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Issues involved:
The judgment involves the issue of rectification petition under section 154 of the Income Tax Act, 1961 for correcting an erroneous declaration made by the assessee in the return of income, leading to a dispute regarding the computation of income and tax liability. Summary: The assessee, a software development company, erroneously entered an amount under income from business or profession in its return of income, resulting in an increase in gross total income. The Assessing Officer (AO) processed the return based on this erroneous declaration, leading to a tax demand under normal provisions. The assessee filed a rectification petition under section 154, which was rejected by the AO, who also initiated penalty proceedings. The Commissioner of Income Tax (Appeals) upheld the rejection of the rectification petition. The matter was then appealed to the Appellate Tribunal. The Tribunal observed that the error in the return was an arithmetical one, as the assessee manually entered a wrong numerical value, causing the income to be wrongly computed. The Tribunal noted that the mistake was apparent from the return and could be rectified under section 154. Referring to a previous Tribunal decision, the Tribunal allowed the rectification petition and directed the AO to adopt the income from business as 'nil'. Consequently, the appeal of the assessee was allowed. In conclusion, the Tribunal held that the erroneous declaration made by the assessee in the return of income, which led to a higher tax liability, was a clear arithmetical error that could be rectified under section 154. The Tribunal directed the AO to consider the income from business as 'nil', thereby allowing the appeal of the assessee.
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