantive examination of the taxpayer's entitlement. In the
present case, the latter position is manifest from the record. The Department
did not merely correct an arithmetical or clerical mistake. It compared the tax
credit claimed by the appellant with ITMS data, examined the relevant CPRs,
required production of orders concerning correction of those CPRs, considered
the explanation regarding their issuance in the name of the Director and
ultimately rejected the appellant's claim on the basis of the person in whose
name the tax had been deposited.
19. Such an exercise cannot, in our view, be
characterised as a mere rectification of an error apparent from the record. The
jurisdiction under section 221 is confined to a mistake which is patent,
obvious and self-evident and which does not require investigation, further
evidence or a process of determination. The superior Courts have consistently
emphasised that where the authority enters into the controversy, investigates
the matter, reassesses evidence or takes additional evidence and thereafter
forms a different opinion, the exercise ceases to be rectification. The same
principle is particularly relevant here because the very entitlement of the
appellant to the disputed tax credit was dependent upon determination of
disputed factual matters concerning the underlying deductions and CPRs.
20. The subsequent expiry of the period of
limitation under section 122 does not alter this legal position. The validity
of the exercise under section 221 has to be tested with reference to the jurisdiction
actually invoked and the nature of the matter sought to be determined,
and not by reference to the fact that the alternative substantive remedy under
section 122 subsequently became time-barred. A proceeding which was not within
the proper scope of section 221 at its inception cannot acquire such
jurisdiction merely because, during its pendency, the period for taking action
under another statutory provision has expired.
Conversely,
the Revenue cannot contend that because section 122 has subsequently become
unavailable by limitation, the proceedings originally instituted under section
221 must now be sustained at all costs. The expiry of limitation under section 122 neither enlarges
the jurisdiction conferred by section 221 nor converts a non-rectifiable
dispute into a mistake apparent from the record.
21. We may put the matter differently. Had
the Department, during the period when section 122 was available, formed the
view that the appellant had been allowed excessive relief within the meaning of
section 122(5)(ii), it was open to the Department to invoke the statutory
mechanism provided for amendment of assessment, subject of course to fulfilment
of all the conditions and procedural safeguards prescribed by law. It elected
instead to proceed under section 221. Having chosen that jurisdiction, the
Department was required to establish the essential jurisdictional condition of
section 221, namely, the existence of a mistake apparent from the record. It could
not use section 221 as a substitute for the substantive assessment-amendment
jurisdiction merely because the result sought by both proceedings might
ultimately involve an increase in tax liability.
22. The distinction assumes even greater
significance because, by the time the impugned order was ultimately passed on 30.06.2025,
the limitation available for substantive action under section 122 had already
expired. However, this subsequent expiry cannot retrospectively validate the
original assumption of jurisdiction under section 221. Nor can it confer upon section
221 a wider field of operation than that expressly assigned to it by the
legislature. To hold otherwise would mean that the Revenue could initiate
proceedings under a limited rectification provision, investigate and adjudicate
a substantive issue falling within section 122 while that provision was
available, and thereafter, upon expiry of the section 122 limitation, rely upon
the pending section 221 proceedings to accomplish the very result which the
substantive provision could no longer independently support. Such an
interpretation would blur the statutory distinction between rectification of an
apparent mistake and amendment of an
assessment on the ground of excessive relief, and would
effectively render the carefully prescribed statutory scheme of section 122
otiose.
Accordingly,
the subsequent expiry of limitation under section 122 does not assist the
Revenue; rather, it reinforces the necessity of examining whether the
jurisdiction originally invoked under section 221 was competent in law. On the
facts before us, it was not, because the alleged excess tax credit was not a
patent mistake apparent from the record but a disputed matter requiring factual
investigation and adjudication.
23. We are fortified in this conclusion by the
principle laid down by the Hon’ble Supreme Court in Shadman Cotton Mills Ltd (2008 PTD 253),
where the Court distinguished between a rectifiable mistake and an error
requiring determination of the substantive rights of the taxpayer. The Court
emphasised that a rectification proceeding cannot be converted into a process
involving elaborate inquiry or determination of a material question affecting
the tax liability. Similarly, in National
Food Laboratories
(1992 SCMR 687), the Supreme Court held
that once the authority enters into the controversy, reassesses evidence or
forms a different opinion on the basis of investigation, the exercise ceases to
be rectification.
24. The facts of the present case fall squarely
within the aforesaid principle. The alleged “excessive credit” did not arise
from an arithmetical error in the order itself. Rather, the Department reached
that conclusion by relying upon ITMS data and by comparing the amount reflected
therein with the amount claimed by the appellant. The appellant, on the other
hand, furnished a factual explanation as to why the relevant deductions were
not appearing in its name and relied upon the alleged inadvertent generation of
CPRs in the name of its Director. Resolution of these rival positions
necessarily requires examination of evidence. Such an exercise is outside the
permissible scope of section 221.
25. The subsequent proceedings pursuant to the
order of the learned CIR(A) also assume considerable significance. The
appellant's case before us is that the learned CIR(A), by order dated 13.01.2023,
remanded the matter with a direction that the issue be reconsidered after the
decision of PRAL upon the applications relating to correction of the CPRs. The
Department, instead of determining the substantive controversy on the basis of
the material available and the directions of the appellate authority, treated
the non-correction of the CPRs as conclusive against the appellant. If the
appellate direction was indeed conditional upon a decision by PRAL concerning
correction of the CPRs, and such decision remained pending for reasons not
attributable to the appellant, the same could not, without examining the
precise terms and effect of the remand order, be converted into an adverse
finding against the taxpayer.
26. It is equally significant that the
Department has not demonstrated before us any patent error in the original
order which could be identified without entering into the disputed factual
controversy. The learned DR, despite being specifically confronted with the
question as to how the alleged excessive relief constituted a mistake apparent
from the record within the meaning of section 221, was unable to identify any
such patent error. No provision has been pointed out which would authorize the
rectifying authority to undertake a fresh factual determination concerning the
ownership and admissibility of the tax deductions merely by invoking section
221.
27. We are conscious that the Revenue is not
precluded from verifying a genuine claim of tax credit and, where the statutory
conditions are fulfilled, from taking appropriate action in accordance with
law. Equally, a taxpayer cannot claim a tax credit merely by assertion if the
underlying deduction is not established. The question before us, however, is
not whether the appellant is ultimately entitled to the disputed tax credit.
That substantive question cannot properly be adjudicated through the limited jurisdiction
of section 221 where its determination requires investigation and appreciation
of evidence. The question before us is whether the particular exercise
undertaken by the learned DCIR was legally permissible under section 221. On
that question, the answer must be in the negative.
28. The Department was required to remain within
the jurisdiction conferred by the provision under which the proceedings were
initiated. A rectifying authority cannot, under the guise of correcting an
apparent mistake, reopen a factual controversy, examine additional material,
determine the evidentiary value of CPRs, decide the true recipient of the tax
deduction, and thereby substitute its own determination for the earlier
position. Such an exercise would, in substance and effect, amount to
reassessment or review and not rectification. The statutory power cannot be
enlarged by the label assigned to the proceedings.
29. We, therefore, hold that the alleged
discrepancy between the tax credit claimed by the appellant and the amount
reflected in the ITMS data, in the peculiar facts of the present case, did not
constitute a mistake apparent from the record
capable of rectification under section 221 of the Ordinance. Determination of
the issue necessarily required investigation into the relevant CPRs, the actual
deduction of tax from rental payments, the person to whom such payments were
made, the circumstances in which the CPRs were generated in the name of the
Director, and the corresponding tax treatment in the returns of the appellant
and the Director. Such an exercise falls outside the limited jurisdiction of
rectification. Consequently, the impugned order dated 30.06.2025,
having been passed in exercise of a jurisdiction not available under section
221 for determination of the disputed factual controversy, cannot be sustained
in law. We, therefore, annulled the impugned order.
30. Before parting with the matter, we consider
it necessary to address a consequential aspect which assumes particular
significance in the facts and circumstances of the present case, namely,
whether, after annulling the impugned order under section 221, the matter can
be remanded to the learned DCIR for determination afresh under the substantive
provisions of the Ordinance. In our considered view, such a course is neither
legally permissible nor warranted. The controversy pertains to Tax Year 2017
and, by the time the impugned order dated 30.06.2025 came to be passed, the
period prescribed under section 122 for taking substantive action had already
expired. The Tribunal cannot, by an order of remand, revive a jurisdiction
which the statute has already extinguished by efflux of time.
31. It is a settled principle that a statutory
period of limitation prescribed for exercise of a fiscal jurisdiction cannot be
enlarged by an appellate or adjudicatory authority unless the statute itself
expressly confers such power. The Tribunal, while exercising appellate
jurisdiction, derives its authority from the Ordinance and cannot confer upon
the assessing authority a jurisdiction which has ceased to exist by operation
of the statutory limitation. Thus, a remand cannot be employed as an instrument
for extending, circumventing or defeating the limitation prescribed by section
122. To permit such a course would, in substance, amount to judicial extension
of the statutory period, which is beyond the jurisdiction of this Tribunal.
32. We are fortified in this view by the
authoritative pronouncement of the Hon’ble Supreme Court in Assistant Collector Customs and others
v. M/s Khyber Electric Lamps and others (2001 SCMR 838 = 84
Tax 133). In that case, while considering the question whether
defective proceedings could be remanded to the competent authority for
proceeding afresh in accordance with law, the Hon’ble Supreme Court declined to
adopt such a course where the period prescribed by law had already expired. The
Hon’ble Court held, in substance, that remand would be a futile exercise once
the statutory period for initiating the proceedings had elapsed, and observed
that the recovery, after expiry of the prescribed period of limitation, had
become unenforceable. The relevant portion is reproduced below:-
"It
was urged by the applicants that the learned High Court after finding the
notices to be defective and not in accordance with law should have remanded the
cases to the Customs Authorities for proceeding in accordance with law, but we
do not find any substance in this contention as the period prescribed by law
for service of notices has already expired and it would be a futile exercise in
remanding the cases to the Customs Authorities.”
33. The principle enunciated by the Hon’ble
Supreme Court, though arising in the context of section 32 of the Customs Act,
is of direct relevance to the present question. The statutory scheme of
limitation serves to define the temporal boundary within which a taxing
authority may lawfully exercise its substantive power. Once that boundary has
expired, neither the assessing authority nor the appellate forum can circumvent
it by describing the subsequent exercise as a remand, reconsideration or fresh
determination. The expiration of limitation is therefore not merely a
procedural irregularity; it operates as a legal bar against initiation or
continuation of the substantive proceedings which the statute required to be
undertaken within the prescribed period.
34. It is, therefore, not open to this Tribunal,
after holding that the proceedings under section 221 were without jurisdiction,
to remit the matter to the learned DCIR with a direction to determine the
appellant’s entitlement to the disputed tax credit under section 122 or any
other substantive provision where the statutory period for such action has
already expired. Such a remand would enable the Revenue to accomplish
indirectly what it could no longer accomplish directly under section 122. The
Tribunal cannot extend the limitation prescribed by the legislature, nor can an
order of remand confer a fresh cause of action or revive an otherwise
time-barred jurisdiction. It is well-settled that “what cannot be done directly
cannot be done indirectly”. Reliance is placed on FBR v. Dewan Salman Fiber Ltd.
(2023 SCMR 1871); CIR v. Wateen Telecom Limited (2021 PTD 1827)
[Islamabad] (DB); CIR v. Oil and Gas Development Co. Ltd., (2016 PTD 2727)
[Islamabad] (DB). A Full Bench of the Madras High Court in the case of Atchayya
v. Venkata (AIR 1915 Madras 1223) also held that:-
"........
There could be no doubt that a Court of first instance, which wrongly assumes
jurisdiction owing to an error of law, acts without jurisdiction. Similarly, it
may, I think, be said that an appellate Court has no jurisdiction to remit for
trial to a lower Court case over which the latter has no jurisdiction and that
if it does so under an error of law, it acts without jurisdiction within the
meaning of the section. "
35. The distinction is material. We are not
holding that the Revenue was forever precluded from examining the disputed tax
credit when the competent statutory proceedings were otherwise within
limitation. Rather, we hold that the Department, having elected to invoke
section 221 in respect of a matter which required substantive determination,
cannot, after the expiry of the period available under section 122, seek to
cure that jurisdictional defect through remand. The choice of an inappropriate
statutory jurisdiction cannot be retrospectively corrected by an appellate
order so as to defeat the limitation expressly prescribed by the legislature.
36. Accordingly, having found that the impugned
proceedings under section 221 were beyond the limited jurisdiction conferred by
that provision, and further finding that the period prescribed under section
122 had already expired, we are constrained in law to annul the impugned order
without remand. Any remand at this belated stage would not only be futile but
would effectively enlarge the statutory limitation, a power which this Tribunal
does not possess. The Federal Constitutional Court has made it clear in the
case of Ghulam Abbas v. Telephone Industries of Pakistan (PLD
2026 FCC 309) that “10…. jurisdiction is
a creature of statute ; it must either exist in law or not at all.”
37. In view of the foregoing discussion, we are
of the considered opinion that the impugned order suffers from a fundamental
jurisdictional defect. The alleged discrepancy between the tax credit claimed
by the appellant and the amount reflected in the ITMS data did not constitute a
mistake apparent
from the record within the contemplation of section 221
of the Ordinance. Its determination required examination and appreciation of
disputed factual matters relating to the relevant CPRs, the actual deduction of
tax from rental payments, the person to whom the payments were made, the
identity of the person entitled to the corresponding tax credit, and the
circumstances in which the CPRs came to be generated in the name of the
Director. Such matters fall outside the limited scope of rectification.
Moreover,
the substantive jurisdiction available under section 122 has, by the time the
matter has reached this Tribunal, become time-barred. This Tribunal, at
this belated stage, cannot remand the matter to the learned DCIR for
undertaking an exercise which could no longer lawfully be initiated under
section 122, nor can this Tribunal extend, enlarge or otherwise revive the
statutory limitation prescribed by the legislature. The
principle laid down by the Hon’ble Supreme Court in Assistant Collector Customs and others
v. M/s Khyber Electric Lamps and others (2001 SCMR 838 = 84
Tax 133) is apposite: where the statutory period for taking the
substantive action has expired, remand for proceedings in accordance with law
would be a futile exercise and cannot be permitted. The Revenue cannot achieve
through a remand what the statute no longer permits it to achieve through
amendment of assessment. A time-barred substantive jurisdiction cannot be revived
through appellate directions, and the Tribunal cannot extend a period of
limitation which the legislature has prescribed in clear terms.
Consequently, the impugned order dated 30.06.2025, passed under section 221 of the
Ordinance, is annulled. The appeal is accordingly allowed.
|
|
-SD- (M. M. AKRAM) JUDICIAL MEMBER |
|
-SD- (MUHAMMAD NAEEM
ASHRAF) MEMBER |
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