Rectification Application U/s 154 Can't Be Termed As Time-Barred If Taxpayer Duly Responded To Notices Issued In Consequence To Intimation U/S 143(1): Ahmedabad ITAT

The Bench of Annapurna Gupta (Accountant Member) observed that “the assessee had duly responded to the demand notices which were issued to it in consequence to the intimation made u/s 143(1) of the Act challenging it constantly and well within the period of four years of the intimation made on the assessee. It was only finally, when the Assessing Officer did not do the needful with respect to the demand raised, that it ultimately moved an application in the year 2022 again seeking rectification in the intimation made u/s 143(1)”. (Para 16)

As per the brief facts of the case, the assessee is a Co-operative Society engaged in the business of providing short term loans to its members. The assessee had filed returns claiming deduction of its entire income u/s 80P(2), thus filing Nil return of income. For all the AYs 2010-11 to 2013-14, intimation u/s 143(1) was made denying grant of deduction u/s 80P(2) and treating the income as income from other sources subjecting the same to tax. Subsequently, demand notices were raised on the assessee, to which the assessee objected repeatedly stating that it had been wrongly denied deduction u/s 80P(2). Finally, the assessee filed rectification application u/s 154 of the Act which was rejected by the Assessing Officer stating that it was time barred.

The Bench observed that as per the provisions of Section 154(7) of the Act, rectification application is to be filed within four years from the end of the financial year in which the order sought to be rectified is passed.

In the present case, the Bench found that the assessee has sought rectification in the

intimation made u/s 143(1) of the Act and his contention is that the said intimation is never served on him, though it was passed in 2010.

The Department admitted, in as many words, that it has no details of service of intimation to the assessee u/s 143(1) of the Act for all the impugned assessment years, added the Bench.

The Bench explained that the clock for the four-year limitation seeking rectification starts ticking the moment the assessee is in receipt of the order, and without his being aware of any such order passed, there is no question of the time barring period ticking into motion, for the simple reason that the assessee is in a position to act upon it and seek rectification only when he is aware of such order passed.

In the present case, the Department has nothing to prove that the intimation was at any time was served on the assessee, and therefore, there arises no question of calculating the period of limitation of four years from the date of passing of intimation u/s 143(1) of the Act, i.e. from the year 2010 for holding the assesses application seeking rectification as barred by limitation, added the Bench.

The Bench observed that entire profits of assessee did not comprise only of interest earned from nationalized banks and it included even profits earned from its activity of providing credit facilities to members, and therefore, the intimation made u/s 143(1) of the Act contained mistake apparent from record which needed rectification.

Hence, the ITAT restored the issue back to the Assessing Officer to consider the application of the assessee filed u/s 154 of the Act afresh.

Counsel for Appellant/ Assessee: H.V. Doshi

Counsel for Respondent/ Revenue: N.J. Vyas

Case Title: Shree Jay Limbach Co. Op. Credit Society Ltd. verses ITO

Case Number: ITA Nos. 570 to 573/Ahd/2023

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