2017 (9) TMI 561 - AT - Income Tax

Rectification of mistake - assessee filled the rental income twice in the respective column income from house property and also in the column income from other sources - by the time the assessee realized this mistake the time for filing of revised return income was over - Held that - Since the CPC directed the assessee to approach respective AO the assessee filed an application u/s 154 before AO to rectify the mistake committed by it in the return of income. AO should have entertained the rectification application of the assessee since the details in the balance sheet and P&L A/c filed by the assessee are not matching with the details filled in the return of income. Therefore the mistake committed by the assessee is very much apparent on record if the AO took little time to compare the balance sheet and return of income. It is the duty of the AO to assess the correct income of the assessee and collect the due tax. It is a settled law that revenue cannot collect any tax on any fictitious income. In the given case assessee has by oversight filled the rental income twice in the respective column income from house property and also in the column income from other sources in the return of income due to which the income was doubled which is fictitious income. As the mistake was apparent on record we find it appropriate to remand back the file to the AO to rectify the above mistake and complete the assessment u/s 143(3) in accordance with law. We order accordingly. Appeal of the assessee is treated as allowed for statistical purposes

Summary

Issues:
Rectification of mistake under section 154 of the Income Tax Act for double declaration of rental income in the return of income filed by the assessee for AY 2010-11.

Analysis:
The appeal was directed against the order of the Commissioner of Income-tax (A) - 5, Hyderabad, for AY 2010-11. The assessee, a real estate and EMU farms company, filed its return of income declaring total income of ?3,99,530, which was processed under section 143(1) resulting in a demand of ?1,28,945. The assessee identified an error where rental income was declared twice, once as income from house property and once as income from other sources. The assessee applied for rectification under section 154, but the Assessing Officer (AO) rejected the application stating that if a mistake was noticed, a revised return should have been filed under section 139(5) instead. The Commissioner of Income Tax (Appeals) dismissed the appeal due to non-appearance of the assessee, noting that rectification under section 154 is only permissible for arithmetical errors.

The grounds of appeal raised by the assessee included contentions related to the dismissal of the appeal, the requirement of filing a revised return, the period available for rectification under section 154, and the nature of mistakes eligible for rectification. The additional grounds focused on the examination of Balance Sheet and Profit & Loss A/c for rectification applications and the authority of the Commissioner to consider claims without a revised return. The Appellate Tribunal admitted the additional grounds as they were legal in nature and essential to the case.

During the hearing, the assessee's representative highlighted that the mistake in double declaration of rental income was inadvertent and brought to notice only after receiving the assessment order from the Central Processing Centre (CPC). The Departmental Representative argued that the mistake should have been rectified by filing a revised return promptly. The Tribunal observed that the mistake was evident from a comparison of the balance sheet and the return of income, indicating a clear error in the declaration of income. As the mistake was apparent and the AO failed to rectify it, the Tribunal remanded the case back to the AO for rectification and completion of assessment under section 143(3) in accordance with the law.

In conclusion, the appeal of the assessee was treated as allowed for statistical purposes, emphasizing the importance of rectifying genuine mistakes to ensure accurate assessment and tax collection. The Tribunal's decision highlighted the need for AO to diligently assess correct income and rectify errors to prevent taxation on fictitious income, ultimately upholding the principles of fair taxation.