INCOME TAX ACT, 1961

Section 154

Rectification under section 154 - Mistake apparent from record - AO wanted to change his view in the garb of rectification of mistake -

Assessee had made investment in property during year under consideration, however, she failed to file her return under section 139(1). Therefore, notice under section 148 was issued for reopening of assessment. In response, assessee filed her return declaring total income at NIL. She intimated that the impugned amount was generated by her late husband as advance money taken by him from his relatives at the time of sale of agricultural land. Accordingly, AO completed assessment under section 147 read with section 143(3) accepting the income returned at NIL. Subsequently, AO issued notice under section 154 to assessee stating that since investment in property was not properly explained by assessee, there was a mistake apparent from record. Thereafter, AO passed rectification order under section 154 by making addition under section 68. Assessee contended that source of investment, which was accepted by AO in his original assessment order, could not be revised in an order under section 154 as it could not be said to be a mistake apparent from record. Held: The source of investment, which was accepted by AO in his original assessment order, could not be revised in an order under section 154 as it could not be said to be a mistake apparent from record. AO wanted to change his view in the garb of rectification of mistake under section 154, which was not permissible. Order passed under section 154 mandates rectification of mistake apparent from record. It is settled law that a mistake apparent on record must be an obvious and patent mistake and not something, which can be established by a long drawn process of reasoning, on points on which there may be conceivably two opinions. Hence, the impugned order passed under section 154 was invalid.

Followed:TS Balaram, ITO, Company Circle IV, Bombay v. Volkart Brothers and Others (1971) 82 ITR 50 (SC) : 1971 TaxPub(DT) 0355 (SC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

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