2023 (2) TMI 1227 - HC - Income Tax

Addition on account of an arithmetical mistake - whether the Tribunal was justified in reversing the order passed by CIT (A) and restoring the addition made in the assessment excluding the case of the assessee that it was on account of an arithmetical mistake - HELD THAT - Tribunal failed to note that this issue arose during the assessment proceedings itself and the assessing officer had issued notice dated 4th December, 2006 for which reply was given on 18th December, 2006 by the assessee which was rejected by the assessing officer while completing the assessment. Therefore, to state that merely because the revised tax audit report was submitted later when the appeal was pending before the CIT(A), may not be a ground on which the learned Tribunal could have taken a different view. Tribunal has observed that the assessee could not point out any mistake as claimed in the tax audit report during the course of the assessment proceedings. This also is factually incorrect as mentioned by us above as the matter was brought to the notice of the assessing officer during the course of the assessment. Tribunal states that the copy of the remand report submitted by the AO could not be produced by both parties. Tribunal failed to note that the assessee was not furnished with the copy of the remand report called for by the CIT(A) but in the order passed by the CIT(A) the said report has been extracted in page 5 of the order passed by the CIT(A). In any event, the assessee was able to establish the factual position as to how it was a genuine arithmetical mistake. In the absence of any material to show that it was not a genuine arithmetical mistake, the tribunal erred in non-suiting the assessee on the ground that the mistake ought to have been detected earlier by the assessee itself. Thus, we are of the view that the conclusion arrived at by the tribunal for setting aside the order passed by the CIT(A)is incorrect as the learned tribunal has ignored the factual position which was available on record. Assessee appeal allowed.

Summary

Issues:
- Justification of Tribunal's decision to reverse Commissioner of Income Tax (Appeals) order and restore addition made in assessment due to arithmetical mistake.

Analysis:
The case involved an appeal by the assessee against the Income Tax Appellate Tribunal's order for the assessment year 2004-05. The substantial question of law was whether the Tribunal was right in reversing the order of the Commissioner of Income Tax (Appeals) and restoring the addition of Rs. 1,55,67,517 made in the assessment on account of an arithmetical mistake. The assessee argued that the mistake was due to a totaling error in the quantity of finished leather stock. The Assessing Officer had issued a notice questioning the closing stock, to which the assessee explained the arithmetical mistake. The Commissioner of Income Tax (Appeals) accepted the explanation based on the rectified Tax Audit Report and auditor's certificate provided by the assessee, but the Tribunal reversed this decision.

The High Court found that the Tribunal's decision was flawed. The Tribunal had erred in not considering the revised Tax Audit Report submitted by the assessee, which demonstrated the arithmetical mistake. The Court noted that the issue of the mistake was raised during the assessment proceedings, and the assessee had provided a timely explanation. The Tribunal's observation that the mistake should have been detected earlier was deemed incorrect. Additionally, the Court criticized the Tribunal for not acknowledging the factual position supported by the records. The Court concluded that the Tribunal's decision to set aside the Commissioner of Income Tax (Appeals) order was incorrect, and the assessee's appeal was allowed. Consequently, the Commissioner of Income Tax (Appeals) order was restored, and the substantial question of law was answered in favor of the assessee.

In summary, the High Court held that the Tribunal's decision to reverse the Commissioner of Income Tax (Appeals) order and restore the addition made in the assessment due to an arithmetical mistake was incorrect. The Court found that the assessee had provided a valid explanation supported by the rectified Tax Audit Report and auditor's certificate, and the mistake was genuine. The Tribunal's failure to consider the timely explanation and factual position led to the Court allowing the assessee's appeal and restoring the Commissioner of Income Tax (Appeals) order.