Rectification of tax assessment for LTCG reporting error restored to AO for verification of CA affidavit and correction where justified

Rectification of an assessment was considered on the basis that a large long-term capital gain entry in Schedule CG of a return arose from a bona fide typographical error by the assessees CA. The appellate order was set aside and the file remitted to the assessing officer for verification of a CA affidavit and supporting evidence; if the inadvertent typographical error is verified, the assessing officer shall delete the addition and accept the return loss. The tribunal held that inadvertent misreporting explained by the assessee can amount to a mistake apparent from record and be rectified.

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Issues: (i) Whether the inadvertent inclusion of Rs. 2,79,79,26,466/- in Schedule CG (LTCG) of the assessee's return constitutes a mistake apparent from the record rectifiable under Section 154 of the Income-tax Act, 1961; (ii) Whether the affidavit and supporting documents filed by the assessee (including bank statements, demat ledger and CA affidavit) ought to be considered/admitted for verifying the claimed typographical error and consequent rectification.

Issue (i): Whether the typographical/inadvertent reporting of LTCG in the return amounts to a mistake apparent from the record amenable to rectification under Section 154.

Analysis: The Tribunal examined the return, the intimation under Section 143(1) and the rectification orders. The authorities below treated the entry as a valid disclosure in the return and therefore an allowable processing adjustment under Section 143(1). The Tribunal considered the affidavit of the Chartered Accountant, the nature of the claimed error as typographical, and precedent requiring that a mistake apparent on record be obvious and not a debatable issue. The Tribunal found that the affidavit and evidence filed by the assessee had not been verified by lower authorities and that inadvertent misreporting, if suitably explained and verified, can amount to a rectifiable mistake.

Conclusion: The inadvertent inclusion of Rs. 2,79,79,26,466/- in Schedule CG can constitute a mistake apparent from the record if the assessee's explanation (supported by affidavit and documents) is verified and found correct; the matter is remitted for verification.

Issue (ii): Whether the affidavit and supporting documents filed by the assessee should be admitted and verified for the purpose of establishing the typographical error and correcting the record.

Analysis: The Tribunal noted that the documents (bank statements, demat ledger, CA affidavit, transaction sheets and tax audit report) were not considered and the affidavit was filed after the rectification and appellate orders. Given that the lower authorities did not verify the affidavit or the evidence, the Tribunal directed that the Assessing Officer verify the affidavit and any other details/evidence submitted by the assessee to ascertain whether the entry was an inadvertent typographical error. The Tribunal emphasised that an assessee should be taxed only on real income and not on inadvertent mistakes by her CA.

Conclusion: The affidavit and supporting documents are to be verified by the Assessing Officer; they are admissible for verification and consideration for rectification of the return if found to establish the typographical error.

Final Conclusion: The Tribunal set aside the appellate order and remitted the matter to the Assessing Officer for verification of the affidavit and supporting evidence; if the Assessing Officer finds the entry to be an inadvertent typographical error, the addition shall be deleted and the returned loss accepted. The appeal is allowed for statistical purposes.

Ratio Decidendi: An inadvertent misreporting in an income-tax return, if suitably explained and verifiable from supporting evidence, can amount to a mistake apparent on the record and be rectified under Section 154; verification of affidavits and supporting documents by the assessing authority is required before denial of rectification.

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