Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in restoring the order of the AO in regard to rectification of status of the assessee within the meaning of the provisions of s. 154 of the Act ?

High Court Of Madras

Annamallais Agencies vs. CIT

Sections 154

Asst. Year 1982-83

R. Jayasimha Babu & K. Raviraja Pandian, JJ.

Tax Case No. 496 of 1996

9th September, 2002

Counsel Appeared

P.P.S. Janardhana Raja, for the Assessee : T.C.A. Ramanujam, for the Revenue

JUDGMENT

R. Jayasimha Babu, J. :

The question referred is :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in restoring the order of the AO in regard to rectification of status of the assessee within the meaning of the provisions of s. 154 of the Act ?”

The assessment year is 1982-83. The assessee, which is a registered firm carrying on “agency business”, had filed return for the asst. yr. 1982-83 along with the letter from its chartered accountant, in which letter it was stated that an application in Form No. 12 for continuation of registration along with Form No. 6 for extension of time for filing the return had already been filed by the assessee. While making the assessment, the AO stated “the assessee is taken as unregistered firm since there is no application for continuation of registration”. That order of assessment was made on 21st March, 1985. Subsequently, on 24th Nov., 1987, that order was rectified under s. 154 of the IT Act. In that order of 24th Nov.,1987, it is stated that the earlier order of assessment was made without taking note of the letter of the chartered accountant, which had accompanied the return and wherein it is clearly stated that an application for renewal had in fact been filed for which, an acknowledgment had also been given by the concerned office and that the assessment should have been made by assessing it as a registered firm and not as an unregistered firm.

The assessee challenged that order made under s. 154 of the Act before the CIT, who set aside the rectification order. However, the Tribunal set aside the order of the CIT and restored the rectification order passed by the ITO. It is submitted by learned counsel for the assessee that there was no mistake apparent on the face of the record which could have been rectified and all that has happened is that the AO has changed his opinion. The question as to whether the assessee is a registered firm or an unregistered firm is not a matter of opinion. It is a question of fact which has to be ascertained. The assessee is, admittedly, a registered firm, which had in fact applied for renewal. At the time of assessment, it did not have with it the copy of the application for renewal nor had a copy of the same been put up before the AO at the time of assessment by the office. However, the factum of having applied for renewal and such application having been received by the office was evident from a perusal of the letter of the chartered accountant, which had accompanied the return. The AO, while making the initial assessment, apparently had ignored the letter which accompanied the return, and the letter, if it had been perused, would have shown that the firm had in fact sought for renewal of the registration and that the application for renewal had also been received in, the office.

The view taken by the AO subsequently for making rectification was that what was already part of the record before the AO had been omitted from consideration by him, and that omission amounted to a mistake which was apparent on the face of the record. Learned counsel for the assessee places reliance on the decision rendered in the case of CIT vs. Bhawani Prasad Girdhari Lal & Co. (1990) 87 CTR (All) 176 : (1991) 187 ITR 257 (All), wherein the Court has observed that section 154 of the Act does not give power to the AO to change his opinion and review his order. There is no dispute about the correctness of that proposition of law. The power to rectify is to be exercised only in cases where mistake is apparent on the face of the record. The record for this purpose does not merely mean the assessment order. The return, the things which accompanied the return are also part of the record and if there has been omission on the part of the AO to take note of the contents of that record, while making his order, the mistake in the assessment can be regarded as apparent. In this case, the power to rectify under s. 154 of the Act has been properly done. It has never been the contention of the assessee that it had not sought for renewal or what had been stated by its chartered accountant in the letter, which accompanied the return, was itself erroneous or incorrect. The firm was duly registered. It had sought renewal and so was required to be treated as a registered firm while making the assessment. The question referred is, therefore, answered in favour of the Revenue (sic) and against the assessee (sic).

[Citation : 260 ITR 478]

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