Omission to claim statutory deduction u/s 57(iv) is a mistake apparent from record, rectifiable u/s 154

Omission to claim statutory deduction u/s 57(iv) is a mistake apparent from record, rectifiable under Section 154

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the order passed by the Assessing Officer (AO) u/s 154 of the Income Tax Act, 1961 (the Act).

ABCAUS Case Law Citation
ABCAUS 3566 (2021) (12) ITAT

Important case law relied referred:
Anchor Pressings (P) Ltd. Vs. CIT (1986) 161 ITR 159 (SC

The assessee during the year in question received interest on compensation qua compulsory acquisition of his agricultural land by Land Collector. 

The interest income was duly disclosed by the assessee in his return of income (ITR) for the year under consideration. Although the assessee as per the mandate of Sec. 57(iv) of the Act was entitled for a statutory deduction of fifty percent of the aforesaid interest income, he failed to raise such a claim in his return of income. The return of income filed by the assessee was processed as such u/s 143(1) of the Act.

The assessee coming to know this omission, moved an application before the AO under the section 154 of the Act. However, the AO was of the view, that the aforesaid claim for deduction could have only been allowed if the same was raised by the assessee in his original/revised return of income. Therefore, vide his order he rejected the rectification petition of the assessee.

The Tribunal opined that receipt of interest itself vests the assessee with a statutory entitlement of a consequential claim for deduction under Section 57(iv) of the Act. As such, the eligibility of an assessee for claim of deduction under the aforesaid statutory provision was not dependent on any documentary evidence/material, but was inextricably interlinked and interwoven with the receipt of the interest on compensation by him.

The Tribunal stated that the failure on the assessee’s part to raise a claim for deduction u/s 57(iv) of the Act, to which he was statutorily entitled, being clearly in the nature of a mistake that was glaring, apparent, patent and obvious from record, therein, rendering the order passed by the AO amenable for rectification u/s. 154 of the Act.

The Tribunal held that an intimation or a deemed intimation under sub-section (1) of Section 143 falls within the realm of clause (b) to sub-section (1) of Section 154 of the Act.

Further, the Tribunal rejected the view of CIT(A) that a remedy for claim of the said deduction can be traced in Sec. 119(2)(b) of the Act. The Tribunal opined that where a remedy available to an assessee falls within the four corners of a specific statutory provision, then, the same cannot be declined to  him, for the reason, that an alternative remedy is available elsewhere.

The ITAT stated that the AO remains under a statutory obligation to deduce the ‘true income’ of an assessee, therefore, the entitlement of the assessee towards deduction u/s 57(iv), which is inextricably interwoven or in fact intertwined with the corresponding interest income which had duly been disclosed by him in his return of income, could not have been declined by the A.O on the basis of hyper technical reasons.

Accordingly, the ITAT set-aside the order of the CIT(A) and directed the AO to allow the assessee’s claim for deduction u/s 57(iv) of the Act.

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