CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 12 , 2016

CORPORATE AND PROFESSIONAL UPDATE FEBRUARY 12, 2016

Omission to produce an auditor’s certificate for claiming a deduction is a mistake rectifiable under sec. 154

HIGH COURT OF MADRAS -Craftsman Automation (P.) Ltd. v.Commissioner of Income-tax, Coimbatore, [2016] 66 Taxmann .com  37 (Madras)

Section 80HHC, read with section 154, of the Income-tax Act, 1961 – Deductions to – Exporters -Rectification of mistake – The assessment year 1997-98

FACTS

The return of income filed by the assessee was processed under section 143(1)(a) and as the assessee had not produced the auditor’s certificate, its claim under section 80HHC was disallowed by the Assessing Officer. The assessee filed a petition under section 154 enclosing the auditor’s certificate.

The revision was allowed by the Assessing Officer holding the non-production of the certificate to be a technical mistake in nature.

The Commissioner, by an order under section 263, set aside the order of the Assessing Officer holding that Assessing Officer was wrong in invoking provisions of section 154 to a case where there was no mistake apparent from the records.

On appeal, the Tribunal upheld the order of the Commissioner.

HELD

A careful look at sub-sections (1) and (2) of section 154 would show that the original authority is conferred with two types of powers to make an amendment. The first type of power is to make an amendment suo motu.The second type of power is to order an amendment whenever any mistake is brought to his notice either by the assessee or by the deductor or by the collector.

The types of mistakes that could be rectified under section 154 are also twofold. While sub-section (1) uses the expression ‘any mistake apparent from the records’, sub-section (2) uses the expression ‘rectifying any such mistake which has been brought to its notice’.

In other words, the type of mistake that sub-section (1) deals with is different from the type of mistake that clause (b) of sub-section (2) deals with. While sub-section (1) deals with a mistake apparent from the record, clause (b) of sub-section (2) deals with a mistake that is brought to the notice of the Assessing Officer by the assessee. The word ‘such’ used in clause (b) of sub-section (2) is actually not in ejusdem generis with sub-section (1), but it goes along with what follows in clause (b) itself, namely, ‘mistake which has been brought to its notice’.

Therefore, the thinking in the mind of the Commissioner as well as the Tribunal that section 154 is available only to correct a mistake apparent from the record, may not be in tune with the scheme of sub-section (2) of section 154.

The next question is as to what could be construed as a mistake so as to fall within either sub-section (1) or sub-section (2) of section 154. According to the Assessing Officer, the mistake was on the part of the assessee in not filing an auditor’s certificate at the time of filing the return.

But, according to the assessee, in his reply to the notice under section 263, the mistake was on the part of the Assessing Officer in not giving an opportunity under section 139(9).

Mistakes can be of several kinds. An omission to produce the record is as much a mistake as an omission to take note of a record. Therefore, the Tribunal as well as the Commissioner were wrong in presuming that the case would not fall under section 154.

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