Withdrawal of deduction u/s 54/54F beyond scope of rectification u/s 154. AO has no jurisdiction to re-appreciate evidences already considered.
ABCAUS Case Law Citation:
ABCAUS 3294 (2020) (04) ITAT
Important case law relied upon by the parties:
T.S. Balaram, Income Tax Officer vs Volkart Brothers & Ors, 82 ITR 50 (SC)
ACIT vs Saurashtra Kutch Stock Exchange Ltd [2008] 219 CTR 90
CIT vs Hero Cycles (P) Ltd (1997) 228 ITR 463 (SC)
In the instant case, the appeal was filed by the assessee against the order of CIT(A) in confirming the action of the AO and the impugned order passed u/s 154 of the Income Tax Act, 1961 (the Act).
The assessee was an individual. During the scrutiny assessment, the Assessing Officer (AO) noted that the assessee had declared capital gains on sale of property. The AO further noted that the assessee had claimed indexed cost of acquisition while computing capital gains. Accordingly, the AO accepted returned income while framing the assessment u/s 143(3. Thereafter the AO proposed to rectify the mistake in the assessment order u/s 154 of the Act to withdraw the claim of deduction u/s 54 of the Act.
The assessee challenged the order passed u/s 154 of the Act before the CIT(A) and submitted that withdrawal of deduction u/s 54/54F is beyond the scope of rectification of apparent and patent mistake as per Section 154 of the Act.
The CIT(A) didn not accept the objection of the assessee and upheld the order of the AO passed u/s 154 of the Act.
The Tribunal noted that the AO while passing the scrutiny assessment u/s 143(3) of the Act accepted the returned income declared by the assessee as capital gains from sale of plot bearing. Also the AO had discussed the facts relating to the transaction of sale and investment made for deduction claimed.
The Tribunal observed that it was quite manifest from the scrutiny assessment order passed u/s 143(3) of the Act that the AO had duly considered the relevant facts as well as documents filed by the assessee in support of claim of investment made for construction. The AO had also considered the cost of acquisition, improvement and other expenditure towards transfer of the property.
The Tribunal opined that though the claim of exemption u/s 54 may not be allowable if the immovable property sold was only a plot of land, however, in such a situation, the deduction u/s 54F of the Act would be allowable.
Withdrawal of deduction u/s 54 / 54F beyond scope of rectification u/s 154
The Tribunal opined that even if it was presumed that the AO had wrongly allowed the claim u/s 54, then the same would not fall in the ambit of apparent, patent and manifest mistake on the face of record. It may be a mistake of decision on the part of the AO. The remedy for such erroneous order passed by the AO lies u/s 263 of the Act and not u/s 154 of the Act.
The Tribunal stated that he AO is not empowered to review its own order or predecessor order even if such order suffers from error and mistake but those errors and mistakes are the errors of judgement and decision and not an apparent and patent error on the face of it. A mistake apparent on record must be an obvious and patent mistake and not something which could be established by a long drawn process of reasoning on the point of issue involved.
The Tribunal pointed point that as held by the Hon’ble Supreme Court only the glaring and obvious mistake on the face of record can be rectified u/s 154 of the Act. A point which is not examined on facts or on law cannot be held as a mistake apparent from record. Therefore, a mistake of decision of wrong appreciation of facts does not fall in the ambit of obvious, patent and apparent mistake from record which can be rectified u/s 154 of the Act.
The Hon’ble Supreme Court had held that rectification is not possible if question is debatable. Moreover, the point which was not examined on facts or in law cannot be dealt as mistake apparent on record when the dispute raised a mixed question of facts and law.
The Tribunal stated that in this case it could be a matter of lack of enquiry or lack of proper enquiry on the part of the AO while passing scrutiny assessment order u/s 143(3) of the Act but the decision taken by the AO after considering the facts and evidences produced by the assessee could not be held as a mistake apparent and patent on the face of the record. Therefore, the AO in proceedings u/s 154 of the Act had re-appreciated the evidences which was already available on record and considered by the AO while passing the scrutiny assessment order u/s 143(3) of the Act.
The Tribunal held that the AO had no jurisdiction u/s 154 of the Act to re-appreciate the evidences already considered by the AO during the scrutiny assessment as it would amount to review of its own order. The AO had travelled beyond the jurisdiction and scope of Section 154 of the Act while passing the impugned order which was a gross misuse of the provisions and powers u/s 154 of the Act.
Accordingly, the Tribunal quashed the order of the AO as without jurisdiction.
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