Omission to Produce auditor’s certificate is mistake u/s 154

By | February 8, 2016

Issue

The return of income filed by the assessee for the assessment year 1997-98 was processed under Section 143(1)(a) on 27.3.1998 and it was found at that time that the appellant had not produced the auditor’s certificate. Therefore, the claim of the appellant under Section 80HHC of the Act was disallowed by the Assessing Officer.

Therefore, the appellant filed a petition  under Section 154 of the Act, enclosing the auditor’s certificate. The revision was allowed by the Assessing Officer holding the non production of the certificate to be a technical mistake in nature.

Thereafter, the Commissioner of Income Tax issued a proposal under Section 263 of the Act, holding that the Assessing Officer was wrong in invoking Section 154 to a case where there was no mistake apparent from the records

Held

Mistakes can be of several kinds. An omission to produce the record is as much a mistake as an omission to take note of a record. Therefore, the Tribunal as well as the Commissioner were wrong in presuming that the case would not fall under Section 154. Hence, the questions of law are answered in favour of the assessee and the appeal is allowed. No costs.

HIGH COURT OF MADRAS

Craftsman Automation (P.) Ltd.

v.

Commissioner of Income-tax, Coimbatore

V. RAMASUBRAMANIAN AND T. MATHIVANAN, JJ.

TAX CASE APPEAL NO. 1177 OF 2005

SEPTEMBER  30, 2015

A.S. Sriraman for the Appellant. A.P. Srinivas for the Respondent.

JUDGMENT

V. Ramasubramanian, J. – This appeal is filed by the assessee under Section 260-A of the Income Tax Act, 1961. The appeal was admitted on the following questions of law, placing reliance upon the decision of the Calcutta High Court inMurali Export House v. CIT [1999] 238 ITR 257. The order passed on 10.11.2015 by this Court, while admitting the appeal requires to be re-produced. Hence, it is re-produced as follows:

“1. Whether the Tribunal is correct in concluding that the assumption of jurisdiction by the respondent was correct for withdrawing the deduction allowed in terms of Section 80 HHC of the Act by the Assessing Officer in the order passed in terms of Section 154 of the Act?
2. Whether the Tribunal is correct in concluding that filing of the audit report in the proceedings in terms of Section 154 of the Act would be fatal to the claim of the deduction under Section 80 HHC of the Act in the computation of taxable total income for the assessment year under consideration?”

2. Heard Mr. A.S. Sriraman, learned counsel appearing for the appellant and Mr. A.P. Srinivas, learned Standing Counsel for the respondent/ Department.

3. The return of income filed by the assessee for the assessment year 1997-98 was processed under Section 143(1)(a) on 27.3.1998 and it was found at that time that the appellant had not produced the auditor’s certificate. Therefore, the claim of the appellant under Section 80HHC of the Act was disallowed by the Assessing Officer.

4. Therefore, the appellant filed a petition on 11.6.1998 under Section 154 of the Act, enclosing the auditor’s certificate. The revision was allowed by the Assessing Officer by an order dated 25.3.1999, holding the non production of the certificate to be a technical mistake in nature.

5. Thereafter, the Commissioner of Income Tax issued a proposal on 03.3.2000 under Section 263 of the Act, holding that the Assessing Officer was wrong in invoking Section 154 to a case where there was no mistake apparent from the records. Though the appellant submitted their objections, pointing out the failure of the Assessing Officer to provide an opportunity under Section 139(9), the Commissioner overruled the objections by an order dated 21.3.2000 and set aside the order passed by the Assessing Officer on the revision petition.

6. The assessee filed an appeal to the Income Tax Appellate Tribunal. But, by an order dated 15.7.2005, the Tribunal dismissed the appeal forcing the assessee to come up with the above tax case appeal.

7. A careful look at Sub-sections (1) and (2) of Section 154 would show that the Original Authority is conferred with two types of powers to make an amendment. The first type of power is to make an amendment suo motu. The second type of power is to order an amendment whenever any mistake is brought to his notice either by the assessee or by the deductor or by the Collector.

8. The types of mistakes that could be rectified under Section 154 are also two fold. While Sub-section (1) uses the expression “any mistake apparent from the records”, Sub-section (2) uses the expression “rectifying any such mistake which has been brought to its notice”. In other words, the type of mistake that Sub-section (1) deals with is different from the type of mistake that clause (b) of Sub-section (2) deals with. While Sub-section (1) deals with a mistake apparent from the record, clause (b) of Sub-section (2) deals with a mistake that is brought to the notice of the Assessing Officer by the assessee. The word “such” used in clause (b) of Sub-section (2) is actually not in ejusdem generis with Sub-section (1), but it goes along with what follows in clause (b) itself, namely “mistake which has been brought to its notice”. Therefore, the thinking in the mind of the Commissioner as well as the Tribunal that Section 154 is available only to correct a mistake apparent from the record, may not be in tune with the Scheme of Sub- section (2) of Section 154.

9. That takes us to the next question as to what could be construed as a mistake so as to fall within either Sub-section (1) or Sub-section (2) of Section 154. According to the Assessing Officer, the mistake was on the part of the assessee in not filing an auditor’s certificate at the time of filing of the return. But, according to the assessee, in his reply to the notice under Section 263, the mistake was on the part of the Assessing Officer in not giving an opportunity under Section 139(9).

10. Mistakes can be of several kinds. An omission to produce the record is as much a mistake as an omission to take note of a record. Therefore, the Tribunal as well as the Commissioner were wrong in presuming that the case would not fall under Section 154. Hence, the questions of law are answered in favour of the assessee and the appeal is allowed. No costs.

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