2018 (8) TMI 859 - HC - Income Tax

Rectification of an error u/s 154 - The order was passed after scrutiny u/s 143(3) - AO revised assessment order and recalculated the indexed cost of acquisition applying the provisions of Section 48(iii) of the Income Tax Act - ITAT deleted the rectification order passed u/s 154 - Held that - As rightly observed, powers under Section 154 of the Income Tax Act can be exercised only when the mistake, which is sought to be rectified is an obvious mistake, which is apparent from the record and not a mistake, which is required to be established by long drawn process of reasoning on points. Under the circumstances, in the facts and circumstances of the case and considering the original assessment order passed by the learned Assessing Officer as well as the subsequent order passed by the learned Assessing Officer under Section 154 of the Income Tax Act, we see no reason to interfere with the impugned order passed by the learned Tribunal. - Decided against the revenue.

Summary

Issues:
1. Validity of order under Section 154 of the Income Tax Act.

Analysis:
The case involved a dispute regarding the validity of an order passed under Section 154 of the Income Tax Act. The appellant, the revenue, challenged the order passed by the learned Tribunal which confirmed the decision of the learned CIT(A) to quash and set aside the order passed under Section 154. The appellant contended that the Tribunal erred in law and on facts in quashing the said order.

The facts of the case revealed that the assessee initially declared a total income in the return, which was later revised. During the assessment proceedings, the assessee claimed long term capital gain against the transfer of shares, which was allowed by the Assessing Officer. Subsequently, the Assessing Officer, under Section 154, recalculated the indexed cost of acquisition and enhanced the long term capital gain. The CIT(A) quashed this order, stating that there was no apparent error or mistake in the original assessment order that warranted correction under Section 154.

Upon review, the High Court observed that the Assessing Officer had passed a detailed order after considering the claim made by the assessee regarding long term capital gain. The court noted that the Assessing Officer, in exercising powers under Section 154, had recalculated the indexed cost of acquisition based on a different provision of the Income Tax Act. However, the court agreed with the CIT(A) and the Tribunal that there was no apparent error or mistake in the original assessment order that justified the exercise of powers under Section 154.

The court emphasized that Section 154 is meant to rectify obvious mistakes that are apparent from the record, not errors that require extensive reasoning to establish. Since the original assessment order was passed after thorough consideration and reasoning, the court concluded that there was no justification for interfering with the decision of the Tribunal. As a result, the court dismissed the Tax Appeal, stating that no substantial question of law arose from the case.

In conclusion, the High Court upheld the decision of the Tribunal and ruled in favor of the respondent, holding that the order passed under Section 154 of the Income Tax Act was not valid due to the absence of any apparent error or mistake in the original assessment order that warranted correction.