2008 (3) TMI 253 - HC - Income Tax

Omission of the assessee to claim deduction on account of payment of the salary to its employees in the income tax return or during the assessment - appellant filed application u/s 154 claiming that omission to claim the expenditure was a mistake apparent from record- assessee failed to show that all the material required for satisfying the conditions requisite for the grant of relief u/s 84, was completed - therefore, it cannot be said that Officer committed a mistake apparent from the record

Summary

Issues:
1. Interpretation of Section 154 of the Income-Tax Act, 1961 regarding rectification of mistakes in assessment.
2. Claiming deductions in the return of income or during assessment proceedings.
3. Application of legal principles from previous judgments to the current case.

Issue 1: Interpretation of Section 154 of the Income-Tax Act, 1961
The appellant filed an appeal under Section 260-A against an order by the Income-Tax Appellate Tribunal, challenging the assessment for the year 1998-99. The appellant had made a provision for arrears of salary in the previous year but failed to claim it as an expense in the return for the current year. The Assessing Officer rejected the rectification application under Section 154, stating that the deduction was not claimed during assessment proceedings or in the return. The Commissioner of Income-Tax accepted the appeal, but the revenue appealed to the Tribunal, arguing that without a claim in the return or revised return, no deduction should be allowed. The Tribunal held that as the claim was not made in the return, there was no mistake apparent from the record to rectify under Section 154.

Issue 2: Claiming Deductions in the Return of Income
The appellant contended that the failure to claim the deduction for salary payment in the return was a mistake apparent from the record and should be rectified under Section 154. The court found that the appellant did not claim the deduction in the original return or during assessment proceedings, nor filed a revised return. Referring to the decision in Goetze (India) Ltd. v. CIT, it was established that deductions must be claimed in the return or revised return for allowance. The court emphasized that the failure to claim the deduction in the return or during assessment proceedings precluded rectification under Section 154.

Issue 3: Application of Legal Principles from Previous Judgments
The appellant relied on judgments like Commissioner of Income-Tax v. Smt. Aruna Luthra and Anchor Pressing (P) Ltd. v. Commissioner of Income-Tax to support the claim for rectification under Section 154. However, the court distinguished these cases from the current scenario. In Commissioner of Income Tax v. Smt. Aruna Luthra, the issue revolved around rectification based on a subsequent court judgment, unlike the present case of failing to claim a deduction in the return. Similarly, the reliance on Anchor Pressing (P) Ltd. v. Commissioner of Income-Tax was deemed misplaced as the appellant had not made a claim for relief under the Income Tax Act. The court reiterated that the failure to claim a deduction in the return or during assessment proceedings did not constitute a mistake apparent from the record for rectification under Section 154.

In conclusion, the court dismissed the appeal, stating that the failure to claim the deduction in the return or during assessment proceedings did not amount to a mistake apparent from the record for rectification under Section 154. The court upheld the principle that deductions must be claimed in the return or revised return for allowance, as established in previous judgments.