Rectification u/s 154 without careful consideration of the facts and circumstances of the case, and the basic issue whether section 154 could be invoked at all - Income Tax - 584/CBDT

INSTRUCTION NO. 584/CBDT Dated : August 9, 1973 It has been noticed by the Board that in choosing the particular mode of remedial action for giving effect to objections raised by the Revenue Audit as well as Internal Audit, sufficient care is not sometimes taken. In most of the cases the assessments are being rectified u/s 154 of I.T. Act, 1961, without careful consideration of the facts and circumstances of the case, and the basic issue whether section 154 could be invoked at all. Section 154 can be invoked only for rectifying mistakes "apparent from the record" Law courts have held that a mistake which could not be gathered from the record as it stands, and relies, for being described as a mistake, on matters or evidence extraneous to be record, is not a mistake "apparent from the record". Similarly a mistake which has to be discovered by a long drawn process of reasoning , or arguments on points where there may conceivably be two opinions, cannot be said to be "mistake apparent from the record". Thus the scope of section 154 is fairly restricted. 2. As regards resort to proceedings u/s 147(b) on receipt of audit objections, this is also likely to be challenged on the ground that there has been no fresh information to justify the assumption of jurisdiction u/s. 147(b) and only a change of opinion on the part of the I.T.O. cannot be a valid ground. There are conflicting High Court decisions on the issue whether information derived from the scrutiny note of the Audit is sufficient information to uphold action u/s. 147(b), and the matter is before the Supreme Court for final adjudication. 3. A safe remedy in cases where the assessments have not been subjected to appeal is intervention by the CIT under section 263, if there is time available for this. Therefore, in all cases where errors are pointed out involving large amounts of tax, the question of action u/s.263 should be considered immediately on the receipt of the audit objection unless of course the simpler proceedings u/s 154 are clearly attracted. Even if an appeal has been filed, the AAC could be requested to keep the appeal in abeyance till completion of the proceedings u/s 263, wherever necessary. 4. The Board desire that on receipt of an audit objection the choice of appropriate remedial measures should be carefully considered by the I.T.O. if necessary in consultation with his I.A.C. For any loss of revenue, caused by resorting to incorrect remedial measures to give effect to audit objections when other viable alternative measures were available, adverse notice should be taken. The IACs (Audit), while processing the replies to Revenue Audit objections, should also apply their mind to the correctness of the remedial measures taken by the ITOs. 5. What has been stated above with regard to remedies under the I.T. Act applies mutatis mutandis to other direct taxes statutes also. These instructions may be brought to the notice of all officers in your charge.