2024 (4) TMI 744 - AT - Income Tax

Validity of order passed u/s 154 - Amount to a review of the original assessment order or not - investment in the property was not properly explained by the assessee during the year under consideration there is a mistake apparent from record rectifiable u/s 154 - whether question is not a mistake apparent from record? - as argued addition u/s. 68 made despite the assessee having explained the source of investment with proper documentary evidences - HELD THAT - As per well established law it is not in dispute that the source of the investment which was accepted by AO in his original assessment order cannot be revised in an order u/s 154 as it cannot be said to be a mistake apparent from record. We find that AO wants to change his view in the garb of rectification of mistake u/s 154 which is not permissible under the law. We find that the impugned order of the AO was passed u/s 154 and Section 154 of the IT Act mandates rectification of mistake apparent from record. The Hon ble Apex Court in the case of ITO vs. Volkart Brothers and others 1971 (8) TMI 3 - SUPREME COURT has held that a mistake apparent on record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. Thus respectfully following the aforesaid binding principle rendered in ITO vs. Volkart Brothers 1971 (8) TMI 3 - SUPREME COURT we hold that the impugned order passed u/s. 154 of the Act of the Assessing Officer is invalid and liable to be quashed. Appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves issues related to the rectification of mistakes apparent from the assessment order under section 154 of the Income Tax Act, 1961. The key issues include the confirmation of the order passed under section 154, addition under section 68 of the Act, and the source of investment explained by the assessee.

Issue 1: Confirmation of Order under Section 154:
The appellant challenged the order passed by the Ld. CIT(A) confirming the order under section 154, contending that the issue in question was not a mistake apparent from the record and that the AO attempted to review his original order passed under section 143(3) of the Act. The appellant argued that a mistake which requires a long drawn process of reasoning cannot be considered a mistake apparent from the record.

The AO observed discrepancies in the source of investment and issued a notice under section 154 for rectification. Despite providing opportunities for explanation, the AO made an addition of Rs. 50,00,000 under section 68 as unexplained income. The appellant argued that the source of investment accepted in the original assessment cannot be revised under section 154 and relied on legal precedent to support this contention.

Issue 2: Addition under Section 68 of the Act:
The AO identified an undisclosed source of investment of Rs. 50,00,000 and added it to the assessee's income under section 68 of the Act. The AO's decision was based on the lack of proper explanation for the source of investment, despite the assessee's claim that the funds were generated from advance money taken by her late husband from relatives during the sale of agricultural land.

The AO provided opportunities for the assessee to explain the discrepancies, but no satisfactory explanation was offered. The addition was made under section 68, treating the amount as unexplained income. The Ld. CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal.

Issue 3: Source of Investment Explanation:
The assessee explained that the investment amount was generated by her late husband as advance money taken from relatives during the sale of agricultural land. The AO, after considering documentary evidence and personal appearances, accepted the income returned as assessed and did not draw any adverse inference against the assessee. However, the AO later issued a notice under section 154, claiming a mistake in the explanation of the investment source.

The Tribunal found that the source of investment accepted in the original assessment could not be revised under section 154 as it was not a mistake apparent from the record. Citing legal precedent, the Tribunal held that a mistake requiring a long-drawn process of reasoning cannot be considered apparent from the record, leading to the quashing of the AO's order under section 154.

This judgment highlights the importance of distinguishing between mistakes apparent from the record and debatable points of law, especially in the context of rectification under section 154 of the Income Tax Act, 1961.