SARJOO PRASAD RAJPAT,KANPUR vs. INCOME TAX OFFICER 1(1)(4), KANPUR

The facts of the case are that a demand of Rs.53,390/- were raised against the assessee for the assessment year 2009-10 under section 143(1) of the Act and this was reflected as outstanding against the assessee on the CPC AO portal for the assessment year 2009-10. Accordingly, the ld. AO served upon the assessee notice on 19.09.2017, requesting that the outstanding arrear demand may kindly be paid by 4.10.2017 or to submit proof of payment of the said demand. In response to the same, the assessee filed in application under section 154, in which it was submitted that in the return of income, which was filed on 27.09.2009, an inadvertent mistake was committed by the assessee in filling the profit and loss account it the return of income. Partners interest of Rs.1,52,264/- was inadvertently filled in column no.42 and depreciation of Rs.179/- was filled in column no. 41, under the head, “interest” which resulted in an additional income of Rs.1,42,085/-, while processing the return by the CPC. Apparently, the assessee filed an application under section 154 to the CPC Bangalore on 11.03.2011, which as submitted by the assessee before the ld. AO, was pending for disposal at the time of the rectification application filed in response to the AO’s letter. The ld. AO considered the replies of the assessee but he held that the application of the assessee did not fall under the purview of section 154 on account of the fact that it did not relate Sarjoo Prasad Rajpat A.Y. 2009-10 to a mistake which was apparent from the record but would require a much deeper study of the assessee’s accounts. He further pointed out that had the assessee found such a mistake, it was duty bound to file a revised return under section 139(5) and because of the failure to do so, its application could not be entertained. The ld. AO also held that the application under section 154 was barred by limitation as return had been processed on 31.12.2010 by the CPC and therefore, the application received on 3.10.2017 was rejected under section 154(8) of the Income Tax Act, 1961.

The assessee went in appeal against this decision to the ld. CIT(A). Before the ld. CIT(A), it was argued that due to clerical error, the amount of depreciation of Rs.179/- was filled in column no. 41 instead of column no.42 and the interest of Rs.1,42,264/- was filled in place of depreciation in column no.42. However, profit before tax in column no. 43 was correctly filled as nil. It was submitted that the amount of interest of Rs.1,42,264/-, consisted of partner’s interest of Rs.82,844/- and unsecured loan of Rs.59,420/- which was duly supported by the audited accounts. On account of these mistakes, the CPC had processed the return and created a tax demand against the assessee. The assessee submitted that it had filed a rectification application before the ITO but the same had not been accepted by him and he had passed the order without giving the assessee an opportunity of being heard, as there was no basis for the addition. The ld. CIT(A) considered the matter and came to the conclusion that the matter concerned did not fall within the purview of section 154 and he also held that the assessee ought to have filed a revised return under section 139(5) to rectify the erroneous return filed by it. Accordingly, he dismissed the appeal of the assessee on this account.

The assessee is aggrieved at this dismissal of its appeal and has accordingly, come before us in appeal. Sh. Pradeep Kumar Sahgal, Advocate (hereinafter referred to as the ld. AR) pointed out that the ld. CIT(A) was incorrect in rejecting the request of the assessee for rectification of mistake under section 154 on the grounds that the Sarjoo Prasad Rajpat A.Y. 2009-10 assessee had not filed a revised return of income. It was pointed out that he was also wrong in stating that a clerical error made at the time of filing the return by wrong filling of accounts interchangeably, did not constitute a mistake apparent from the records. It was submitted that a mistake apparent from the record appearing in section 154 of the Income Tax Act extended to amendment of the intimation under section 143(1) of the Act and also mistakes committed in the return filed by the assessee, and therefore had a much wider meaning than the narrow interpretation given by the ld. CIT(A), NFAC. The ld. AR placed reliance upon the Circular No.014/XL-35/1955 dated 11.04.1955 issued by CBDT and pointed out that if there were some mistake or ignorance committed by the assessee that could not become the basis for levying tax upon him and the tax authorities were duty bound to help him to correct his mistake so that only the correct amount of tax may be realized. Accordingly, it was prayed that the order passed by the ld. CIT(A) deserved to be quashed and the appeal deserved to be allowed.

On the other hand, Sh. Deepak Yadav, DR appearing on behalf of the Revenue pointed out that the assessee had itself filed the return of income where it had supposedly made these mistakes. It had the opportunity to revise this return of income, which it had not availed and the processing has been done as per the return of income filed by the assessee. Accordingly, there is no mistake which is apparent from the record, as the contentions of the assessee have to be verified with extensive examination of the books of accounts and therefore, it cannot be said to be a matter coming within the purview of section 154. Accordingly, he held that the application under section 154 had been dismissed correctly. He accordingly prayed that the order of the ld. CIT(A) may be retained.

We have duly considered the facts and circumstances of the case. The final accounts and the audit report are as much a part of the record as the income tax return filed by the assessee. A cursory glance at the figures contained in the final accounts and