2016 (2) TMI 709 - HC - Income Tax

Applicability of Section 154 - Rectification of mistake - permissibility of computation of deduction under Section 80HHC - Held that - No error can be said to be apparent on the face of the record when it is not manifest or self-evident but requires an examination or argument to establish it. Admittedly the issue involved pertains to permissibility of computation of deduction under Section 80HHC of the Act by excluding 90% of the gross lease income from the business profits. The issue admittedly involves closer scrutinity/ examination of facts and application of law to the facts stated supra and therefore the mistake cannot be construed to be apparent on the face of the record. Therefore the Assessing Officer has no jurisdiction to invoke Section 154 of the Act while making the assessment order dated 27.06.2001. Therefore the order by the Tribunal upholding the same has to be set aside.

Summary

Issues:
Applicability of Section 154 of the Income Tax Act in rectifying a mistake apparent from the record.

Analysis:
The appellant, a company, filed a return of income for the Assessment Year 1998-1999, declaring an income. The Assessing Officer included 'lease income return' as 'income from business' but omitted to reduce 90% of the gross lease income from the business income for calculating eligible business profits under Section 80HHC of the Act. A notice under Section 154 was issued to rectify this error. The Assessing Officer revised the assessment order, excluding 90% of the gross lease income based on the Commissioner's decision for the earlier year. The appellant appealed to the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, challenging the validity of the order under Section 154 of the Act. The Tribunal dismissed the appeal, leading to the current appeal.

The main issue raised in this appeal is the applicability of Section 154 of the Act. Section 154 allows rectification of any mistake apparent from the record by an Income Tax Authority. For Section 154 to apply, there must be a mistake that is obvious, clear, and patent on the face of the record. The Tribunal, being bound by the Act, can rectify a mistake under Section 154 only if the conditions are met.

The appellant argued that the issue involves complex facts and law regarding the computation of deduction under Section 80HHC, making it unsuitable for rectification under Section 154. The Revenue contended that the mistake was apparent and justified the rectification. Citing legal precedents, it was established that a debatable issue cannot be considered a mistake apparent from the record. The issue of excluding 90% of the gross lease income requires detailed scrutiny, indicating that the mistake was not apparent. Therefore, the Assessing Officer lacked jurisdiction to invoke Section 154.

The Court held that the mistake in this case was not apparent on the face of the record, as it required examination and argument to establish. The Tribunal's decision upholding the rectification under Section 154 was set aside, and the Tax Case Appeal was allowed. The order passed by the Tribunal was overturned.

In conclusion, the judgment focused on the interpretation and application of Section 154 of the Income Tax Act in rectifying mistakes apparent from the record, emphasizing the need for mistakes to be clear and evident without requiring extensive reasoning or debate.