2014 (9) TMI 284 - HC - Income Tax

Rectification of mistake u/s 154 Held that - CIT(A) rightly observed that the assessee should have agitated such matter in an appeal against the original assessment order, which laws not done - What the AO has done in the order u/s 154 is correction of a simple totaling mistake - It is a mistake apparent from record, and it falls within the scope of S.154 - the Tribunal refused to address the question pertaining to the submission of reply on 02.04.1996, on the ground that it was raised for the first time before it - The observation cannot be sustained in law, since the Tribunal happens to be the final forum on facts, in the system of adjudication under the Act - The Tribunal ought to have addressed two aspects in this regard - There was no basis for it to refuse to deal with the question at all on the specious plea that the question was not raised before the Appellate Commissioner - the Appellate Commissioner did not record any finding to the effect that the appellant did not file any explanation - the order passed u/s 154 of the Act, the ITO has not only added the income from house and levied tax upon it, but also proceeded to levy the interest under Section 234-A, B & C of the Act, which is indeed phenomenal compared to the entire assessment thus, the matter is remitted back to the ITO for fresh consideration Decided in favour of assessee.

Issues:
1. Assessment under Income Tax Act, 1961 for the assessment year 1993-94.
2. Rectification of assessment order by the Income Tax Officer.
3. Appeal to Commissioner of Income Tax (Appeals) and further to Income Tax Appellate Tribunal.
4. Consideration of explanation submitted by the appellant.
5. Refusal by the Tribunal to accept the explanation.
6. Levying additional liability and interest under Section 234-A, B & C of the Act.
7. Judicial review of the Tribunal's decision.

1. Assessment under Income Tax Act, 1961 for the assessment year 1993-94:
The appellant, an assessee under the Income Tax Act, had her returns processed by the Assistant Commissioner of Income Tax, leading to an order passed on 30.12.1994. Subsequently, the Income Tax Officer proposed rectification of the order by adding an additional amount related to Income from House Property.

2. Rectification of assessment order by the Income Tax Officer:
The Income Tax Officer issued a show cause notice to the appellant on 26.02.1996, seeking an explanation for not adding Income from House Property. Despite the appellant's submission of an explanation on 02.04.1996, the Officer passed an order on 03.09.1996 under Section 154 of the Act, levying an additional amount of &8377; 25,415. This led to the appellant approaching the Commissioner of Income Tax (Appeals) and subsequently the Income Tax Appellate Tribunal.

3. Appeal to Commissioner of Income Tax (Appeals) and further to Income Tax Appellate Tribunal:
The appeal before the Tribunal raised the issue of the Income Tax Officer not considering the explanation submitted by the appellant. However, the Tribunal refused to accept this contention, stating it was not raised before them for the first time. The Tribunal also opined that the explanation could not be accepted on merits.

4. Consideration of explanation submitted by the appellant:
The Tribunal's decision highlighted the appellant's submission of an explanation dated 02.04.1996 and the contention that it was not taken into account by the Income Tax Officer. The Tribunal, however, did not delve into verifying the submission of the explanation, leading to a lack of clarity on this crucial aspect.

5. Refusal by the Tribunal to accept the explanation:
The Tribunal, while refusing to address the appellant's explanation, made observations on the merits of the case and concluded that the plea raised in the explanation could not be entertained in proceedings under Section 154 of the Act, which raised concerns about the consistency of their decision.

6. Levying additional liability and interest under Section 234-A, B & C of the Act:
The Income Tax Officer not only added the Income from House Property but also levied interest under Section 234-A, B & C of the Act, which was deemed excessive compared to the entire assessment, prompting a judicial review of the Tribunal's decision.

7. Judicial review of the Tribunal's decision:
The High Court found fault with the Tribunal's refusal to address the submission of the explanation and its contradictory stance on considering the plea raised in the explanation. Consequently, the Court allowed the appeal, remanding the matter to the Income Tax Officer for fresh consideration and disposal, emphasizing the verification of the appellant's explanation and prohibiting the levy of interest due to the absence of delay on the appellant's part.

This comprehensive analysis of the judgment covers the issues involved in the legal proceedings, providing a detailed overview of the facts, contentions, and decisions made at each stage of the case.

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