Case Law Details
Surajit Ghosh Vs ITO (ITAT Kolkata)
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal considered whether an inadvertent error committed by the assessee while filing the return of income could be rectified under Section 154 of the Income-tax Act. The assessee had mistakenly selected the acquisition period of certain mutual fund units as “on or after 31.01.2018” instead of “on or before 31.01.2018” in Schedule 112A, resulting in incorrect computation of long-term capital gains and a tax demand. The Assessing Officer rejected the rectification application on the ground that the proposed correction would alter the total income and required filing of a revised return. The appellate authority upheld this view. However, the Tribunal observed that the term “record” under Section 154 extends beyond the assessment order and includes all relevant records available with the tax authorities. Since evidence showed that the assets had been acquired before 31.01.2018, the Tribunal held that the inadvertent error constituted a mistake apparent from the record. The matter was remanded to the Assessing Officer to verify the evidence and recompute the capital gains accordingly.
Core Issue: Whether an inadvertent error in the income tax return regarding the date of acquisition of mutual fund units, resulting in incorrect computation of long-term capital gains under section 112A, constitutes a mistake apparent from the record capable of rectification under section 154.
Facts: The assessee filed his return of income for AY 2021-22 declaring long-term capital gains arising from redemption of mutual funds. While filling Schedule 112A, an inadvertent error occurred whereby the mutual fund units were shown as acquired on or after 31.01.2018 instead of on or before 31.01.2018. Consequently, the long-term capital gains were computed at ₹24,343 instead of the correct taxable gain of ₹6,972 after applying the grandfathering provisions. The return was processed and a tax demand of ₹14,380 was raised. The assessee filed an application under section 154 seeking rectification of the mistake and furnished evidence showing that the mutual fund units had in fact been acquired before 31.01.2018 and were held as on that date. The Assessing Officer rejected the application on the ground that the proposed correction would alter the total income and therefore fell outside the scope of section 154.
CIT(A) Findings: The appellate authority upheld the rejection of the rectification application. It held that section 154 permits correction only of mistakes apparent from the record in an assessment order or intimation and not mistakes committed by the assessee while filing the return. According to the CIT(A), the proper remedy was filing a revised return and not seeking rectification.
ITAT Findings: The Tribunal reversed the view of the lower authorities. It held that the expression “record” for the purposes of section 154 is not confined merely to the assessment order or intimation but includes the entire record relating to the assessee available with the Assessing Officer. Reliance was placed on judicial precedents including Maharana Mills Pvt. Ltd. v. ITO (SC), M.R.M. Plantations (P.) Ltd. (Madras High Court), Upasana Hospital & Nursing Home (Kerala High Court) and Ethel Rodrigues (Mysore High Court).
The Tribunal observed that the evidence produced by the assessee clearly showed that the mutual fund units had been acquired before 31.01.2018 and were in existence on that date. The mistake had arisen solely due to incorrect selection of the relevant column in the return of income. Such an inadvertent error, when demonstrable from the record itself, constituted a mistake apparent from the record capable of rectification under section 154.
The Tribunal further held that rectification cannot be denied merely because correction of the mistake would result in a change in total income. Once the error is apparent from the record, the Revenue authorities are duty-bound to compute the correct taxable income in accordance with law.
Gist of Cases Relied Upon
1. Maharana Mills Pvt. Ltd. v. ITO (SC)“Record” for rectification is not limited to the assessment order; it includes all materials and proceedings on which the assessment is based.
2. Ethel Rodrigues v. ACED Rectification can be based on the assessment records relating to the case and is not confined to a single document.
3. CIT v. M.R.M. Plantations (P.) Ltd. For section 154, the relevant record includes material available with the authority at the time rectification proceedings are initiated.
4. Upasana Hospital & Nursing Home v. CIT The term “record” covers the entire record of the assessee available with the Assessing Officer and should be interpreted broadly
Principle: The term “record” in section 154 has a wide scope and includes all material and records relating to the assessee available with the Assessing Officer. An inadvertent mistake in the return of income itself can constitute a mistake apparent from the record if it is capable of verification from existing evidence. Rectification cannot be refused merely because the correction affects the computation of total income.
Held: The incorrect reporting of the acquisition date of mutual fund units in Schedule 112A was a mistake apparent from the record. The assessee was entitled to seek rectification under section 154. The matter was restored to the Assessing Officer with directions to verify the evidence and recompute the long-term capital gains by treating the mutual fund units as assets acquired prior to 31.01.2018. The appeal was partly allowed for statistical purposes. (Para 6).
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Addl/JCIT(A)-2, Gurugram [hereinafter referred to as Ld. ‘Addl/JCIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2021-22 dated 15.12.2025.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That the order of the Ld. Addl/JCIT(A) confirming the erroneous order of the AO is bad in law and against the facts of the case.
2. On the facts of the case and in law, the Ld. Addl/JCIT(A) erred in dismissal of appeal for rectification of mistake while the mistake was apparent and obvious in the return filed by the appellant and the mistake on merits the AO and Ld. Addl/JCIT(A) admitted to also.
3. On the facts of the case and in law, the Ld. Addl/JCIT(A) erred in dismissing the appeal by observing that the scope of rectification is very limited to and thus can be carried out only to correct the mistake/errors that are obvious & patent from the existing record in an order or intimation passed by the A.O but not the Income Tax Return filled by the appellant.
4. On the facts of the case and in law, the Ld. Addl/JCIT(A) erred in dismissal of appeal for rectification of mistake and thus uphold the decision of the below authority who denied to rectify the mistake in the Income Tax Return for an unlawful reason that after the impugned rectification total income of the appellant will be change that is not allowed under rectification – which is nothing but goes against the spirit of law and natural justice.
5. On the facts of the case and in law, the Ld. Addl/JCIT(A) erred in dismissal of appeal and thus uphold the decision of the below authority who have not acted in accordance with his duty so laid down by the CBDT Circular No. 014(XL-35)/1955 dated 11th April 1955 that mandates the tax officers to responsible for ensuring the correct computation of income in accordance with the law and even advise the assessee as to its benefit.
6. That the appellant craves leave to add and/or modify any ground(s) of this appeal at the time or before hearing.”
3. Brief facts of the case are that the assessee had filed the return of income for AY 2021-22 on 23.11.2021. The return was processed with a demand of ₹14,380/- due to an inadvertent error in Schedule 112A, where the period of acquisition for Long Term Capital Gains (LTCG) arising from the redemption of mutual funds was selected as ‘on or after 31.01.2018‘ instead of ‘on or before 31.01.2018‘ and consequently, the LTCG was erroneously computed at ₹24,343/-instead of the actual taxable profit of ₹6,972/-. To correct this patent mistake, the assessee filed a rectification application u/s 154 of the Act, pointing out the error. The Ld. AO rejected the rectification application vide order dated 01.05.2024, by holding that the correction of such an error required a revision of the return, as the proposed rectification would alter the total income, which falls beyond the limited scope of section 154 of the Act. Aggrieved with the rejection of the rectification petition, the assessee filed an appeal before the Ld. Addl/JCIT(A), who observed that the rectification u/s 154 of the Act can only be carried out to correct a mistake apparent from the record in an order or intimation passed by the Ld. AO. Since the return was processed exactly as per the details furnished by the assessee in the ITR, there was no error committed by the Revenue authorities. The Ld. Addl/JCIT(A) held that the appropriate remedy to correct an omission or error made by a taxpayer in the original return is to file a revised return, as appellate proceedings examine the correctness of the Ld. AO’s order and not the mistakes made by the taxpayer. Finding that the scope of rectification is limited to obvious and patent errors without requiring new facts, the Ld. Addl/JCIT(A) determined that the issue did not fall under the purview of a mistake apparent from the record. Accordingly, the Ld. Addl/JCIT(A) confirmed the action of the Ld. AO and dismissed the appeal of the assessee.
4. Aggrieved with the order of the Ld. Addl/JCIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. The assessee has furnished the required evidence before us in support of the claim that the asset was purchased prior to 31.01.2018 being the UTI Infrastructure Fund, UTI Hybrid Equity Fund and UTI Value Opportunity Fund (merged with Multicap Fund). In the course of the appeal before us, the assessee has also filed the bank statement for UTI Mutual Fund in support of the claim that these funds were appearing as on 31.01.2018 as well. It was requested that the directions may be issued to the Ld. AO to treat the assets as acquired before 31.01.2018 and to re-compute the capital gains of.
6. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. Addl/JCIT(A). As per section 154 of the Act, a mistake apparent from record can be rectified. It has been held in the case of Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC) that The word ‘record’ contemplated by section 35 of the 1922 Act does not mean only the order of assessment but it comprises all proceedings on which the assessment order is based. In Ethel Rodrigues v. ACED [1963] 49 ITR (ED) 128 (Mys.) decided under the Estate Duty Act, it is held that the ‘Record’ means the record relating to assessment and not any other record. In CIT v. M.R.M. Plantations (P.) Ltd. [1999] 102 Taxman 1 (Mad.) it is held that the ‘record’ for purpose of section 154(1) is the record available to the authorities at the time of initiation of proceedings for rectification and not merely the record of the original proceeding sought to be rectified. Further, in Upasana Hospital & Nursing Home v. CIT [2002] 120 Taxman 545/253 ITR 507 (Ker.), it is also held that Power of rectification under section 154 is to be exercised with reference to the records of the assessee available with the Assessing Officer, and not with particular reference to the assessment alone. ‘Record’ cannot be said to be the record of one particular assessment, but the entire record of the assessee relating to all the assessment years. Since the details filed show that the assets were acquired before 31.01.2018, there was no reason not to correct the error in inadvertently made while filing the return of income as the mistake apparent from record had arisen in the return of income itself on account of incorrect filling of the relevant column and the same was liable to be rectified. The assessee is directed to furnish the required evidence filed before us in support of the claim that the assets were acquired prior to 31.01.2018 before the Ld. AO who is directed to re-compute the capital gains in view of the evidence filed that the assets were acquired prior to 31.01.2018. Hence, Hence, all the Grounds of appeal are partly allowed for statistical purpose
7. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 9th June, 2026.
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