Legal Principle & Question Decided

Ruling Summary: This decision was rendered by the Lahore High Court on 2021-12-31, officially reported as 2025 PTD 77. In this matter between M/s Kot Addu Power Company Limited and The Commissioner Inland JUDGMENT, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.

Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.

Full Judgment Text & Judicial Ruling

Court Name: Lahore High Court Judge(s): Muhammad Sajid Mehmood Sethi, Asim Hafeez Title:M/s Kot Addu Power Company Limited vs The Commissioner Inland

JUDGMENT

Reported As: 2022 LHC 3627, 2025 PTD 77 Result: Application Dismissed Judgment JUDGMENT ASIM HAFEEZ, J. This and connected reference applications, bearing ITRs No.225, 226, 227, 228 and 229 of 2015, raise common questions of law and are hereby decided, through this single decision. 2. Pertinently mentioned out that reference applications were previously decided by this Court vide order dated 12.11.2018 passed in ITR No.219/2015, in terms whereof matters were remanded to the Appellate Tribunal for determination of the proceedings, wherein revenue department has sought rectifica tion of its earlier order . Applicant dissatisfied, approached Honourable Supreme Court of Pakistan where Civil petitions were heard, and with concurrence of the parties allowed vide order dated 09.08.2019, and matter was remanded for decision afresh, after addressing the questions of law involved. 3. Matters relate to the Tax years from 2003 to 2008. 4. Reiterated, at the cost of repetition, that through these reference applications order dated 14.03.2012 of the Appellate Tribunal (original order) was not assailed but the subsequent order dated 29.06.2015 (rectified order), whereby Appellate Tribunal had allowed miscellaneous application(s), filed by the department, in exercise of rectification jurisdiction under section 221 of Income Tax Ordinance, 2001 ("Ordi nance 2001"). Maintainability of these reference applications, impugning the order passed on the miscellaneous applications, is not disputed in terms of ratio settled in the case of "Messrs HONG KONG CHINESE REST AURANT , MAIN BOULEV ARD GULBERG, LAHORE v. ASSIST ANT COMMISSIONER OF INCOME TAX, CIRCLE 6, LAHORE and another" (2002 PTD 1878 ), on the principle of merger of rectified order with original order . 5. Following questions embody the legal issue and are common to all reference applications, which read as, "i) Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal can lawfully revisit, review or recall its order under the garb of rectification in the terms of section 221 of the Income Tax Ordinance,

---

## Page 2

2001? ii) Whether on the facts and in the circumstances of the case, the learned Tribunal on the basis of judgments of the superior courts, which were subsequent in time, could lawfully rectify or recall its earlier order? iii) Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal in view of the specific provision as contained in section 221 of the Income Tax Ordinance, 2001 is not bestowed with the jurisdiction to recall its earlier order in the garb of exercise of powers of rectification, which shall tantamount to reviewing of earlier order , in the light of law laid down by the Hon'ble Apex Court in cases reported as 2007 PTD 967, 1992 SCMR 687 , 2000 PTD 306 and 2003 SCMR 401? iv) Whether on the facts and in the circumstances of the case, the order dated 29th June, 2015 passed by the learned T ribunal on application by revenue is ab-initio void and illegal? 6. Before taking-up the submissions, it is expedient to reproduce texts of the original and rectified order , for facility of reference, Text of original Order of 14.03.2012 "Since we have declared the proceedings under Section 122 (5A) as void ab initio and order passed unlawful, there is no need to adjudicate the grounds on merit regarding the allowability of deprecia tion allowance. All the six orders passed under section 122(5A) are hereby declared null and void". Text of rectified Order of 29.06.2015 "6. We have heard the argument of both the rival parties and perused the relevant record available on file. On the issue of dispute, the larger bench of the Appellate Tribunal Inland Revenue in the case of Prima Commercial Bank vs. Commissioner Income Tax consisting of 5 members has decided the issue by holding that after delegation of power by Commissioner to Additional Commissioner , the later is competent to pass the order under section 122(5A) of the Ordinance 2001. Subsequently , vide Misc. Application in the same case, seven members bench has once again held that Additional Commissioner is authorized to pass the order under the provision of section 122(5A). Similarly on the identical issue the higher courts of Karachi, Lahore, Peshawar have also held like manner of the larger bench consisting of five members and M. A. (Rectification) of Prime Commercial Bank Limited consisting of seven members bench at Lahore. 7. Similarly the Hon'ble Islamabad High Court has also accorded the similar treatment in the case of Mobile Communication (Pvt.) Ltd., in Civil Appeal filed by the taxpayer before the Hon'ble Apex Court of the country with the consent of both the parties has remanded back the case for the reason recorded as under: "Learned counsel for the petitioner agreed for disposal of the listed petitions if the observations are made, the petitioner shall file reply to the show cause notices before the Commissioner , Income Tax, raising all legal objections available to him and the legal objections shall be disposed of preferably before proceeding on merit and thereafter if need be merits of the case shall also be considered. 2. Petition are disposed of accordingly". 8. In view of the foregoing we are of the considered opinion that through the impugned order the Tribunal has committed a mistake by holding that Additional Commissioner was not competent to make such an order u/s 122(5A) of the Ordinance. The mistake is so apparent and obvious which is rectifiable under the provisions of section 221 of the Income Tax Ordinance, 2001. Therefore, doing so the order passed vide ITA Nos. 415 to 419 & 815/LB/2009 for the tax years 2003 to 2008 dated 14-03-2012 is recalled which will result the acceptance of Miscellaneous Applications on behalf of department." [Emphasis supplied] 7. Brief facts are that Appellate Tribunal through original order , simplicitor , and without adverting to the merits of the appeal, annulled the amended assessment order by the Additional Commissioner , purportedly passed in exercise of powers under sub-section (5A) of section 122 of the Income Tax Ordinance, 2001 ('section 122(5A) of the Ordinance, 2001) on the premise that Additional Commissioner lacked jurisdiction to amend the deemed assessment order under section 122(5A) of the Ordinance, 2001. Original order was rectified upon miscellaneous application(s) filed by revenue department, by invoking powers extended under section 221 of the Ordinance, 2001. Appellate Tribunal allowed application(s) and rectified original order , declaring that earlier declaration of

---

## Page 3

absence of jurisdiction of Additional Commissioner - to amend assessment in terms of order under section 122(5A) of the Ordinance, 2001 - was a mistake apparent from the record. Matters are adjudicated upon in this backdrop. 8. Indubitably , the central controversy regarding alleged exercise of jurisdiction by Additional Commissioner under section 122(1) of the Ordinance, 2001, read with section 122(5A), of the Ordinance, was dispositively a settled question of law - wherein constitutional courts of the country held that Additional Commissioner , in exercise of its delegated powers / authority , in terms of section 210 of the Ordinance, is competent to re-visit the deemed assessment and amend it under section 122(1)/122(5A) of the Ordinance. Appellate Tribunal rectified its original order by placing reliance on the judicial precedents - also referring to a decision of the larger Bench of the Appellate Tribunal. Controversy , in the context of the facts narrated and judicial pronouncements, calls for interpretation of the scope, extent, and limits of rectification jurisdiction, envisaged under section 221 of Ordinance, 2001, which provision of law is reproduced hereunder for convenience, "Section 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 T ribunal, the Commissioner . [(1A) The Commissioner may, by an order in writing, amend any order passed unde r the repealed Ordinance by the Deputy Commissioner , or an Income Tax Panel, as defined in section 2 of the repealed Ordinance to rectify any mistake apparent from the record on his own motion or any mistake brought to his notice by a taxpayer and the provisions of sub-section (2), sub-section (3) and sub-section (4) shall apply in like manner as these apply to an order under sub-section (1).] (2) No order under sub-section (1) which has the effect of increasing an assessment, reducing a refund or otherwise applying adversely to the taxpayer shall be made unless the taxpayer has been given a reasonable opportunity of being heard. (3) Where a mistake apparent on the record is brought to the notice of the Commissioner [or] Commissioner (Appeals) [ ], as the case may be, and no order has been made under sub-section (1) before the expiration of the financial year next following the date on which the mistake was brought to their notice, the mistake shall be treated as rectified and all the provisions of this Ordinance shall have effect accordingly . (4) No order under sub-section (1) may be made after five years from the date of the order sought to be rectified." 9. Submissions narrated ; Primary contention of the counsels for the applicant is that Appellate Tribunal exceeded its jurisdiction in the guise of section 221 of Ordinance 2001, which jurisdiction cannot be stretched to review the original order , that too upon application of mind. Learned counsels further submit that original order of the Tribunal cannot be annulled / modified on the pretext of a subsequent decision of the constitutional courts, when said decisions were not available, at the time of passing of original order , hence, no question of any mistake apparent from the record, in the first place, arose. Further submits that rectification jurisdiction cannot be equated with or treated as substitute for the jurisdiction, conferred upon this Court through filing of reference applications for the determination of questions of law. Adds that original order , as evident from its nature, could be assailed by resorting to remedy of filing reference application, provided under section 133 of the Ordinance, 2001. Learned counsels stated that rectification jurisdiction cannot be invoked to upset the finality attained by the original order , which can only be challenged by filing of reference application, within the limitation prescribed . And limitation in this case had lapsed before the filing of applications. Adds that Tribunal, after passing of original order , became functus officio, which lacked powers to re-visit its original order , once passed and remedy of reference was not availed. Submits that there was no mistake apparent from the record, and Appellate Tribunal erred in law while assuming and exercising powers under section 221 of the Ordinance, which otherwise acted illega lly by giving retrospective effect to the decisionson the subject matter controversy - jurisdiction of the Additional Commissioner to amend the assessment(s). Learned counsel placed reliance on decisions in the cases of "COMMISSIONER OF INCOME TAX, PESHA WAR v. Messrs GUL COO KING OIL AND VEGET ABLE GHEE (PVT.) LTD. and 6 others" (2008 PTD 169), "COMMISSIONER OF INCOME TAX and another v. Messrs PAKIST AN PETROLEUM LTD. and 2

---

## Page 4

others" (2012 PTD 501), "PAKIST AN TOBBACO COMP ANY LTD., ISLAMBAD v. ADDITIONAL COMMISSIONER (UNIT -II), TAXATION OFFICER, LARGE TAX PAYERS UNIT , ISLAMABAD" (2013 PTD 747), "COMMISSIONER OF INCOME TAX, KARACHI v. ABDUL GHANI" (2007 PTD 967), "COMMISSIIONER OF INCOME TAX, KARACHI v. Messrs SHADMAN COTT ON MILLS LTD., KARACHI through Director" (2008 SCMR 204), "ISLAMUDDIN AND 3 others v. THE INCOME-T AX OFFICER and 4 others" (2000 PTD 306), "COMMISSIIONER OF INCOME TAX/ WEAL TH TAX, MUL TAN v. Messrs MOVE (PVT .) LTD., MUL TAN" (2013 PTD 2040 ), "THE COMMISSIONER INLAND REVENUE, LTU, LAHORE v. KOHNOOR ENERGY LTD., LAHORE" (2019 PTD (Trib.) 1953 ), "Messrs NISHA T TALKIES, KARACHI V. THE INCOME TAX OFFICER etc." (1989 PTD 513), "INCOME TAX OFFICER, CENTRAL CIRCLE II, KARACHI AND ANOTHER v. CEMENT AGENCIES LTD." (PLD 1969 SC 322), "COMMISSIONER OF INCOME TAX v. Messrs BASHIR JAMIL & BROTHERS LTD." (2002 PTD 557), "COMMISSIONER INLAND REVENUE (ZONE-III), L.T.LU., ISLAMABAD v. Messrs OIL AND GAS DEVELOPMENT CO. LTD." (2016 PTD 2727 ), "W.P. No.177 OF 2008 M/s NISHA T CHUNIAN LTD. v. PROVINCE OF PUNJ AB, ETC.", "FAWAD AHMED v. ELEC TION APPELLA TE TRIBUNAL, RAWALPINDI and others" (PLD 2018 Lahore 742) and "COMMISSIONER OF INCOME-T AX COMP ANY'S II, KARACHI v . Messrs NA TIONAL FOOD LABORA TORIES" ( 1992 SCMR 687 ), 10. Conversely , learned counsel for the department submits that the order passed by the Appellate Tribunal squarely falls within the ambit of jurisdiction extended under section 221 of Ordinance 2001, who relied upon the ratio settled in the case of "Pak Arab Refinery Limited v. Commissioner of Income Tax / Wealth Tax (Appeals), Zone-I, Lahore" (PTR No.545 of 2006). 11. In rebuttal, learned counsel for the applicant submits that the case referred is though distinguishable on facts still the ratio settled therein supports applicant' s case and the original order is not rectifiable in purported exercise of rectification jurisdiction. Determination by the Court. 12. Before dilating upon the question of retrospective or prospective application of the judgments of the jurisdictional / constitutional courts - settling the issue of jurisdiction of the Additional Commissioner to amend assessment under section 122(1)/122(5A) of the Ordinance, 2001 - we consider it appropriate to highlight some critical facts in the context of relevant timelines. The question of legality of the jurisdiction exercised by the Additional Commissioner was not the case of first impression before the Appellate Tribunal, when original order dated 14.03.2012 was passed. Appellate Tribunal had earlier encountered similar question and decided it vide decision in ITA No.735/IB of 2010 vide order dated 09th August 2010 - reported as 2010 PTD (Trib.) 2254 . And even before said order of the Appellate Tribunal, Hon'ble Islamabad High Court had settled controversy vide judgment in the case of "PAKIST AN MOBILE COMMUNICA TION LTD. v. COMMISISONER OF INCOM E TAX AUDIT DIVISION and 5 others" (2010 PTD 1506 ), passed in exercise of constitutional jurisdiction, decided on 16.07.2009. And thereafter subject matter controversy - assumption and exercise of jurisdiction by Additional Commissioner - was numerously affirmed through variously passed decisions by the constitutional courts, including decision by the Apex Court while deciding Civil Appeals bearing No.1664-1665 of 2009 vide order of 11.09.2009 . Series of judgments were passed on this issue, which need not to be recapitulated. Hence, the submission that decisions settling issue of jurisdiction of the Additional Commissioner were made after the passing of original order is misconceived. Now we take up the issue of the scope and extent of the rectification jurisdiction. 13. Section 221 of the Ordinance, 2001 is successor to section 156 of erstwhil e Income Tax Ordinance, 1979 (Ordinance, 1979). Hundreds of judgments are reported in law journals, periodical digests, and otherwise accessible through online search engines, whereby section 221 of the Ordinance, 2001, section 156 of Ordinance, 1979 and section 35 of erstwhile Income Tax Act 1922, were invariably interpreted. There is no cavil that broader principles for exercise of rectification jurisdiction are settled, which defined princi ples are followed, invoked, and applied in the context of facts of each case. To bring broader the principles into sharper focus, reference is made to the ratio settled in the case of "COMMISSIONER OF INCOME-T AX COMP ANY'S II, KARACHI v. Messrs NATIONAL FOOD LABORA TORIES" ( 1992 SCMR 687 ) and relevant portion whereof is reproduced hereunder ,

---

## Page 5

"Section 35 of the repealed Income-tax Act, 1922, hereinafter referred to as 'The Act' confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercis ed Suo Motu or if it is brought to the notice by any assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy , investigates into the matter , reassesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order , then it will not amount to 'rectification' of the order . Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under section 35. In this regard reference can be made to Shaikh Muhammad Iftikharul Haq v. Income-tax Officer, Bahawalpur , PLD 1966 SC 524) and Pakistan River Steamer Limited v. Commissioner of Income-tax, 1971 PTD 204. In the present case the mistake pointed out by the petitioner was not of a nature to attract section 35 and, therefore, the High Court has correctly answered the first question in the negative". 14. We are called upon to interpret section 221 of the Ordinance in the context of specific question, that whether recalling of original order , on the premise of non-consideration of a decision of the jurisdictional court(s), relating to the exercise of jurisdiction of Additional Commissioner , can be construed as 'mistake apparent from the record'. We will also deal with the ancillary objections that whether Appellate Tribunal, upon passing of original order , became infructuous and whether finality , attributed to the original order , cannot be disturbed in the guise of rectification jurisdiction. It is apparent that similar issue came up for adjudication before the Supreme Court of India in the case of "Assistant Commissioner , Income Tax, Rajkot v. Saurashtra Kutch Stock Exchange Ltd." ([2008]305 ITR 227(SC) = (2008)14 SCC 171), relevant portion whereof is reproduced, 41. A similar question came up for consideration before the High Court of Gujrat in Suhrid Geigy Limited v. Commissioner of Surtax, Gujarat MANU/GJ/0074/1998 : [1999]237ITR834 (Guj). It was held by the Division Bench of the High Court that if the point is covered by a decision of the Jurisdictional Court rendered prior or even subsequent to the order of rectification, it could be said to be "mistake apparent from the record" under Section 254(2) of the Act and could be corrected by the Tribunal. 42. In our judgment, it is also well - settled that a judicial decision acts retrospectively . According to Blackstonian theory , it is not the function of the Court to pronounce a 'new rule' but to maintain and expound the 'old one'. In other words, Judges do not make law, they only discover or find the correct law. The law has always been the same. If a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively . To put it differently , even where an earlier decision of the Court operated for quite some time, the decision rendered later on would have retrospective effect clarifying the legal position which was earlier not correctly understood. 43. Salmond in his well-known work states; The theory of case law is that a judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was law. Hence any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicatae or accounts that have been settled in the meantime. 44. It is no doubt true that after a historic decision in Golak Nath v. Union of India MANU/SC/0029/1967; [1967]2SCR762 , this Court has accepted the doctrine of 'prospective overruling'. It is based on the philosophy: The past cannot always be erased by a new judicial declaration/ It may , however , be stated that this is an exception to the general rule of the doctrine of precedent. 45. Rectification of an order stems from the fundamental principle that justice is above all. It is exercised to remove the error and to disturb the finality . 46. In S. Nagraj and Ors.l v . State of Karnataka MANU/SC/0797/1993 (1994) ILLJ851SC, Sahai, J. Stated;

---

## Page 6

Justice is a virtue which transcends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the Court should not be prejudicial to anyone. Rule of stare decisis is adhered for consistency but it is not as inflexible in Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher courts is founded on equity and fairness. If the Court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mista ke is as valid reason to recall an order . Difference lies in the nature of mistake and scope of rectification, depend ing on if it is of fact or law. But the root from which the power flows is the anxiety to avoid injustice. It is either statutory or inherent. The latter is available where the mistake is of the Court. In Administrative Law, the scope is still wider. Technicalities apart if the Court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order . 47. In the present case, according to the assessee, the Tribunal decided the matter on October 27, 2000. Hiralal Bhagwati was decided few months prior to that decision, but it was not brought to the attention of the Tribunal. In our opinion, in the circumstances, the Tribunal has not committed any error of law or of jurisdiction in exercising power under Sub-section (2) of Section 254 of the Act and in rectifying "mistake apparent from the record". Since no error was committed by the Tribunal in rectifying the mistake, the High Court was not wrong in confirming the said order . Both the orders, therefore, in our opinion, are strictly in consonance with law and no interference is called for . [Emphasis Supplied] 15. In another case of "M.K. Venkatachalam, I.T.O. and another v. Bombay Dyeing and Mfg. Co. Ltd." (AIR 1958 SC 875), involving construction of section 35 of the Income Tax Act 1922, the effect of amendment in law, retrospectively , was considered by Supreme Court of India in the context of scope of order of rectification, regarding completed assessment, wher ein order of the Bombay High Court was set-aside and exercise of rectification jurisdiction was upheld. It is appropriate to highlight relevant findings recorded in said case, which read as, 6. "It is in the light of this position that the extent of the Income-tax Officer's power under section 35 to rectify mistakes apparent from the record must be determined; and in doing so, the scope and effect of the expression "mistake apparent from the record" has to be ascertained. At the time when the Income-tax Officer applied his mind to the question of rectifying the alleg ed mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from April 1, 1952 . If that be the true position then the order which he made giving credit to the respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima facie it may appear somewhat strange that an order which was good and valid when it was made should be treated as patently invalid…

Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.

Related Legal Research & Directories

• Browse all judgments from Lahore High Court
• Browse Pakistani court decisions from the year 2021
• Search Pakistani statutes: Constitution of Pakistan 1973, PPC, CrPC, CPC & Family Laws
• Analyze this case with Al Wakeelo AI Legal Assistant