2024 (3) TMI 101 - AT - Income Tax

Rectification Petition Dismissed: Court Rules Section 154 for Clear Errors, Not Subjective Adjudication in Tax Disputes.

The ITAT concluded that the assessee's rectification petition under section 154 of the Income Tax Act, 1961, was not maintainable. The NFAC's reversal of ... Maintainability of rectification application - high rate of profit noted in assessee’s line of business when compared to the identical cases of contractors - HELD THAT:- We are afraid that such a question involving subjective adjudication of comparables in the assessee’s line of business could hardly be treated as an instance of rectification u/sec.154 proceedings going in TS Balram, ITO vs. Volkart Bros. [1971 (8) TMI 3 - SUPREME COURT]. Their lordships have settled the law longback that purpose of sec. 154 rectification is only to deal with an apparent mistakes on record than those involving detailed roving enquiries. We further wish to emphasize that the NFAC’s detailed discussion has nowhere reversed the AO’s categoric findings on this legal aspect of maintainability of assessee’s rectification petition. Nor the assessee’s had raised any such ground as per his Form-35 before us. Whether Revenue has wrongly quoted the case law of Goetze (India) Ltd [2006 (3) TMI 75 - SUPREME COURT] wherein their lordships’ made it amply clear that powers of appellate authority(ies) exercising their respective jurisdiction(s) under the provisions of the Act is not impinged upon for the purpose of entertaining a new claim? - We are of the considered view that the said judicial precedent nowhere dealt with an instance of sec. 154 rectification. Be that as it may, once we have concluded that the assessee’s rectification itself is not maintainable in the peculiar facts of the instant case wherein the AO’s clear-cut findings have not been reversed by the NFAC’s, all other aspects deserve to be treated as academic only. Revenue succeeds in it’s first and foremost substantive grievance in very terms. Revenue appeal allowed. Issues Involved:The judgment involves the maintainability of the assessee's rectification petition under section 154 of the Income Tax Act, 1961 and the interpretation of relevant legal precedents.Issue 1: Maintainability of Rectification Petition:The judgment addressed the question of whether the assessee's rectification petition was maintainable under section 154 of the Income Tax Act. The Assessing Officer had rejected the rectification based on the figures in the income tax return. The NFAC reversed the Assessing Officer's decision, but the court found that the high rate of profit claimed by the assessee was subject to subjective adjudication and not a clear mistake. Citing the TS Balram, ITO vs. Volkart Bros. case, the court emphasized that rectification is meant for apparent mistakes on record, not detailed inquiries. The court ruled that the rectification petition was not maintainable, as the NFAC did not reverse the Assessing Officer's findings on this aspect, and the assessee did not raise any such ground in the appeal.Issue 2: Interpretation of Legal Precedents:The judgment also delved into the interpretation of legal precedents cited by the Revenue. The court analyzed the case law of Goetze (India) Ltd. vs. CIT and clarified that the powers of appellate authorities under the Act are not impinged upon for entertaining a new claim. However, the court noted that this precedent did not specifically address a situation of section 154 rectification. Ultimately, the court concluded that since the rectification petition was deemed not maintainable, all other aspects were considered academic. The Revenue succeeded in its substantive grievance, and the appeal was allowed accordingly.Separate Judgment:The judgment was delivered by Shri Satbeer Singh Godara, Judicial Member, and Shri Dr. Dipak P. Ripote, Accountant Member.