2025 (3) TMI 223 - HC - Income Tax

Record for the purposes of Section 154 - Whether entire records of the assessee for all the assessment years and not pertaining to only the year under consideration? - HELD THAT - Tribunal states that if at all the assessee was of the opinion that the contractual liability had been settled in the previous year relevant to AY 1998-99 it ought to have been made the claim in the return itself. This conclusion does not appeal to us as the petition u/s 154 has been filed solely for the reason that the claim was not made in the return of income. The application of Section 154 would extend to situations such as the present where legitimate claims have been omitted to have been made for a variety of reasons. Hence the observations of the Tribunal rejecting the claim of the assessee on this ground are completely misconceived. Directions of the Tribunal in order in the appeal filed for AY 1992-93 was not so unequivocal that the assessee could claim relief solely based on such directions - We agree. However the appellant has not rested its claim solely on those observations but has been proactive in moving an application seeking rectification of Return for AY 1997-98. It was hence incumbent upon the assessing officer while disposing the application u/s 154 to have looked into the plea for rectification on the merits thereof. If at all the AO wished to test the claim of the assessee and verify whether the amounts had actually been paid necessary documentary evidence could well have been sought. Tribunal states that the Assessing Authority has not tested whether the amounts were actually paid at the time of original assessment proceedings - This statement is again misconceived for the reason that there could be no verification of a claim that was never made by the assessee in the return of income. In fact this is the very reason why the assessee has filed a petition for rectification. The object of Section 154 cannot be defeated by reason of such mechanical and technical objections. As to what constitutes record for the purposes of Section 154 undoubtedly the records of assessment would include the financials for the years in question and the books of accounts including ledgers. Hence it cannot be said that the payment of surcharge in Financial Year 1996-97 was not a matter of record. If at all any break-up/details of payments were required nothing prevented the authority concerned to have called for the same. Since the records in question are more than two decades old we are loathe to remit the matter to the authority for verification. In order to satisfy ourselves that the amount of surcharge had in fact been paid as claimed we had called for supporting documents and the assessee has produced ledger accounts that establish payment of a sum of Rs. 95, 36, 264/- that includes a sum of Rs. 65, 22, 000/- being the subject payment on 20.11.1997. The documents have been made available to the learned standing counsel as well who has also been afforded opportunity to verify the same. There is no dispute that the amount of surcharge was paid in the financial year relevant to the year in question and for the detailed reasons set out herein above we find that the order of the Tribunal impugned before us calls for intervention.

Summary

The appeal in this case was filed by the assessee challenging an order of the Income Tax Appellate Tribunal (ITAT) regarding the interpretation of the term "record" for the purposes of Section 154 of the Income Tax Act, 1961. The key issue was whether the term "record" should include the entire records of the assessee for all assessment years or only pertain to the year under consideration.The sequence of events began in the assessment year 1992-93 when the assessee claimed an amount in respect of additional charges levied by the Andhra Pradesh State Electricity Board (APSEB). The dispute arose as to whether this claim should be allowed in AY 1992-93 or in a later year when the dispute was settled. The Assessing Authority initially disallowed the claim, leading to a series of appeals and orders.The Tribunal, in its order dated 26.07.2005, confirmed the assessing authority's conclusion but indicated that if the dispute related to a contractual liability, the assessee would be entitled to deduction when the dispute was settled. The Tribunal remanded the issue to the Assessing Officer for further consideration.Subsequently, the assessee filed a petition under Section 154 for rectification of what it believed was a mistake apparent on record in AY 1998-99. The Assessing Authority rejected the claim without providing a detailed explanation. The CIT(A) and the Tribunal also upheld the rejection of the claim, leading to the current appeal.The Tribunal rejected the claim based on three grounds. Firstly, it stated that the claim should have been made in the return of income. Secondly, it found that the directions in the previous order were not sufficient to support the claim. Thirdly, it noted that the Assessing Authority had not verified whether the amounts were actually paid during the original assessment proceedings.The Court disagreed with the Tribunal's reasoning. It emphasized that Section 154 allows for rectification of mistakes apparent from records, even if legitimate claims were omitted for various reasons. The Court also highlighted that the Assessing Officer should have considered the merits of the claim and verified the payments if necessary.Regarding the term "record" in Section 154, the Court clarified that it should include financials for the relevant years and books of accounts. The Court examined ledger accounts provided by the assessee, which demonstrated the payment of the disputed amount. As there was no dispute that the surcharge was paid in the relevant financial year, the Court intervened and allowed the appeal in favor of the assessee.In conclusion, the Court held that the order of the Tribunal required intervention, and the substantial question of law was answered in favor of the assessee.