Income Tax Appellate Tribunal

Town Vividoddesha Sahakari Bhandara Niyamitha vs. Income Tax Officer

MANU/IL/0014/2024

17.01.2024

Direct Taxation

Rectification proceedings under Section 154 of the IT Act is applicable for a patent mistake which can be established not by a long-drawn process

The assessee is a credit co- operative society engaged in the business of providing credit facilities to its members. For the AY 2014-15, return of income was filed declaring a net income of Rs.3,700, after claiming deduction under Section 80P of the Income Tax Act, 1961 (IT Act) amounting to Rs.27,16,210. The case was selected for scrutiny and notices were issued. After hearing the assessee, the AO passed an order accepting the returned income. Subsequently, the assessee was issued notice by the AO informing his intention to rectify the assessment order. Since there was no reply to the notice issued, the AO passed an order under Section 154 of the Act denying the claim of deduction under Section 80P.

Aggrieved by the order of the AO passed under Section 154 of the Act, the assessee filed appeal before the first appellate authority. The CIT(Appeals) dismissed the appeal of the assessee and confirmed the view taken by the AO in his order passed under Section 154 rejecting the claim of deduction under Section 80P of the Act. Aggrieved by the order of the CIT(Appeals), the assessee has filed the present appeal before the Tribunal.

The AO has merely stated that the assessee has been wrongly granted deduction u/s. 80P of the Act and therefore the same has been rectified. The AO has not passed a speaking order stating that deduction u/s. 80P allowed is a mistake apparent from the record. The mistake apparent from the record is which prima facie it is visible to the naked eye that the claim is not allowable and without any verification of document. In the instant case, the AO has not brought out single material on record to show that the deduction granted in the assessment order completed is a mistake apparent from the record. The rectification order does not provide for any reason.

In the instant case, the AO while issuing show cause notice for rectification had not mentioned that the assessee had violated the principles of mutuality by dealing with non- members. Therefore, the issue is highly debatable and by no stretch of imagination can be termed as a mistake apparent on the record. Only an obvious and patent mistake which can be established not by a long drawn process of reasoning alone can be subjected to rectification proceedings under Section 154 of the Act.

In this case, there is nothing on record to suggest that the assessee had violated the principles of mutuality and has been dealing with non-members. Therefore, the issue raised in present appeal is not a mistake apparent on record which is amenable to rectification under Section 154 of the Act. The assessee's appeal is allowed.

Tags : Assessment Provision Applicability

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