Law: Income Tax Ordinance, 2001

Section: 113,113(1),113(3),221,

(a) Income Tax Ordinance (XLIX of 2001)--- ----Ss.221 & 113---Rectification of mistake---Scope---Minimum tax on certain transaction---Gross loss---Order under S.221 of the Income Tax Ordinance, 2001 was passed to charge tax under S.113 of the Income Tax Ordinance, 2001 on declared net turnover---Taxpayer contended that it was not patent mistake apparent from the record rather levy of the minimum tax under S.113 involved interpretation of provisions of law, hence was beyond the scope of rectification---Validity---Failure of application of any provision of law fell under the purview of rectification---Scope of rectification could not be limited to arithmetical error and any mistake of law which was glaring and floating on the surface---Taxpayer could not take refuge to avoid application of law merely complicating or protracting the legal issue---Neither documents were called nor fishing enquiries were made prior to the order under S.221 of the Income Tax Ordinance, 2001---Accounting records accompanying the return were consulted to apply the relevant legal provisions---Departmental action to invoke the provisions of S.221 of the Income Tax Ordinance, 2001 was the correct treatment---Appeal on this issue was rejected by the Appellate Tribunal. PLD 1999 Lah. 446 ref. (b) Income Tax--- ----"Gross profit"---Meanings of---Expenses---Base line---Illustration---"Gross profit" means gross income as reduced by all the expenses to acquire, produce, procure, convert, manufacture, import or even the input of human services or machine hours---After producing and possessing (including constructive possession), its further delivery for the purpose of earning would involve indirect expenses---Base line to identify expenses capable of selling and all indirect expenses would be incurred for the purpose of selling till the product reaches the consumer or buyer---Same principle was applied to distinguish and charge carriage inward (direct) carriage outward (indirect), wages (direct), salaries (indirect), import expenses (direct), export freight (indirect), depreciation on production machines (direct), depreciation on selling machines (fork lift) (indirect) and so on. (c) Income…

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