2003 (3) TMI 73 - HC - Income Tax

Rectification order rectification of mistakes - depreciation - mistake found on the face of the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. - The writ petition is allowed.

Summary

Issues:
Challenging order passed by Commissioner of Income-tax regarding withdrawal of depreciation claimed under section 32(1) of the Act. Interpretation of section 154 for rectification of mistakes in assessment. Disputing the withdrawal of depreciation as a mistake under section 154. Examining the discretion exercised by the authorities in withdrawing the depreciation. Application of legal principles from judgments to determine if the withdrawal of depreciation qualifies as a mistake under section 154.

Analysis:
The petitioner challenged an order withdrawing the depreciation granted on a motor vehicle claimed under section 32(1) of the Income Tax Act for the assessment year 1994-95. The initial claim for depreciation was accepted during regular assessment, but a notice under section 154 was issued proposing to rectify the assessment mode under section 143(3) to withdraw the depreciation. The petitioner objected to this withdrawal, arguing that section 154 is meant to correct mistakes and not for reassessing the entire case. The Department contended that the withdrawal was based on apparent mistakes in the assessment.

The court analyzed the application of section 154 for rectification of mistakes by the Income-tax Officer. It noted that the authorities were attempting to rectify a mistake under section 154 by withdrawing the depreciation claimed by the petitioner. The court examined the legal precedents set by judgments such as T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 and CIT v. South India Bank Ltd. [2001] 249 ITR 304 to define what constitutes a mistake apparent from the record. It emphasized that a debatable point of law or a difference of opinion among judges does not qualify as a mistake under section 154.

The court further referred to a Division Bench ruling in M.D. Narayan v. Agrl. ITO [1974] 95 ITR 452, which set aside a rectification order in a similar situation where two views were possible on a question. In the present case, the court concluded that the withdrawal of depreciation under the guise of a mistake was an attempt to set aside one view of the assessing authority, which does not align with the criteria for rectification under section 154. Consequently, the court set aside the impugned orders, allowing the writ petition and directing each party to bear their respective costs.