This section is a neutral provision, neither revenue friendly unlike section 263 nor assessee friendly unlike section 264 of the Act. But it has limited application, since it is bound by the wording of "Mistake apparent from records"
Only those order which are passed by Income tax authority u/s 116 comes under its ambit. Order has been provided wide connotation herein and covers intimation also. CIT, Pr. CIT, CIT (A) are covered U/S 116. Hence, revision u/s 263, 264 or appeal order u/s 250 can also rectified provided it is saved by other provision of this section.
Order passed by Settlement commission u/s 245D is not passed by Income tax authority, hence rectification provision of u/s 154 is not applicable. The same has been affirmed by the Madras High court in the case of UOI Vs Dr. L. Subramanian. (407 ITR 411).
The honorable supreme court in the case of Brij Lal vs CIT (328 ITR 77), with due respect, wrongly upheld that, order of settlement commission cannot be rectified since it is in the nature of arbitration, not an assessment. Section 154 does not distinguish between the order passed by the authority. It is clearly more focused on the, type of authority, who has passed the order.
For the purpose of rectification, there has to be an independent application of mind, only of that authority, whose orders need to be rectified.
Within the meaning of this section, the "doctrine of merger" of the order does not apply. If an appeal has been filed against the order. The adjudicating authority can still rectify its order, only to that part of order, which has not been decided by appeals. Action under this section can be taken more than once to rectify different mistakes.
Mistake apparent from records, its limitation application, needs to be dissected further as "Mistake", "Records" & "Apparent from Records".
1. Mistake
Plain meaning of word "Mistake" is incorrect idea or opinion, things are done incorrectly done or thought, error of judgment, misunderstanding meaning thereof. In the Honorable Supreme Court judgment of T.S. Balaram, ITO Vs Volcart Bros. (82 ITR 50) (SC) held that rectification is not only confined to clerical or arithmetical mistakes. The mistake apparent from records must be obvious and patent. That is, the mistake may be a mistake of fact or mistake of law but it must not involve a debatable point of law.
2. Records
For the purpose of this section, records include all the proceedings and material on which the assessment is based upon. Documents of the earlier year or subsequent year of the assessee can be a part of records. A reference to an outside document would not be permissible. If the assessee wrongly claims long-term capital gain as short-term and shows to the assessing officer, broker's capital gain statement, it is not a part of the records. Relief is to be taken by way of regular appeal only. Even records of partnership can not be considered for the purpose of personal partner assessments. Here, it can not be rectified apart from section 155 of the Act.
3. Apparent from Records
The dictionary meaning of the word "Apparent" is easily visible, obvious. There should not be any scope of involvement of debatable points. A case where the liability to pay tax is already disputed, interest u/s 220 is not leviable in rectification. CBDT's Circular No. 68 dated 17.11.1971 requires a special mention here. As per this circular, a mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute 'mistake apparent from the records' and rectification u/s 154 can be made. To provide the effect of retrospective legislation would not constitute as apparent from records.
Disclaimer: This document has been prepared for academic use only and to share the same with fellow professionals and all concerned. Though every effort has been made to avoid errors or omissions in this document yet they may creep in inadvertently. The author shall not be responsible for any damage or loss to anyone, of any kind, in any manner due to this article. The author shall also not be liable or responsible for any loss or damage to anyone in any matter due to differences of opinion or interpretation in respect of the text. It is suggested that to avoid any doubt(s), the user should verify the contents of this article via tax consultant. Further suggest on this article is welcome.
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