This blog is written by Mr. Hussain Mehmood, Senior Manager, Taxation Advisory Services. Please read this blog and provide your valued comments.
Non-Applicability of Invoking Provisions of Section 221 against an order Treated to have been issued under Section 120(1)(B)
This blog is on the subject of a practice adopted by the FBR Officers of invoking provisions of section 221 i-e rectification of mistakes (apparent/floating on the surface of the record) and attempts to guide the dealing of such notices.
Although the option of section 177, 214C, 214D (to some extent) and 122 were there to explore, however, the invoking of section to rectify mistake was still taken as an option by the FBR officers. The said section 221 is reproduced hereunder:
“221. Rectification of mistakes.— (1) 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 on [his or its] own motion or any mistake brought to [his or its] notice by a taxpayer or, in the case of the Commissioner (Appeals) or the Appellate Tribunal, the Commissioner.
………………….” (emphasis supplied)
The above mentioned section states the mandate of the section in sub-section (1) that a Commissioner, Commissioner (Appeals), or Appellate Tribunal Inland Revenue (ATIR) and rectify if:
- Its passed by him/it;
- The mistake is apparent on record
- Brought in his attention by taxpayer or by his own motion.
As we were discussing the amendment of assessment by invoking this section was based on the words used in section 120(1)(b) i-e the return to be a deemed assessment issued by the Commissioner. For exact wording, it would be in fitness of things to read section 120(1)(b):
“[120. Assessments.—(1) Where a taxpayer has furnished a complete return of income (other than a revised return under sub-section (6) of section 114) for a tax year ending on or after the 1st day of July, 2002,—
- the Commissioner shall be taken to have made an assessment of taxable income for that tax year, and the tax due thereon, equal to those respective amounts specified in the return; and
- the return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was
…………………………………..” (emphasis supplied)
The above clause (b) of sub-section (1) of the Section 120 gives the status to the return filed by the taxpayer of an assessment order issued to the taxpayer by the Commissioner on the day the return is furnished.
The Department relied on this wording and invoking provisions of section 221 to rectify the mistakes (as per Deptt view) considering the return to be an assessment order passed by the Commissioner.
While the words “the return shall be taken for all purposes” creates a fiction of deemed assessment but does not create the fiction of deemed mistake contagiously to resort to section 221 (Ref: ITA No. 565-A/IB/2015 dated February 17, 2020).
While the words “amend any order passed by him” and does not mention the order treated to have been passed by the Commissioner/authority. Therefore the scope of application of the section is restricted to “order passed by him” and not to the deemed assessment.
Observing above mentioned discussion the honorable ATIR has recently passed a judgment deciding the similar issue in following words:
Quote“…………. I will hold that the provisions of section 221 of the Ordinance cannot be invoked in respect of an assessment order treated to have been issued under section 120(1)(b) of the Ordinance………………………”Un-quote
The honorable ATIR also held that for the purposes of amending an order u/s 120(1)(b), the provisions of section 122 may only be invoked.
The above judgment is very good as it has decided a technical issue with comprehensive discussion.
Therefore, if there is any notice issued u/s 221 intending to amend any deemed assessment u/s 120, the same may be requested to be withdrawn in light of order bearing number “ITA 565-A/IB/2015 dated February 17, 2020”.
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