2023 (5) TMI 788 - AT - Income Tax

Rectification of mistake u/s 154 - AO accepting the returned income instead of substituting the same with the assessed income - In order passed u/s. 143(3) r.w.s. 153A, AO had accepted the returned income without rectifying the figure of the assessed income, there was an apparent mistake in the order HELD THAT - . We do not find any infirmity in the order of the CIT(A) on this issue. We find the ld.CIT(A) while upholding the action of the AO held that there is no change of opinion but a substitution of the last assessed income as per record and the demand not being a subject matter of 154 proceedings as it is identical to the demand raised in 153A proceedings. So far as the submission of assessee that the AO has made the addition in AY 2018-19 and therefore, the same could not have been rectified in the 154 proceedings is concerned, the same in our opinion is without any merit. In the original order, the AO had made the addition on the ground that assessee has deposited the money in the long-term capital gain account scheme beyond the due date and has also withdrawn the amount before the period of three years. Although, the assessee has offered the income to tax in the AY 2018-19, however the AO has brought to tax the same in AY 2016-17 and the matter is still pending before the ld.CIT(A). When there was an apparent mistake in the order of the AO in accepting the returned income instead of substituting the same with the assessed income there was an apparent error and the AO was fully justified in rectifying the same. The proposition of assessee that there cannot be addition of the same amount in two different assessment years is correct. Merely, because the AO has retained the addition in AY 2018-19 as per the income retuned by the assessee, it cannot be said that the income cannot be brought to tax in AY 2016-17 especially when the appeal is still pending before the ld.CIT(A).Thus we do not find any infirmity in his order - Decided against assessee.

Summary

Issues Involved:

1. Validity of the rectification order under Section 154.
2. Change of opinion versus substitution of assessed income.
3. Taxation of long-term capital gains.

Summary:

1. Validity of the Rectification Order under Section 154:

The assessee, a professional interior decorator, filed her return of income for AY 2016-17, declaring an income of Rs. 29,35,780/-. The AO initially assessed the income at Rs. 2,32,42,684/- under Section 143(3), making additions for long-term capital gains and denial of cost of improvement. A subsequent search led to an assessment under Section 153A, where the AO accepted the originally returned income of Rs. 29,35,780/-. The AO later issued a notice under Section 154 to rectify the assessment to the previously determined income of Rs. 2,32,42,684/-. The assessee argued that the rectification was invalid as it amounted to a change of opinion. The CIT(A) upheld the AO's rectification, stating that the AO had merely substituted the last assessed income without changing the tax liability.

2. Change of Opinion versus Substitution of Assessed Income:

The assessee contended that the rectification under Section 154 was a change of opinion and thus invalid. The CIT(A) disagreed, noting that the AO had followed the "last assessed income" concept, substituting the correct assessed income without altering the tax liability. The Tribunal found no infirmity in the CIT(A)'s order, agreeing that there was no change of opinion but a substitution of the last assessed income as per records.

3. Taxation of Long-Term Capital Gains:

The AO initially added Rs. 1,56,71,710/- to the assessee's income for AY 2016-17, citing the late deposit and early withdrawal of funds from the long-term capital gain scheme. The assessee offered this amount for taxation in AY 2018-19. The Tribunal noted that the AO had brought the same amount to tax in both AY 2016-17 and AY 2018-19, with the matter still pending before the CIT(A). The Tribunal upheld the rectification under Section 154, emphasizing that the AO was justified in correcting the apparent error of accepting the returned income instead of the assessed income.

Conclusion:

The Tribunal dismissed the appeal, upholding the CIT(A)'s order and the AO's rectification under Section 154, finding no change of opinion but a proper substitution of the last assessed income. The Tribunal also clarified that the same amount could not be taxed in two different assessment years, but the addition in AY 2016-17 was justified pending the appeal before the CIT(A).