Facts of the Case

The Assessing Officer passed a rectification order under Section 154 of the Income-tax Act purportedly to correct an error in the assessment. The rectification resulted in modification of the assessee’s tax liability. The assessee challenged the rectification on the ground that the issue involved was not a simple clerical or apparent mistake but required detailed examination. The Commissioner (Appeals) upheld the action of the Assessing Officer, prompting the assessee to file an appeal before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the alleged error constituted a “mistake apparent from the record” within the meaning of Section 154.
  2. Whether the Assessing Officer exceeded jurisdiction by rectifying a debatable issue.
  3. Whether the rectification order was legally sustainable.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the issue sought to be rectified involved interpretation of facts and law and was therefore debatable.
  • It was argued that Section 154 cannot be invoked to review or reconsider an assessment on merits.
  • The assessee maintained that rectification powers are limited to correcting obvious errors and not to making substantive changes. 

Respondent’s (Revenue’s) Arguments

  • The Revenue supported the rectification order passed by the Assessing Officer.
  • It was submitted that the error was apparent on the face of the record and required correction.
  • The Department contended that the rectification was within statutory powers and necessary to compute correct tax liability.

Court Order / Findings (ITAT)

  • Section 154 permits rectification only of mistakes that are obvious, patent, and self-evident from the record.
  • Issues requiring investigation, interpretation, or debate fall outside the scope of rectification proceedings.
  • The Assessing Officer cannot use Section 154 as a substitute for reassessment or review.

Important Clarification

The Tribunal reiterated that rectification is not a mechanism to revisit concluded matters. Only clerical, arithmetical, or manifest errors can be corrected; substantive or debatable issues must be addressed through appropriate appellate or reassessment procedures. Rectification is meant to correct apparent mistakes, not to alter the character of the assessment.

Link to download the order –

https://itat.gov.in/public/files/upload/1626416295-26%20of%202020%20B.%20M%20Gupta%20(Assessee%20Appeal)%20154%20order.pdf

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