Eight Roads Investment Advisors Private Limited Vs ACIT (ITAT Mumbai)
No Opportunity, No Rectification- Rectification Enhancing Income Without Notice Is Unsustainable– ITAT Mumbai
Mumbai ITAT has quashed a rectification order passed by CPC, Bengaluru u/s 154 on the ground that no notice or opportunity of hearing was granted to Assessee before enhancing income & reducing refund. Tribunal held that such action was in direct violation of Sec 154(3) which mandates opportunity of hearing in cases where rectification increases liability.
Assessee had filed return for AY 2020-21 declaring income of ₹14.16 crore & claiming refund of ₹1.16 crore. Subsequently, CPC issued a rectification order u/s 154 dated 24.09.2021, enhancing income to ₹15.06 crore & reducing refund to ₹99.25 lakh. Notably, no intimation u/s 143(1) was issued prior to such rectification. Assessee preferred appeal before CIT(A) who dismissed the appeal observing that in subsequent scrutiny proceedings u/s 143(3), AO had upheld the rectification order & thus no relief could be granted.
Before Tribunal, Assessee argued that the rectification was illegal as it was passed without serving any notice or granting an opportunity of hearing, which is mandatory u/s 154(3). Reliance was placed on Supreme Court ruling in M. Chocklingam & Meyyappan v. CIT (48 ITR 34), Calcutta HC decision in Arun Kumar Bose v. ITO (2025) & ITAT Mumbai decision in ADIT v. Linklaters (2014), all holding that rectification enhancing assessment without notice is unsustainable.
