Case Law Details
Brief of the Case
ITAT Ahmedabad held In the case of ACIT vs. Rupam Impex that the AO has justified the mistake on record on the ground that it is attributed to the assessee. The income tax proceedings are not adversarial proceedings. As to who is responsible for the mistake is not material for the purpose of proceedings under section 154; what is material is that there is a mistake- a mistake which is clear, glaring and which is incapable of two views being taken. The fact that mistake has occurred is beyond doubt. The fact that it is attributed to the error of the assessee does not obliterate the fact of mistake or legal remedies for a mistake having crept in. It is only elementary that the income liable to be taxed has to be worked out in accordance with the law as in force. In this process, it is not open to the Revenue authorities to take advantage of mistakes committed by the assessee. Tax cannot be levied on an assessee at a higher amount or at a higher rate merely because the assessee, under a mistaken belief or due to an error, offered the income for taxation at that amount or that rate. It can only be levied when it is authorized by the law, as is the mandate of Art. 265 of the Constitution of India. A sense of fairplay by the field officers towards the taxpayers is not an act of benevolence but it is call of duty in socially accountable governance.
Facts of the Case
In the assessment order dated 26th July 2010, passed by the Assessing Officer under section 143(3), the Assessing Officer computed assessed income of the assessee. The assessee then moved a rectification petition pointing out that the net profit as per profit and loss account, which is starting point of the computation of taxable income, is Rs 1,94,33,895. It was also pointed out that the depreciation as per books of accounts, which is required to be added back to the profit as per profit and loss account, is Rs 3,20,466 and not Rs 32,40,466. The Assessing Officer was, accordingly, urged to rectify the mistake apparent on record. However, the Assessing Officer rejected this request primarily on the ground that the assessee himself has computed the income on the basis of these figures. He, however, did not dispute that the factual contentions of the assessee with respect to the profit and depreciation figures are correct.
Contention of the Revenue
The ld counsels of the revenue submitted that the Assessing Officer should not be faulted for accepting the claim made by the asseessee. He further submitted that pointing out the correct figures of profit and depreciation amounts to a new claim by the assessee which cannot be made except through a revised return. He submits that since the claim of the assessee, as made in the income tax return, was accepted and the assessee could not have made a fresh claim, without a revised return, the Assessing Officer was justified in not adopting the figures of the profit and depreciation as per profit and loss account on record. He vehemently supports and justifies the stand of the Assessing Officer. He submits that the CIT(A) committed a grave error in granting the impugned relief.
Held by CIT (A)
CIT (A) reversed the order of AO. It was held that the AO has completely erred by not rectifying such mistakes which were clearly apparent very well from records in appellant’s case. The mistakes were so glaring that the AO was not even required to look or verify any other document. If such kind of typographical or clerical mistakes are not rectified, the provisions of Section 154 would become redundant. Considering the totality of facts and the above discussion, the AO is not correct in refusing the rectification of the appellant.
Held by ITAT
ITAT held that in the figures set out in the assessment order are admittedly incorrect. Clearly the Assessing Officer did not even apply his mind to the material on record. He did a simple cut and paste job from the statement of taxable income filed by the assessee. The starting point of his computation of income was incorrect, he accepts it but still fights shy of giving effect to the natural corollaries of discovering this mistake. If there is a mistake, it is to be rectified. There cannot be any justification of Assessing Officer’s inertia in this respect. The same is the position with respect to the depreciation figure, and the same is the stand of the Assessing Officer.
A lot of emphasis is placed on the fact that the mistake was committed by the assessee himself which has resulted in the error creeping in the assessment order as well. Instead of being apologetic about the complete non application of mind to the facts and making a mockery of the scrutiny assessment proceeding itself, the Assessing Officer has justified the mistake on record on the ground that it is attributed to the assessee. The income tax proceedings are not adversarial proceedings. As to who is responsible for the mistake is not material for the purpose of proceedings under section 154; what is material is that there is a mistake- a mistake which is clear, glaring and which is incapable of two views being taken. The fact that mistake has occurred is beyond doubt. The fact that it is attributed to the error of the assessee does not obliterate the fact of mistake or legal remedies for a mistake having crept in. It is only elementary that the income liable to be taxed has to be worked out in accordance with the law as in force. In this process, it is not open to the Revenue authorities to take advantage of mistakes committed by the assessee. Tax cannot be levied on an assessee at a higher amount or at a higher rate merely because the assessee, under a mistaken belief or due to an error, offered the income for taxation at that amount or that rate. It can only be levied when it is authorised by the law, as is the mandate of Art. 265 of the Constitution of India. A sense of fairplay by the field officers towards the taxpayers is not an act of benevolence by the field officers but it is call of duty in socially accountable governance. If authority is needed even for justifying this approach to the taxpayers, one need not look beyond the circulars issued by the CBDT itself.
Word of caution
When the first appellate authority gives relief in such deserving cases, the agony of the taxpayer is not allowed to come to an end. The appeals against the relief granted by the first appellate authority are filed as a matter of routine. One can understand the young Assessing Officers being overzealous in their approach and making such mistakes, something is needed to be done to ensure that the appeals are not filed before the higher forums as a matter of routine. Only if the field authorities are little more cautious, and stay away from such pedantic approach, such thoughtful initiatives and pragmatic approach of the Government, at the highest level, will earn more goodwill and greater trust at the ground level. As we are dismissing this appeal, and confirming the relief granted by the learned CIT(A), we make it clear that while we are not awarding any costs in this case, we must put in a word of caution here. There has to be proper mechanism to ensure that such frivolous appeals are not filed. However, if that does not happen and these frivolous appeals continue to clog the system, it is only a matter of time that the Tribunal starts awarding costs, in such cases, as a measure to deterrence to the officers concerned. We hope that does not happen
