2018 (1) TMI 1148 - HC - Income Tax

Rectification of mistake u/s 154 - rectifying the mistakes committed under Section 220 for calculating interest on refund - Held that - As seen from the proviso to sub-section (2) of Section 220, evidently, there can be variation in charging interest, and such variation can be effected through correction under Section 154 of the Act. Therefore, we fail to countenance the assessee s contention that Section 154 of the Act is unavailable for rectifying the mistakes committed under Section 220 of the Act. Even otherwise, miscalculation of interest is, at best, an arithmetical error and it needs no elaborate cogitation or adjudication, long drawn or otherwise, to hold that there was an error committed. As to correcting a mistake committed by an authority in calculating interest on refund, it is always open for the authorities to rectify that mistake. Again, in our reckoning, the reasons assigned to our interpretation of Section 220 apply here, too. - Decided against assessee

Summary

Issues Involved:
1. Calculation of interest under sections 220(2) and 245D(6A) of the Income Tax Act.
2. Rectification of mistakes under section 154 of the Income Tax Act.
3. Jurisdiction of the Assessing Officer (AO) versus the Settlement Commission in levying interest.

Detailed Analysis:

1. Calculation of Interest under Sections 220(2) and 245D(6A) of the Income Tax Act:
The core issue revolves around the correct calculation of interest under sections 220(2) and 245D(6A). The AO made several adjustments to the assessee's income and interest calculations over multiple proceedings, including rectifications and reassessments. The AO initially charged interest under sections 220(2) and 245D(6A) but later found errors in these calculations. These errors were subsequently corrected, leading to disputes over the legitimacy and accuracy of these corrections.

2. Rectification of Mistakes under Section 154 of the Income Tax Act:
The Department argued that the Tribunal erred in setting aside the AO’s rectification order under section 154, which allows for correcting "any mistake apparent from the record." The Tribunal had observed that such a mistake must be obvious and not require extensive reasoning. However, the Department contended that the errors corrected by the AO were simple arithmetical mistakes, thus falling within the purview of section 154. The Court examined whether the AO's corrections constituted an error apparent on the face of the record, concluding that arithmetical errors do qualify for rectification under section 154.

3. Jurisdiction of the Assessing Officer (AO) versus the Settlement Commission in Levying Interest:
The assessee argued that once the Settlement Commission passes an order under section 245D(1), the regular assessment ceases to exist. Therefore, any further levy of interest under section 220(2) should be within the exclusive jurisdiction of the Settlement Commission. The Court, however, noted that the proviso to section 220(2) allows for variation in charging interest through corrections under section 154. Thus, the AO was justified in rectifying the mistakes related to interest calculations, even after the Settlement Commission's involvement.

Conclusion:
The Court concluded that the AO was justified in invoking section 154 to correct the arithmetical errors in interest calculations under sections 220(2) and 245D(6A). The Tribunal's interference with the AO’s rectification order was deemed incorrect. The Court restored the CIT(A)'s order, favoring the Department's position on all substantial questions of law.