The Word record us 154 include all records available with AO. Rectification of Mistake not confined to mere clerical or arithmetical mistake-ITAT

The Word record us 154 include all records available with AO. Rectification of Mistake not confined to mere clerical or arithmetical mistake. Meaning of the word “record” was clarified by ITAT Visakhapatnam in a recent judgment as under:

Case Law Details:
ITA No.727/Vizag/2013  Assessment Year: 2008-09
M/s. Y.V.R. & Co. vs. Addl CIT
Date of Judgment/Order: 06/05/2016

Brief Facts of the Case:
The assessment of the was completed u/s 143(3) by the Assessing Officer by making an addition of Rs. 17,76,410/- towards disallowance of labour expenses. However, thereafter, the A.O. issued a notice u/s 154 proposing to rectify the order with the observation that while completing the assessment u/s 143(3) an amount of Rs. 48,59,340/- was determined as assessed income after making an addition of Rs. 17,76,410/- towards excess claim of labour expenses for which no bills & vouchers are produced. During the course of assessment proceedings, it was observed that the assessee had agreed for 20% disallowance of total labour expenses of Rs. 1,58,74,000/-. However, while finalizing the assessment, by mistake only an addition of Rs. 17,76,410/- was made. This, according to the AO constituted a mistake apparent from the records which needed to be rectified u/s 154 of the Income Tax Act, 1961. Thereafter, considering the relevant explanations of the assessee, the AO passed order u/s 154 enhancing the income by adding difference labour charges of Rs. 21,56,567/-.

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A) who held that the A.O. has rightly rectify the assessment order.

Aggrieved by the CIT(A) order, the assessee went in appeal before ITAT.

Contentions of the Assessee:
The assessee argued that the order sheet entry regarding acceptance of 20% disallowance in assessment records was only a discussion that was recorded at the time of assessment proceedings, but not in the assessment order. The mistake pointed out by the assessing officer was not from the assessment order, but from the assessment records. Any mistakes which can be rectified u/s 154 of the Act should be from the face of the assessment order. Therefore, the A.O. was not correct in rectifying the assessment order by referring to the order sheet entry. 

Important Excerpts from ITAT Judgment:

Section 154 of the Act provides for rectification of mistake apparent from the records. As per the said section, mistake not confined to mere clerical or arithmetical mistake. The only point is that the mistake must be obvious and patent and not involving a debatable point. Similarly, the word record has not been defined u/s 154 of the Act or in the definition section. Therefore, the said word will have to be given a wider import by including the records that is available with the A.O. 

The assessee’s contention is that records means only an assessment order is not acceptable for the reason that record means not only the assessment order, but also includes any records available with the A.O. at the time of passing assessment order.