Rectification application u/s 154 allowed treating demand notice as intimation u/s 143(1)

ITAT allows rectification application u/s 154 treating the first demand notice as deemed date of intimation u/s 143(1)

In a recent judgment, ITAT Rajkot allowed delayed rectification application u/s 154 treating the first demand notice for recovery proceedings as deemed date of intimation u/s 143(1) for limitation purpose. 

ABCAUS Case Law Citation:
4307 (2024) (11) abcaus.in ITAT

Case laws relied upon by the Parties:
GIT vs. Shelly Products (2003) 261 ITR 367
S. R. Koshti vs. GIT (2005) 276 ITR 165 (Gui)
Ester industries vs. CIT(2009) 185 TAXMAN 266
CIT vs. Pruthvi Brokers & Shareholders (P.) Ltd. [20121 349 ITR 336 (Bom)

In the instant case, the assessee had challenged the order passed by the CIT(A)/NFAC in confirming the order of CPC Bengaluru in rejecting rectification application u/s 154 of the Income Tax Act, 1961 (the Act).

The assessee was a AOP (Trust) and was also registered u/s 12AA of the Act. It had filed a rectification application under section 154 of the Act, before the CPC, Bengaluru, (Assessing Officer/AO), stating that there was a mistake in the processing u/s 143(1) of the Act, by CPC, Bengaluru, raising a demand.

The assessee had e-filed its original return of income for the relevant Assessment Year u/s 139(1) of the Act declaring total income at Rs. NIL. The Return of income was processed by CPC, Bengaluru and intimation issued u/s 143(1) of the Act, wherein CPC had not considered the exemption claimed u/s 11 of the Income Tax Act.

On verification of the case records and details submitted by the assessee it was noticed by the assessing officer, that while filing the return of income, the assessee- trust had not mentioned the 12AA registration number in the return of income, hence at the time of processing the return of income u/s 143(1), the CPC had not allowed the exemption claimed u/s 11 of the Act.

The assessing officer noticed that the assessee had made an application under section 154 of the Income tax Act after expiry of four years from the end of the financial year in which the order was made. In view of the above, the application under section 154 of the Income Tax Act was rejected, by the assessing officer.

The CIT(A) confirmed the action of the assessing officer.

Before the Tribunal the assessee contended that it could not make application in time as the assessee came to know, the impugned order (processing the Return of Income u/s 143(1) of the Act on only through first notice of recovery of outstanding demand. Therefore, the service of demand notice may be treated as the date of intimation u/s 143(1) of the Act.

The Tribunal observed that the trust was engaged in the educational activities irrespective of cast, creed, religious and community and without motive of profit since its inspection. It was further observed that the assessee had filed a request letter before the AO (Exemption) stating that it had neither received any commutation from the department nor received intimation u/s. 143(1) of the Act and therefore, to provide the original or certified copy of intimation of the same so that necessary compliance can be made in the matter.

The Tribunal noted that as per the assessee no intimation u/s 143(1) of the Act, was received by the assessee, therefore assessee was not aware about passing of order against him, u/s 143(1) of the Act. The assessee came to know about passing the intimation order u/s 143(1) of the Act, when it received the demand notice for recovery of demand. However, the assessee had replied to the Assessing Officer stating that assessee is not liable to pay the demand. Soon after getting intimation order u/s 143(1) of the Act, the assessee filed the rectification application u/s 154 of the Act.

The Tribunal opined that there was genuine difficulty before the assessee, to make the rectification application, under section 154 of the Income Tax Act, within the time limit of four years. Hence, rectification application was filed, after expiry of 4 years, due to the circumstances, beyond the control of the assessee.

The Tribunal noted that the assessee, vide its letter filed statement of income, acknowledgement of ROI, Form 10B, certificate u/s 12A before the department, hence, such genuine assessee should not be penalized because of technicalities. Under the circumstances the date of deemed date of intimation u/s 143(1) of the Act may be treated being the first notice for recovery proceedings and the petition u/s 154 of the Act, of the assessee needs to be considered.

The Tribunal further noted that the Hon’ble Supreme Court held that the dichotomy between administrative and quasi-judicial function vis-à-vis the doctrine of natural justice is presumably obsolescent which makes the water-shed in the application of natural justice to administrative proceedings. The rules of natural justice are rooted in all legal systems and are not any new theology. They are manifested in the twin principles of nemo judex in parte sua (no person shall be a judge in his own case) and audi alterem partem (the right to be heard). It had been pointed out that the aim of natural justice is to secure justice.

The Tribunal directed the assessing officer to consider the rectification application of the assessee, filed under section 154 of the Act and rectify the mistake apparent from record in accordance with law.

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