TaxTMI 
TaxTMI 
2000 (9) TMI 216
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....to31st March, 1989. The return of income declaring a loss of Rs. 5,71,78,485 including the current year's loss of Rs. 67,07,530 was filed. The assessment under s. 143(3) of the Act was completed determining the loss at Rs. 60,98,706. Subsequently during audit conducted by DC(Audit) certain discrepancies were pointed out. Accordingly a notice under s. 154/155 of the Act was issued by the AO on11th Jan., 1993, pointing out the following mistakes apparent from record: "(1) Depreciation has been wrongly allowed in excess of Rs. 5,59,44,983 as the assessee claimed depreciation for the period 1st Aug., 1987, to 31st March 1989 (20 months). (2) The company has debited prior period expenses of Rs, 2,27,73,422 in order to compute the profit under s. 115-J. (3) The company has debited on account of Rs. 40,18,166 as amount of provision of royalty. In terms of s. 40A(a)(i) royalty can be allowed in the year when tax has been actually paid. (4) The additional rupees liability on foreign exchhange loan is to be treated a part of the cost of plant and machinery only in the year when such liability is incurred and not during any other year on notional basis." 4. The assessee vide le....
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....read as under: "(1) With a view to rectifying any mistake apparent from the record an IT authority referred to in s. 116 may - (a) amend any order passed by it under the provisions of this Act." The scope of s. 154 of the Act is very limited. Such scope under s. 154 has been the subject-matter of adjudication by various Courts. Hon'ble Madras High Court in the case of Subbaraja Mudaliar vs. CIT & Anr. (1958) 33 ITR 228 (Mad) has held that it is no doubt that a mistake capable of being rectified under s. 35 (corresponding to s. 154 of IT Act, 1961) is not confined to clerical or arithmetical mistakes. On the other hand, it does not cover any mistake which may be discovered by a complicated process of investigation, argument or proof. A mistake which can be rectified must be a mistake from record. It may be a mistake either or law or of fact. This view is supported by various decisions in Nand Lal Manga Ram Pamnani & Ors. vs. G. Lakshminarasimhan & Ors. (1971) 82 ITR 1 (Bom), T.S. Balram, ITO & Ors. vs. Volkart Bros. & Ors., CIT vs. Calcutta Steel Co. Ltd. (1985) 48 CTR (Cal) 146 : (1985) 153 ITR 488 (Cal), and Sirsa Industries vs. CIT (1983) 36 CTR (P&H) 130 : (1984) 147 IT....
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....quires for being shown to be a mistake. Matter or evidence extraneous to record is not a mistake apparent from the record. In a nutshell it can be taken to be well settled that the provisions of s. 154 cannot be resorted to in order to make a revision in a matter on which there could be two plausible interpretations. 12. Keeping in view the ratio laid down by various Courts mentioned above we have to consider whether there was a patent or apparent mistake in the original order passed by the AO. The assessee was adopting its accounting year from 1st August to 31st July next year. It was calculating its depreciation on straight line method. With effect from1st April, 1989, there was amendment in s. 3 of the IT Act according to which one uniform accounting year ending on 31st March of each year was provided. As this was the first year when the amendment became applicable the assessee's accounting year consisted of 20 months. The assessee, therefore, prepared two P&L a/cs in accordance with Parts-II and III of the Companies Act. One P&L a/c was prepared for the period1st Aug., 1986, to31st July, 1987, and the other one for1st Aug., 1987, to31st March, 1989. Both the P&L a/cs were pr....
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.... appended to "A guide to Company Audit" it is stated as under: "2.3 As a change in the method of providing depreciation is a change in the method of accounting, disclosure is mandatory in the accounts of the year in which the change takes place. No disclosure is necessary in subsequent years. The type of disclosing required is stated in paragraph 11.7 of the Statement on Auditing Practices. 2.4 On changing the method, depreciation should be recalculated from the date of the asset coming into use. 2.6 When the change in method results in a surplus in the provision for depreciation, it is recommended that the surplus be initially transferred to the Appropriations part of the P&L a/c and hence to General Reserve through the same part of the P&L a/c. Conversely any deficiency so arising must be made up. 2.7 In the year in which the method of depreciation is changed, full depreciation for that year, calculated in accordance with the new method, must be debited in the P&L a/c of the year." The rates of depreciation in Sch. XIV to the Companies Act are the minimum rates of depreciation as clarified by the Department of Company Affairs vide Circular, dt.7th March, 1989." ....