2021 (6) TMI 326 - AT - Income Tax

Rectification of mistake u/s 154 - Assessment u/s 143(3) - whether authorities below have erred taking figure of income computed under section 143(1) as returned income by the CPC, instead of income declared by the assessee in the return filed on 29th September, 2020? - HELD THAT - Though a detailed submissions has been made by the assessee before the first appellate authority, but ld.CIT(A) without going into the merit of the contentions raised by the assessee, summarily and in a cryptic way rejected the same and confirmed order of the ld.AO. CIT(A) ought to have considered the pleadings of the assessee before him and should have passed an order on merit. According to us the mistake is self-evident, and apparent from the record. For rectifying the mistake, the assessee filed rectification application under section 154, which was rejected by the AO on the ground that the same is barred by limitation. This foundational fact was not inquired into by both the authorities below in the course of rectification proceedings under section 154 of the Act, and simply dismissed the application on the ground of limitation. The assessee submitted before the ld.CIT(A) that the assessee has filed application under section 154 on 20.1.2017 against the order passed under section 143(3) on 13.11.2012. Rectification of an order can be made within 4 years from the end of the financial year in which the order sought to be amended was passed, therefore, in the present case period for filing the application expires only on 31.3.2017, and therefore, application of the assessee under section 154 is within the limitation period. As regards, the mistake pointed out by assessee in the impugned assessment order is concerned, as stated above, is self-evident and apparent on face of the record, and thus, the lower authorities are not justified in rejecting the application under section 154 of the Act of the assessee. Allow appeal of the assessee and direct the ld.AO to consider the income declared by the assessee in its return of income, while computing assessed income under section 143(3) of the Act. - Appeal of the assessee is allowed.

Summary

Issues:
1. Interpretation of returned income under section 143(3) of the Income Tax Act, 1961.
2. Rejection of rectification application under section 154 on the ground of limitation.
3. Failure to consider the merit of contentions raised by the assessee by lower authorities.

Analysis:
1. The sole issue in the appeal was the incorrect consideration of assessed income under section 143(1) as returned income, instead of the income declared by the assessee in the original return. The assessee's return declared income at ?32,01,050, but the CPC assessed it at ?37,66,259 under section 143(1). The assessment order under section 143(3) also used the CPC-assessed income as returned income, leading to an erroneous assessed income. The Tribunal found this mistake apparent and directed the AO to consider the income declared by the assessee in the return for computing assessed income under section 143(3).

2. The assessee filed a rectification application under section 154 to correct the error, but it was rejected by the AO as time-barred. The Tribunal noted that the application was filed within the statutory time limit, as the order sought to be amended was passed on 13.11.2012, and the rectification application was filed on 20.1.2017, well within the four-year limitation period ending on 31.3.2017. The lower authorities failed to inquire into this fact during the rectification proceedings, leading to an unjustified rejection of the application.

3. The Tribunal criticized the lower authorities for summarily rejecting the assessee's submissions without delving into the merits of the contentions raised. The AO and the CIT(A) failed to consider the error in the assessment order and dismissed the rectification application solely on the ground of limitation, overlooking the self-evident mistake in using the CPC-assessed income as returned income. The Tribunal emphasized the importance of considering the pleadings of the assessee and passing orders on merit, rather than dismissing applications without proper examination.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the AO to rectify the assessed income by considering the income declared in the original return. The judgment highlighted the need for a thorough examination of rectification applications, adherence to statutory time limits, and the importance of addressing the merit of contentions raised by taxpayers in assessment proceedings.