Wrong penalty section in Assessment order can be rectified being mistake apparent on record

Wrong penalty section mentioned in Assessment order can be rectified being mistake apparent on record when there is no debate in imposing penalty under rectified section.

In a recent judgment, ITAT Ahmedabad has held that when section 271AAB was wrongly mentioned in Assessment order instead of Section 271AAC, it can be rectified as there was mistake apparent on record and there was no debate in imposing penalty u/s 271AAC in assessee’s case.

ABCAUS Case Law Citation:
4924 (2025) (12) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in upholding the validity of the rectification order under section 154 of the Income Tax Act, 1961 (the Act) passed by Assessing Officer.

A search action u/s 132A of the Act was carried out in the case of the assessee. The Assessing Officer observed that the assessee offered cash seized during the course of search in his return of income for the year under consideration under the provisions of special slab rate u/s. 115BBE of the Act.

Consequently, while passing assessment order u/s 143(3) of the Act, the AO initiated penalty proceedings u/s 271AAC of the Act. However, due to the typographical error, penalty u/s 271AAB instead of 271AAC of the Act was mentioned in the assessment order.

On realising the mistake, it was rectified by the AO by passing rectification order u/s 154 of the Act.

Being aggrieved by the rectification order u/s. 154 of the Act, the assessee filed appeal before the CIT(A) who dismissed the appeal of the assessee.

Before the Tribunal, the assessee contended that the AO through the impugned rectification order had not merely changed the section of Penalty, but changed his satisfaction statutorily required for initiation of penalty, which is not permissible under section 154 of the Act. 

It was contended by the assessee that initiation of penalty is not a clerical job but a quasi-judicial function requiring conscious application of mind by the Assessing Officer. Therefore, branding such a jurisdictional defect to be a clerical mistake cannot be appreciated at all. Further, recording of satisfaction by the AO for initiation of penalty is a jurisdictional requirement and such an act of the AO cannot be delegated, substituted, or retrospectively altered.

It was further submitted that the penalty was originally initiated u/s 271AAB. The appellant successfully demonstrated before the Assessing Officer that penalty under section 271AAB was not leviable in his case. This position stood accepted. However, soon thereafter, the AO invoked section 154 and substituted penalty u/s 271AAB with penalty u/s 271AAC(1) that too after a long period of time much after limitation ended for initiation and imposition of penalty. This deprived the appellant of finality of relief and exposed him to fresh penal consequences which the law does not permit under section 154.

The Tribunal observed that penalty whether should be imposed/initiated u/s. 271AAB/271AAC cannot be the matter of typographical error as appreciated by the Hon’ble Delhi High Court wherein it was clearly held that when issues are debatable, the same cannot be rectified u/s. 154.

However, the Tribunal observed that in the present case Section 271AAB was wrongly mentioned instead of Section 271AAC. This can be rectified as there was mistake apparent on record and there was no debate in imposing penalty u/s 271AAC in present assessee’s case.  Thus, the Assessing Officer rightly rectified the same. 

The Tribunal opined that the contention that Section 154 order was passed after 14 months of assessment order and that too after assessee’s submission in response of Section 271AAB proceedings cannot sustain as the Assessing Officer when realised the mistake apparent from record has to rectify the same u/s. 154 of the Act.

Therefore, the Tribunal held that CIT(A) was right in upholding rectification order passed u/s. 154 of the Act. 

Accordingly, the appeal of the assessee was dismissed.

Download Full Judgment Click Here >>

• When foundation of reopening does not survive, no addition can be made for other issues
• GST Advisory & FAQs on Electronic Credit Reversal & Re-claimed Statement & RCM Liability
• Negligence of tax payer would not make exempt income taxable – ITAT
• For a notice sent by GSTN Portal no inference may be drawn as to its actual service
• Cash deposit of Rs. 250000 cr (credit) misread as crores by AO – Plea declined