Law: Income Tax Ordinance, 2001

Section: 120,120(1),122(2),170,170(3),221

INCOME TAX ORDINANCE, 2001 (XLIX OF 2001)---Sections: 120, 120(1), 122(2), 170, 170(3) ,  221 - Rectification of mistakes - Refunds - Return deemed to be assessment order u/s 120(1) of Ordinance, 2001 - Adjustment of unverified refund of previous year towards the current years, tax liability - Notice issued by the OIR u/s 221 - Passing of order u/s 221, disallowing adjustment of previous year - Rejection of appeal by the CIR(A) - Validity - Challenge to - FACTS Brief facts necessary for disposal of appeal are that the taxpayer is a private limited company engaged in production and sale of poultry feed. Return of total income for tax year 2019 e-filed by the taxpayer was deemed to be assessment order in terms of section 120(1) of the Income Tax Ordinance, 2001 (‘the Ordinance’). Later, the Officer of Inland Revenue (OIR) observed that the taxpayer had wrongly adjusted unverified refund of previous year amounting to Rs.25,731,483 towards the current year’s tax liability. This was termed as mistake warranting rectification under section 221. The OIR, issued notice under section 221 requiring the appellant to explain as to why said refund adjustment may not be disallowed. No reply was furnished by the taxpayer. The OIR passed the impugned order under section 221 of the Ordinance by disallowing adjustment of previous year refund at Rs.25,731,483 against tax liability for tax year 2019. Being aggrieved, the taxpayer filed appeal before the CIR (Appeals- II) Multan who vide appellate order dated 27.01.2022 rejected the appeal and confirmed the impugned treatment for the reasons recorded therein. The taxpayer being dissatisfied has come up in further appeal before this forum on grounds as set out in Memorandum of appeal. ARGUMENTS The learned A.R of the appellant agitated the treatment accorded by the lower fora on multiple grounds. It was contended that the rectification order as well as appellate order were illegal as the adjustment was as per law/rules as well as established past practice. It was further argued that the impugned order is contrary to the ratio settled by Lahore High Court in 2015 LHC 226 in PTR No.15/2012 titled CIR vs. Sheikh Manzoor Ahmad. It…

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