AO Competent To Invoke Section 154 Jurisdiction If Glaring Mistake Of Fact/Law Is Committed While Passing Assessment Order: Madras High Court

The Madras High Court has held that the Assessing Officer is not incompetent to invoke the jurisdiction under Section 154 of the Income Tax Act, 1961, if such officer had committed a glaring mistake of fact or law while passing the assessment order.

The bench of Justice C. Saravanan has observed that the meaning of the expression “error apparent on the face of record” is wider than the expression “mistake apparent from the record.”.

The petitioner/assessee had filed a regular return under Section 139 of the Income Tax Act, 1961, on March 4, 2019 for the assessment year 2018–19. A notice dated September 28, 2019 was thereafter issued to the petitioner under Section 143(2), read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961. It was specifically stated that the said notice was being issued only for a limited scrutiny of the “agricultural income” of the petitioner. The petitioner appears to have replied to the above notice. A scrutiny assessment order dated January 23, 2021, was passed under Section 143(3) of the Income Tax Act, 1961.

The petitioner submitted that only information that was called for from the petitioner was regarding the “Agricultural Income” of the petitioner, whereas the impugned notice dated January 27, 2023, issued under Section 154 of the Income Tax Act, 1961, seeks to rectify the Assessment Order dated January 23, 2021.

The petitioner contended that power to rectify an order under Section 154 of the Income Tax Act, 1961, is confined only to “error apparent on the face on records” or when there were clerical mistakes. There is no error apparent on the face of records in the scrutiny assessment order under Section 143(3) of the Income Tax Act, 1961, on January 23, 2021.

The department contended that only a notice under Section 154 of the Income Tax Act, 1961, has been issued to the petitioner. Since there was an apparent error on the face of record, the assessment officer has rightly invoked jurisdiction under Section 154 of the Income Tax Act, 1961. The writ petition is liable to be dismissed. The writ petition is premature as no order has been passed by the Assessing Officer under Section 154 of the Income Tax Act, 1961. If the petitioner is convinced that the notice was without merit and there is no scope for interference at this stage, It is therefore open for the petitioner to reply to the notice.

Under Sub-section 1(A) to Section 154 of the Income Tax Act, 1961, where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, under Sub-section 1(A) to Section 154 of the Income Tax Act, 1961, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.

“The power of the officers mentioned in Section 154 of the Income Tax Act, 1961, to correct “any mistake apparent from the record” is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an “error apparent on the face of the record”,” the court said.

The court has held that if an AO has failed to do what is required under the law at the time of passing an assessment order and has passed an assessment order with such defects, such assessment orders can be rectified by the officer by exercising power under Section 154 of the Income Tax Act, 1961. It is the effort of the assessing officer while exercising the power under Section 154 of the Income Tax Act, 1961.

Counsel For Petitioner: R.Sivaraman

Counsel For Respondent: S.Premalatha

Case Title: M/s.Sabari Alloys & Metals India Private Limited Versus The Deputy Commissioner of Income Tax

Citation: 2024 LiveLaw (Mad) 110

Case No.: W.P.No.6143 of 2023 and W.M.P.Nos.6157 & 6158 of 2023

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