Only Obvious & Patent Mistake Can Be Subjected To Rectification Proceedings U/s 154: Bangalore ITAT

The Bangalore ITAT held that the CIT(A) is not justified in confirming the order of the AO passed u/s 154 of the Income Tax Act, on finding that the issue raised in the appeal is not a mistake apparent on record.

The Bench comprising of George George K (Vice President) and Chandra Poojari (Accountant Member) observed that, “the AO while issuing show cause notice for rectification had not mentioned that the assessee had violated the principles of mutuality by dealing with non-members. Therefore, the issue is highly debatable and by no stretch of imagination can be termed as a mistake apparent on the record. Only an obvious and patent mistake which can be established not by a long-drawn process of reasoning alone can be subjected to rectification proceedings u/s. 154”. (Para 8)

Thus, the Bench enshrined that in the present case, there is nothing on record to suggest that the assessee had violated the principles of mutuality and has been dealing with non-members.

As per the brief facts of the case, the Assessee's return was selected for scrutiny, wherein hearing the assessee, the AO passed an order of accepting the returned income claimed u/s 80P. Subsequently the assessee was issued notice by the AO informing his intention to rectify the assessment order. Since there was no reply to the notice issued, the AO passed an order u/s. 154 denying the claim of deduction u/s. 80P. On appeal, the CIT(A) confirmed the view taken by the AO.

The Bench noted that the AO has merely stated that the assessee has been wrongly granted deduction u/s. 80P and therefore the same needs to be rectified.

The Bench also observed that the AO has not passed a speaking order stating that deduction u/s. 80P allowed is a mistake apparent from the record.

The Bench clarified that the mistake apparent from the record is which prima facie it is visible to the naked eye that the claim is not allowable and without any verification of document.

The Bench further observed that the AO has not brought out single material on record to show that the deduction granted in the assessment order completed is a mistake apparent from the record. The rectification order does not provide for any reason.

Therefore, on finding that the issue raised in this appeal is not a mistake, the ITAT allowed assessee's appeal.

Counsel for Appellant/ Taxpayer: Sandeep Chalapathy

Counsel for Respondent/ Department: Ganesh R. Ghale

Case Title: Town Vividodesha Sahakari Bhandara Niyamitha verses The Income Tax Officer

Case Number: ITA No.1089/Bang/2023

Click here to read/ download the Order