2019 (3) TMI 1357 - HC - Income Tax

Rectification of mistake u/s 154 - modifying the rate of FBT treating the assessee s sales promotion items as gifts - review w/s rectification - Tribunal allowed the assessee s appeal - HELD THAT - We are in agreement with the view of the Tribunal. A.O. having examined the assessee s claim and having passed the order, accepting the FBT after scrutiny, could not have modified such an order in purported exercise of rectification powers. It is well settled that the power of rectification is not the same as review power. Under such powers, the A.O. can rectify errors apparent on record. Detailed consideration would not be permissible. - Decided against revenue

Summary

Issues Involved:
1. Interpretation of Section 154 of the Income Tax Act, 1961 regarding rectification of mistakes in the assessment order.

Analysis:
The judgment by the High Court of Bombay involved appeals by the Revenue concerning the Assessment Year 2008-09. The primary issue raised was whether the Tribunal was correct in holding that the order passed by the Assessing Officer (AO) under Section 154 of the Income Tax Act, which modified the original assessment order, was justified. The AO had initially accepted the assessee's calculation of Fringe Benefit Tax (FBT) liability but later sought to rectify the assessment by modifying the rate of FBT, treating certain items as gifts. The CIT(A) upheld the AO's decision, leading the assessee to appeal to the Tribunal.

The Tribunal, in its judgment, considered the nature of the issue at hand, emphasizing that the valuation of fringe benefits was a debatable matter. It noted that the AO's power under Section 154 was limited to rectifying mistakes apparent on record and not for revision or review purposes. The Tribunal highlighted that a mistake is considered apparent on the face of the record only if it is evident without the need for external assistance. Citing relevant legal precedents, the Tribunal stressed that if an alleged mistake involves factual investigation, legal interpretation, or allows for multiple opinions, it cannot be rectified under Section 154. The Tribunal ultimately sided with the assessee, concluding that the AO exceeded the scope of rectification by modifying the original assessment order.

The High Court, after examining the arguments presented by both parties and the case records, concurred with the Tribunal's view. It reiterated that the power of rectification is distinct from the power of review, emphasizing that rectification is limited to correcting errors that are apparent on the record. Detailed reevaluation of assessments is not permissible under rectification powers. Consequently, the High Court dismissed the Income Tax Appeals, stating that no question of law arose in the case and no costs were awarded. The judgment underscored the importance of adhering to the statutory limitations of rectification powers under the Income Tax Act, ensuring that rectification is confined to correcting clear and evident mistakes on record without delving into substantive reevaluation of assessments.