Dispatch Register Entry Not Primary Evidence to Deny Section 154 Rectification

Alok Kumar Mohapatra Vs ITO (Orissa High Court)

Entry made in dispatch register is not primary evidence for revenue to rely upon and deny petitioner remedy of rectification on ground of time bar.

In Alok Kumar Mohapatra vs. ITO, the Orissa High Court addressed a dispute over the rejection of a rectification application under Section 154 of the Income Tax Act, 1961. The petitioner, Alok Kumar Mohapatra, claimed that he was wrongfully assessed for income tax despite being eligible for an exemption. His rectification request was denied on the grounds that it was time-barred, with the revenue citing an entry in its system showing service of the original assessment order on April 5, 2012. However, the petitioner contested this, arguing that the alleged service was unsubstantiated, and the assessment order had not been received.

The petitioner discovered the error upon receiving an intimation about the adjustment of a refund for the assessment year 2017-18. He promptly applied for rectification, only to have it rejected. During proceedings, the revenue admitted that the original return and physical acknowledgment of service were untraceable, relying solely on a system-generated entry. The court noted that such an entry, recorded in a dispatch register, did not constitute primary evidence and could not justify the denial of rectification.

The court set aside the revenue’s communications rejecting the rectification application and subsequent demand notices. It emphasized that without concrete proof of service, the petitioner could not be denied his statutory remedy. The revenue was directed to reconsider the rectification application in accordance with the law.

This judgment underscores the importance of primary evidence in tax proceedings, particularly when denying taxpayers their legal remedies. The court’s decision reiterates that procedural lapses or unsubstantiated claims by the revenue cannot override a taxpayer’s right to seek rectification.

FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT

1.  The writ petition is up for hearing. Mr. Ray, learned senior advocate appears on behalf of petitioner-assessee and Mr. Kedia, learned advocate, Junior Standing Counsel, for revenue.

2.  We reproduce below paragraphs 1 to 4 from earlier order dated 2^nd September, 2023.

“1. Mr. Ray, learned senior advocate appears on behalf of petitioner and submits, impugned are communications dated 27^th March, 2019 and 1st February, 2023. First is, rejection of his client’s application for rectification made under section 154 in Income Tax Act, 1961 of having been erroneously assessed in spite of being entitled to exemption of charge of income tax under the proviso to clause (c) under sub-section (1) of section 5 in Income Tax Act, 1961.

2. On query from Court Mr. Ray submits, information regarding discovery of the erroneous assessment was made upon intimation on adjustment of refund for subsequent assessment pertaining to assessment year 2017-2018. Hence, the application was made immediately on the discovery but rejected on reliance of sub-section (7) in section 154. He draws attention to internal communication dated 12^th February, 2021 from the ITO to the DCIT to submit, the file is untraceable in the department. He seeks interference.

3. Mr. Chimanka, learned advocate, Senior Standing Counsel appears on behalf of revenue and relies on annexure-1 in the counter. He submits, the system clearly says date of service to have been on 5th April, 2012. There should not be interference. However, adjournment be granted to obtain instructions.

4. There was intimation of adjustment of refund pertaining to assessment year 2017-2018. Considering that and the file not traceable in the department, revenue must substantiate entry made in their system to demonstrate there was service on 5th April, 2012. Entry made in the system is not primary evidence. It has to be based on something to show that the assessment order denying the exemption claim was informed to petitioner. Adjournment is granted to revenue to produce the evidence.”

3. Counter has been filed. From it, we reproduce the passage dealing with paragraph 3.7 in the petition.

“Para No.3.7

That the rejection of application for rectification is totally unsustainable and arbitrary because of the fact that the said intimation never saw the light of the day as claimed by the Petitioner is not correct. The return filed by the assessee was processed u/s 143(1) and the demand was uploaded in the system. As per the processing order details generated from the system, the date of service was shown as 05/04/2012. The same is enclosed herewith as Annexure-1. However, the original return filed by the Petitioner and physical acknowledgement of intimation served on the Petitioner are not traceable.”

(emphasis supplied)

4. Entry made in dispatch register is not primary evidence for revenue to rely upon and deny petitioner remedy of rectification on ground of time bar. As such, petitioner is entitled to relief. Communication dated 27^th March, 2019 saying petitioner’s rectification application cannot be acted upon and subsequent demand dated 1^st February, 2023 are set aside and quashed. Concerned authority will consider and deal with the rectification application in accordance with law.

5. The writ petition is disposed of.