The Law not applied – a mistake apparent from the record

1
Customer Care No. 91-11-45562222
The Law not applied a mistake apparent from the
record
www.taxmann.com
2

• Rectification of mistake.
• 154. (1) With a view to rectifying any mistake
  apparent from the record an income-tax authority
  referred to in section 116 may,
• (a) amend any order passed by it under the
  provisions of this Act
• (b) amend any intimation or deemed intimation
  under sub-section (1) of section 143
• (c) amend any intimation under sub-section (1)
  of section 200A
• (d) amend any intimation under sub-section (1)
  of section 206CB.
• 1. The purpose of this study is to examine the
  scope of the usage "rectifying any mistake
  apparent from the record", as appearing in
  section 154. The pre-condition for the
  rectification of any mistake is that it should be
  an apparent mistake, obvious from the record.
  Interestingly, the terms mistake, apparent, the
  record have not been defined in the Act, hence
  are subject to judicial interpretation.
• 2. The judiciary has time and again come to the
  rescue of the beleaguered assessees in according
  a just and fair interpretation to the terms
  mistake apparent, so that the assessee is not
  exposed to post-assessment consequences, in the
  nature of appeal, which could not only be harsh
  and uncertain, but also costly, time consuming
  and unwarranted, specially when the assessee does
  not have a natural right of appeal. The fact
  remains uncontested that the tax proceedings can
  be ruthlessly crucifying, than even the criminal
  proceedings. It is submitted that the judiciary
  has largely clarified the said terms mistake
  apparent, and the heat and dust attendant there
  to seem to have largely settled. Hence no much
  emphasis is accorded to these terms in this
  article.

Customer Care No. 91-11-45562222
www.taxmann.com
3

• 3. However, the term "the record" has not been
  subject to intensive judicial examination leaving
  the said term wide open to interpretation. The
  significance of the said term "the record" is
  analysed by attempting answers to the following
  questions
• 3.1 Whether the AO should rectify the order/
  intimation, in case the assessee does not produce
  a favourable judgment at the assessment stage,
  but after the assessment, relying on a favourable
  judgment, applies for rectification of mistake
  apparent from "the record" u/s 154?
• 3.2 Whether the judgments already pronounced by
  the courts or tribunals (whether jurisdictional
  or otherwise), whether pre or post passing of the
  order or intimation by the AO, would fall within
  the meaning of "the record", for the purpose of S
  154, irrespective of whether the assessee relies
  on them or not at the assessment stage?
• 3.3 Whether the AO should be permitted to argue
  that only such law, as is placed before him by
  the assessee, constitutes "the record", to the
  utter oblivion of the law that holds good, though
  not brought to the notice of the AO by the
  assessee?
• 3.4 Whether the AO would be correct in arguing
  that the law as enunciated by the courts or
  tribunals, would constitute "the record" for the
  purpose of S 154, only when it is brought to his
  notice by the assessee in the assessment
  proceedings that not bringing such law to his
  notice, makes it extraneous to "the record",
  lacking application?

Customer Care No. 91-11-45562222
www.taxmann.com
4

• 4. Judicial pronouncements
• The following judicial pronouncements, need
  careful consideration
• 4.1 S 263revision orders
• 4.1.1 S 263 can be invoked by the Commissioner of
  Income Tax (CIT) in case the order passed by the
  AO is erroneous and is prejudicial to the
  interests of the revenue. Explanation 2(d) to sub
  clause 1 of section 263, requires the AO to apply
  the decisions prejudicial to the assessee,
  rendered by the jurisdictional High Court or
  Supreme Court in the case of the assessee or any
  other person, failing which the CIT is empowered
  to invoke S 263 revision of such an order.
• 4.1.2 It is submitted that such prejudicial
  orders to the assessee, obviously may not be
  brought on the record by the assessee in the
  course of assessment proceedings, though the AO
  is expected to be in the knowledge of such
  prejudicial orders, and also to apply them in the
  assessment.
• 4.1.3 An order by the judicial authorities is the
  law as expounded articulated by them, which
  essentially is the purpose of the constitution
  and existence of such judicial authorities. Such
  expounding and articulation owes its allegiance,
  essentially to the provisions of the statute
  under which such orders are pronounced. Such law
  takes effect not from the date of pronouncing
  such orders, but from the date from on which such
  provision found place in the statute.

www.taxmann.com
Customer Care No. 91-11-45562222
5

• 4.1.4 There can be no denying that law (read the
  Income Tax Act 1961) as expounded articulated
  by the judicial authorities forms a part of the
  record of the AO, which he is duty bound to
  enforce. It is therefore submitted that such
  orders even if not brought on record by the
  assessee, ought to be applied by the AO, as a
  part of the law, on the record, which he is
  obliged to enforce.
• 4.1.5 It is submitted that the law (read the
  Income Tax Act 1961) is part of the record of the
  AO. A conscious effort is made by the legislation
  to apply to the assessee, from the record of the
  AO, the orders prejudicial to the assessee, in
  the course of assessment, as the law as expounded
  articulated by the judicial authorities is the
  law of the land.
• 4.1.6 It requires a particular mention that such
  law (read orders prejudicial to the assessee) if
  not applied by the AO, renders the
  order erroneous in law, liable for revision u/s
  263, provided it is prejudicial to the revenue.
• 4.1.7 In view of the above, it is submitted that
  there can be no denying that even the law (read
  orders prejudicial to the revenue) as expounded
  and articulated by the judicial authorities, are
  a part of the law (read Income Tax Act 1961),
  on the record of the AO, which he is obliged to
  enforce. The purpose of an assessment is to apply
  the law by the AO, and not to only extricate
  apply from the record of the AO, such orders as
  are prejudicial to the assessee. The purpose of
  an assessment is also not, to only pass such
  orders, as are prejudicial to the assessee.
• 4.1.8 As regards admission of additional evidence
  by CIT (A) the assesseehas to contest the
  infirmities appearing in Rule 46A, before such
  additional evidences can be admitted. Whereas S
  154 application is due to the AO not passing an
  order in accordance with the law as interpreted
  by judiciary, which needs rectification u/s
  154. Such S 154 application is not the equivalent
  of admission of additional evidence.

Customer Care No. 91-11-45562222
www.taxmann.com
6

• 4.1.9 The AO by not considering the law at
  assessment stage, commits a mistake in
  application of law rather ignorantly not
  consciously, which mistake resulting from
  ignorance of law needs rectification when
  notified to him.
• 4.1.10 It is submitted that no duty is cast on
  the assessee, by the legislation, to submit the
  orders prejudicial to the revenue (read orders
  favourable to the assessee) to the AO in the
  course of the assessment proceedings, obviously
  for the reason that the law, required to be
  enforced by the AO is already a part of the
  record, of the AO, which and which only he is
  expected to owe allegiance to and enforce,
  irrespective of whether it is placed on record by
  the assessee or not. Further, there is nothing in
  s 154 which supports the interpretation that
  existing case laws, whether favourable or
  otherwise to the assessee, if not brought to the
  notice of the AO vide submissions by the
  assessee, are not a part of the record of the AO.
  There is again, nothing in the Section 154, which
  states that only the orders prejudicial to the
  assessee constitutes the record of the AO.
• 4.1.11 In view of the above it is submitted that
  such orders, favourable to the assessee, which is
  a part of the record, of the AO, if not applied
  by the AO for want of its submission by the
  assessee, in the course of assessment
  proceedings, is a mistake apparent from the
  record,liable for rectification u/s 154
  proceedings when initiated by the assessee.

Customer Care No. 91-11-45562222
www.taxmann.com
7

• To read more, please click here

Customer Care No. 91-11-45562222
www.taxmann.com