Rectification of patent penalty computation error allowed where annuity deposit deduction was wrongly omitted on notional unregistered-firm basis.

In computing penalty for a registered firm treated as unregistered under section 271(2) of the Income-tax Act, the tax had to be worked out on the notional unregistered basis after allowing the annuity deposit deduction. Omitting that deduction was a glaring, obvious and patent calculation error, not a debatable issue with two possible views. The mistake was therefore rectifiable under section 154, and the Tribunal erred in refusing correction; the assessee's position was upheld and the Revenue's objection rejected.

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Issues: Whether the omission to deduct annuity deposit on a notional basis while computing penalty under section 271(1)(c) read with section 271(2) of the Income-tax Act, 1961, in the case of a registered firm treated as unregistered for penalty purposes, constituted a mistake apparent from the record rectifiable under section 154 of the Income-tax Act, 1961.

Analysis: The computation of penalty under section 271(1)(c) in the case of a registered firm deemed to be unregistered under section 271(2) required the tax to be worked out on that notional basis after allowing the annuity deposit deduction. The error in omitting that deduction was held to be a glaring, obvious and patent mistake in calculation, falling within the scope of section 154. The matter was not treated as a debatable one or as involving two possible views so as to exclude rectification.

Conclusion: The omission was rectifiable under section 154, and the Tribunal was wrong in holding otherwise. The answer was therefore in favour of the assessee and against the Revenue.

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