1. The Law not applied – a mistake apparent from the record Customer Care No. 91-11-45562222 www.taxmann.com

2. Rectification of mistake. 154. [(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,— (a) amend any order passed by it under the provisions of this Act ; [(b) amend any intimation or deemed intimation under sub-section (1) of section 143;]] [(c) amend any intimation under sub-section (1) of section 200A;] [(d) amend any intimation under sub-section (1) of section 206CB. ] 1. The purpose of this study is to examine the scope of the usage "rectifying any mistake apparent from the record", as appearing in section 154. The pre-condition for the rectification of any mistake is that it should be an apparent mistake, obvious from the record. Interestingly, the terms mistake, apparent, &the record have not been defined in the Act, hence are subject to judicial interpretation. 2. The judiciary has time and again come to the rescue of the beleaguered assessees in according a just and fair interpretation to the terms mistake & apparent, so that the assessee is not exposed to post-assessment consequences, in the nature of appeal, which could not only be harsh and uncertain, but also costly, time consuming and unwarranted, specially when the assessee does not have a natural right of appeal. The fact remains uncontested that the tax proceedings can be ruthlessly crucifying, than even the criminal proceedings. It is submitted that the judiciary has largely clarified the said terms mistake & apparent, and the heat and dust attendant there to seem to have largely settled. Hence no much emphasis is accorded to these terms in this article. 2 Customer Care No. 91-11-45562222 www.taxmann.com

3. 3 Customer Care No. 91-11-45562222 www.taxmann.com 3. However, the term "the record" has not been subject to intensive judicial examination leaving the said term wide open to interpretation. The significance of the said term "the record" is analysed by attempting answers to the following questions : 3.1 Whether the AO should rectify the order/ intimation, in case the assessee does not produce a favourable judgment at the assessment stage, but after the assessment, relying on a favourable judgment, applies for rectification of mistake apparent from "the record" u/s 154? 3.2 Whether the judgments already pronounced by the courts or tribunals (whether jurisdictional or otherwise), whether pre or post passing of the order or intimation by the AO, would fall within the meaning of "the record", for the purpose of S 154, irrespective of whether the assessee relies on them or not at the assessment stage? 3.3 Whether the AO should be permitted to argue that only such law, as is placed before him by the assessee, constitutes "the record", to the utter oblivion of the law that holds good, though not brought to the notice of the AO by the assessee? 3.4 Whether the AO would be correct in arguing that the law as enunciated by the courts or tribunals, would constitute "the record" for the purpose of S 154, only when it is brought to his notice by the assessee in the assessment proceedings& that not bringing such law to his notice, makes it extraneous to "the record", lacking application?

4. 4. Judicial pronouncements The following judicial pronouncements, need careful consideration: 4.1 S 263revision orders 4.1.1 S 263 can be invoked by the Commissioner of Income Tax (CIT) in case the order passed by the AO is erroneous and is prejudicial to the interests of the revenue. Explanation 2(d) to sub clause 1 of section 263, requires the AO to apply the decisions prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person, failing which the CIT is empowered to invoke S 263 revision of such an order. 4.1.2 It is submitted that such prejudicial orders to the assessee, obviously may not be brought on the record by the assessee in the course of assessment proceedings, though the AO is expected to be in the knowledge of such prejudicial orders, and also to apply them in the assessment. 4.1.3 An order by the judicial authorities is the law as expounded &articulated by them, which essentially is the purpose of the constitution and existence of such judicial authorities. Such expounding and articulation owes its allegiance, essentially to the provisions of the statute under which such orders are pronounced. Such law takes effect not from the date of pronouncing such orders, but from the date from on which such provision found place in the statute. 4 www.taxmann.com Customer Care No. 91-11-45562222

5. 4.1.4 There can be no denying that law (read the Income Tax Act 1961) as expounded & articulated by the judicial authorities forms a part of the record of the AO, which he is duty bound to enforce. It is therefore submitted that such orders even if not brought on record by the assessee, ought to be applied by the AO, as a part of the law, on the record, which he is obliged to enforce. 4.1.5 It is submitted that the law (read the Income Tax Act 1961) is part of the record of the AO. A conscious effort is made by the legislation to apply to the assessee, from the record of the AO, the orders prejudicial to the assessee, in the course of assessment, as the law as expounded & articulated by the judicial authorities is the law of the land. 4.1.6 It requires a particular mention that such law (read orders prejudicial to the assessee) if not applied by the AO, renders the order erroneous in law, liable for revision u/s 263, provided it is prejudicial to the revenue. 4.1.7 In view of the above, it is submitted that there can be no denying that even the law (read orders prejudicial to the revenue) as expounded and articulated by the judicial authorities, are a part of the law (read Income Tax Act 1961), on the record of the AO, which he is obliged to enforce. The purpose of an assessment is to apply the law by the AO, and not to only extricate &apply from the record of the AO, such orders as are prejudicial to the assessee. The purpose of an assessment is also not, to only pass such orders, as are prejudicial to the assessee. 4.1.8 As regards admission of additional evidence by CIT (A) the assesseehas to contest the infirmities appearing in Rule 46A, before such additional evidences can be admitted. Whereas S 154 application is due to the AO not passing an order in accordance with the law as interpreted by judiciary, which needs rectification u/s 154. Such S 154 application is not the equivalent of admission of additional evidence. 5 Customer Care No. 91-11-45562222 www.taxmann.com

6. 4.1.9 The AO by not considering the law at assessment stage, commits a mistake in application of law rather ignorantly & not consciously, which mistake resulting from ignorance of law needs rectification when notified to him. 4.1.10 It is submitted that no duty is cast on the assessee, by the legislation, to submit the orders prejudicial to the revenue (read orders favourable to the assessee) to the AO in the course of the assessment proceedings, obviously for the reason that the law, required to be enforced by the AO is already a part of the record, of the AO, which and which only he is expected to owe allegiance to and enforce, irrespective of whether it is placed on record by the assessee or not. Further, there is nothing in s 154 which supports the interpretation that existing case laws, whether favourable or otherwise to the assessee, if not brought to the notice of the AO vide submissions by the assessee, are not a part of the record of the AO. There is again, nothing in the Section 154, which states that only the orders prejudicial to the assessee constitutes the record of the AO. 4.1.11 In view of the above it is submitted that such orders, favourable to the assessee, which is a part of the record, of the AO, if not applied by the AO for want of its submission by the assessee, in the course of assessment proceedings, is a mistake apparent from the record,liable for rectification u/s 154 proceedings when initiated by the assessee. 6 Customer Care No. 91-11-45562222 www.taxmann.com

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