2022 (3) TMI 901 - HC - Income Tax

Rectification u/s 154 - addition u/s 69 r.w.s. 115BBE - disallowing 30% of the expenditure pertaining to salary, rent, contract and professional fee as per Section 40 (a) (ia) - HELD THAT - Rectification order came to be passed during the pendency of the present writ petition. Earlier order dated 28.08.2021 would have to be read in conjunction with the order dated 29.11.2021. On a conjoint reading of both the orders, it is evident that the two issues raised by the petitioner for rectification has been gone into by the assessing authority. While on the issue pertaining to unexplained cash credit and consequently the addition under Section 69 with view taken is that this is not a mistake apparent on the face of the record and therefore, rectification u/s 154 of the Act is not warranted. Regarding disallowance u/s 40 (i)(a) is concerned, the same has been rectified in the manner indicated above. The power of rectification of an order of assessment u/s 154 lies within a very narrow compass. The order to be rectified must be an order which reflects an error apparent on the face of the record. The error or mistake which would require determination after long drawn hearing would not come within the ambit of Section 154. We are of the view that prayer of the petitioner for rectification has been gone into by the AO following which the assessment order would stand rectified. If the petitioner is still aggrieved by such assessment order as rectified he can assail the same in appropriate appellate proceedings, which he has already availed of.

Summary

Issues:
1. Rectification application under Section 154 of the Income Tax Act, 1961.
2. Disposal of rectification application by the Assessing Officer.
3. Applicability of Section 154 for rectification of errors in the assessment order.
4. Judicial review of rectification orders by the High Court.

Analysis:
1. The petitioner, a Trust assessed under the Income Tax Act, filed a rectification application under Section 154 of the Act seeking to rectify additions made in the assessment order for the year 2017-18. The petitioner approached the High Court through a writ petition seeking directions for the disposal of the rectification application, which had not been acted upon by the Assessing Officer.

2. The Assessing Officer initially rejected the rectification request, stating that the assessment was completed based on available records and no response was received from the assessee on the Assessment Portal. Subsequently, after a series of correspondences and an appeal by the petitioner, the Assessing Officer passed a rectification order on 28.08.2021, rejecting the rectification application related to certain additions made in the assessment order.

3. The High Court reviewed the rectification order dated 29.11.2021 passed by the Assessing Officer and noted that the issues raised by the petitioner for rectification were considered. The court emphasized that the power of rectification under Section 154 is limited to errors apparent on the face of the record and does not extend to issues requiring detailed hearings. The court found that while one issue was rectified, the other issue related to unexplained cash credit did not qualify for rectification under Section 154.

4. The High Court dismissed the writ petition, stating that the Assessing Officer had appropriately considered the rectification request within the scope of Section 154. The court highlighted that if the petitioner remained dissatisfied, they could challenge the rectified assessment order through appellate proceedings. The court's decision was based on the limited scope of rectification under Section 154 and the Assessing Officer's compliance with the legal requirements in addressing the rectification application.

This comprehensive analysis of the judgment highlights the legal intricacies involved in the rectification process under the Income Tax Act and the judicial review conducted by the High Court regarding the rectification orders passed by the Assessing Officer.