2022 (9) TMI 32 - AT - Income Tax

Rectification u/s 154 - Addition u/s 68 - contention of the assessee that increase in cash in hand was to correct the accounting error committed by the assessee s Accountant and the said sum was already included in the addition made u/s 68 - HELD THAT - Upon verification, the assessee noticed that this amount was paid by Motcab Finance Pvt. Ltd. to the assessee on 14.09.2015, which inadvertently was considered by the assessee s Accountant as cash in hand deposited into assessee s account, resulting in a decrease in cash balance (Therefore it was submitted that amounts received from Motcab Finance Private Limited was Rs.3.88 crore during the year and not Rs.3.58 crore). Immediately thereafter, revised return was filed on 03.11.2017 with updated schedules. Accordingly, as per the revised return, the AO had completed the assessment by making the total addition of Rs.3.88 crore (3.58 crore 30 lakh). The original return and the revised return filed by the assessee are placed on record. In the original return, the loans and advances outstanding was disclosed at Rs.9,70,90,675 and the same was increased by Rs.30 lakh in the revised return to Rs.10,00,90,675 - Further, the cash in hand as per original return was at Rs.3,48,71,938 and the same was increased by Rs.30 lakh to a sum of Rs.3,78,71,938 - AO and the CIT(A) had considered the addition of Rs.30 lakh on a standalone basis without reference to the corrections made in the revised return. (increase in cash in hand and loans advances). The addition of Rs.30 lakh is made in a rectification order passed u/s 154 - There is no mistake apparent and facts on record only discloses an error in accounting entry by the Accountant, which does not warrant a rectification u/s 154 - Further, this amount of Rs.30 lakh is prima facie already included in Rs.3.88 crore while the A.O. making the addition u/s 68 of the I.T.Act. For the aforesaid reasons, we quash the rectification order passed u/s 154 - Assessee appeal allowed.

Issues Involved:
1. Validity of the rectification order under Section 154 of the Income Tax Act.
2. Justification of the addition of Rs. 30,00,000 to the total income.
3. Double addition of Rs. 30,00,000.
4. Calculation of interest under Section 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Rectification Order under Section 154 of the Income Tax Act:
The core issue was whether the Assessing Officer (A.O.) was justified in issuing a rectification order under Section 154 of the Income Tax Act to correct an alleged error in the original assessment order. The A.O. believed that an additional Rs. 30,00,000 needed to be added to the total income due to an increase in cash in hand between the original and revised returns. The assessee argued that there was no apparent mistake warranting rectification and that the addition was already included in a previous addition of Rs. 3.88 crore. The CIT(A) upheld the rectification order, stating that the A.O. had intended to make additions on both accounts but had only added Rs. 3.88 crore initially. The Tribunal, however, found that the facts on record disclosed an error in accounting entry by the Accountant, which does not warrant a rectification under Section 154, and quashed the rectification order.

2. Justification of the Addition of Rs. 30,00,000 to the Total Income:
The A.O. added Rs. 30,00,000 to the total income under Section 68 of the Income Tax Act, citing an increase in cash in hand between the original and revised returns. The assessee contended that this amount was already included in the Rs. 3.88 crore addition made in the original assessment order. The Tribunal noted that the A.O. and CIT(A) considered the Rs. 30,00,000 addition on a standalone basis without reference to the corrections made in the revised return. The Tribunal found that the amount was prima facie already included in the Rs. 3.88 crore addition and that there was no mistake apparent from the record to warrant a rectification.

3. Double Addition of Rs. 30,00,000:
The assessee argued that the Rs. 30,00,000 addition resulted in double addition, as it was already included in the Rs. 3.88 crore addition made in the original assessment order. The Tribunal agreed with the assessee, noting that the original and revised returns showed an increase in cash in hand and loans & advances by Rs. 30,00,000. The Tribunal concluded that the Rs. 30,00,000 was already included in the Rs. 3.88 crore addition and quashed the rectification order.

4. Calculation of Interest under Section 234B of the Income Tax Act:
The assessee disputed the calculation of interest under Section 234B of the Income Tax Act, arguing that it was incorrect in terms of quantum, period, rate, and method. However, the Tribunal's judgment primarily focused on the rectification order and the addition of Rs. 30,00,000. The Tribunal did not provide a detailed analysis of the interest calculation issue, as the primary contention was resolved by quashing the rectification order.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the rectification order passed under Section 154 of the Income Tax Act. The Tribunal found that the Rs. 30,00,000 addition was already included in the Rs. 3.88 crore addition made in the original assessment order and that there was no apparent mistake warranting rectification. The appeal was allowed, and the rectification order was quashed.

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