2015 (7) TMI 729 - AT - Income Tax

Rejection of application u/s.154 - whether the mistake on the part of the AO in the return so filed can be rectified by invoking the provisions of section 154 of the Act? - Held that - As per Section 139(1) of the Act return is required to be filed by every person (a) being a company (or a firm) or; (b) being a person other than a company (or a firm) if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax. Shall on or before the due date furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed. As per Section 139(5) of Act If any person having furnished a return under sub-section (1) or in pursuance of a notice issued under sub-section (1) of section 142 discovers any omission or any wrong statement therein he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. From the provisions it is evident that it is not the case that Revenue Authorities have to accept whatever stated in the return and compute the taxable income mechanically. As per provisions of section 143(1) of the Act the concerned Revenue Authority has to examine whether any claim as made by the assessee is correct or not. In our considered view this includes under statement and overstatement of the income. If the Revenue Authority failed to take note of any incorrect claim with regard to total income of the assessee such failure would necessarily mean mistake apparent from the record. we hereby set aside the order of the ld.CIT(A) and direct the AO to allow the application of the assessee made u/s.154 of the Act and grant refund amount of 1, 88, 580/-. See Pawan Kumar Aggarwal vs. CIT 2014 (5) TMI 449 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Rectification application under section 154 of the Income Tax Act, 1961.
2. Rejection of rectification application by Assessing Officer.
3. Appeal against the order of the Ld. Commissioner of Income Tax(Appeals).

Analysis:
1. The appeal was against the order of the Ld. Commissioner of Income Tax(Appeals) dated 24/06/2011 for Assessment Year 2007-08. The Assessee filed a rectification application under section 154 of the Income Tax Act seeking to revise the income declared in the return. The Assessing Officer rejected the application stating that a revised return should have been filed instead. The Assessee appealed, arguing that the mistake in the return could be rectified under section 154. The authorities upheld the rejection, leading to the current appeal.

2. The main contention was whether the mistake in the return could be rectified under section 154. The Assessee, a private company in the tobacco manufacturing business, argued that the overstatement of taxable income was due to an error in not deducting Deferred Tax Assets. The authorities maintained that the mistake required a revised return, not a rectification application. The Assessee cited relevant case laws to support their position.

3. The Tribunal analyzed the provisions of sections 139, 143, and 154 of the Act. It noted that the Revenue Authorities are required to verify claims made in the return and correct any errors, including under or overstatements of income. The Tribunal differentiated the facts of the present case from the case cited by the Revenue. Relying on judgments from the Hon'ble High Courts of Delhi and Calcutta, the Tribunal concluded that the mistake in the audited accounts could be rectified under section 154. Consequently, the Tribunal set aside the order of the Ld. Commissioner of Income Tax(Appeals) and directed the Assessing Officer to allow the rectification application and grant the refund requested by the Assessee.

In conclusion, the Tribunal allowed the appeal of the Assessee, emphasizing the applicability of section 154 for rectifying mistakes in the audited accounts, contrary to the authorities' stance.