2016 (7) TMI 239 - AT - Income Tax

Rectification of mistake - determination of taxable income - Held that - A perusal of the order dated 11.9.2014, it reveals that the AO has observed that income of the assessee was wrongly recomputed at ₹ 21,091/-. In his understanding it was an apparent error. But what is the basis to arrive at this belief is not discernible from the impugned order. When the ITAT has set aside the issue for fresh adjudication, the AO was supposed to pass an assessment order. The order dated 28.3.2013 can be equated to an order by virtue of that taxes could be recovered from the assessee on determination of taxable income at ₹ 21,0921/-. How the AO has arrived at a revised income of ₹ 4,64,792/- by recording that an apparent mistake had occurred in the order dated 28.3.2013 is not discernible. We could appreciate the case of the AO, had he framed an assessment order and determined the taxable income at ₹ 4,64,792/-, but at the end of the order, in the computation, he committed a mistake by taking income at ₹ 21,091/-. But that is not the case. We have extracted complete orders passed by the AO in pursuance of ITAT s order. We have extracted the finding of the Tribunal while setting aside the original assessment order. Therefore, there cannot be any rectification order under section 154 passed on 11.9.2014. - Decided in favour of assessee

Summary

Issues:
Appeal against rectification order upholding by CIT(A) - Recomputation of total assessed income - Rectification order under section 154 of the Income Tax Act - Challenge to rectification order before CIT(A) - AO's failure to point out apparent error - Basis of revised income determination - Power of rectification under section 154 - Apparent error in the order dated 28.3.2013 - AO's belief on apparent error - AO's revised income determination basis - Tribunal's finding while setting aside original assessment order - Quashing of impugned order.

Issue 1: Appeal against Rectification Order Upholding by CIT(A):
The assessee appealed against the order of the ld.CIT(A) dated 8.10.2015, where the solitary grievance was the upholding of the rectification order passed by the AO on 11.9.2014. The AO had initially issued a notice under section 148 of the Income Tax Act due to the assessee not filing any return of income for the assessment year 2003-04. Subsequently, the AO passed an assessment order under section 143(3) r.w.s. 147, determining the total taxable income of the assessee at &8377; 69,76,391. The matter was challenged before the CIT(A) and then the Tribunal, which set aside the issue to the file of the AO, directing the assessee to furnish all documents called for. The AO then passed an order giving effect to the ITAT's order, revising the total assessed income to &8377; 21,091. This order was further rectified under section 154 of the Act, leading to a revised total income of &8377; 4,64,792.

Issue 2: Challenge to Rectification Order Before CIT(A):
The assessee contended before the CIT(A) that the AO failed to point out any apparent error in the order dated 28.3.2013, questioning the basis for revising the income to &8377; 4,64,792. The ld.DR relied on the orders of the Revenue authorities below. The power of rectification under section 154 can only be exercised for an obvious and patent mistake apparent from the record, not requiring lengthy reasoning to establish.

Issue 3: Tribunal's Finding While Setting Aside Original Assessment Order:
Upon careful consideration, the Tribunal noted that the AO's belief in an apparent error leading to the revised income determination of &8377; 4,64,792 was not discernible. The Tribunal emphasized that the AO should have passed an assessment order after the ITAT set aside the issue for fresh adjudication. The AO's revision to &8377; 4,64,792, based on an apparent mistake in the order dated 28.3.2013, lacked clarity. The Tribunal highlighted the need for a proper assessment order to determine taxable income accurately, ultimately allowing the appeal and quashing the impugned order.

Conclusion:
The Tribunal's decision emphasized the importance of a clear and accurate assessment order in determining taxable income, highlighting the necessity for apparent errors to be discernible from the record for rectification under section 154. The appeal was allowed, and the impugned order was quashed, providing clarity on the requirements for rectification in income tax assessments.